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Friday, 28 September 18
FITCH RATINGS: METALLURGICAL COAL MINERS MAY CURB COSTS AS PRICES SLIP
Strong cost inflation in the global metallurgical coal sector suggests that miners may focus on cost controls as prices decline from their current high levels over the next 18 months, say Fitch Ratings and CRU. However, mining companies rated by Fitch are well-positioned for any potential squeeze on margins, as their costs are relatively low by global standards and, in most cases, their diversified business operations limit exposure to the sector.
CRU estimates that global costs in the metallurgical coal sector increased by 18% in 2017 and continued to rise in 2018. Severe weather has played a role in Australia, causing supply-chain disruption that led to demurrage penalties and increased storage costs for unshipped coal. However, costs have also been pushed up globally by higher oil prices and attempts by mining companies to maximise production to take advantage of high prices.
Coking coal prices are currently sufficiently high that cost inflation has not undermined profitability. CRU estimates that the seaborne industry generated an average cash margin of 40% in 2016-2017, and profitability has remained very strong this year.
The metallurgical coal market is unlikely to become oversupplied in the near term, and Fitch does not expect prices to fall deep into the cost curve, as they did during 2014-2016. However, prices have already eased off from their peak of USD260/tonne in 4Q16, and are likely to decline further as supply constraints continue to ease. Fitch’s current assumptions are that hard coking coal prices will average USD185/tonne this year and USD140/tonne thereafter. These declines could put pressure on some less competitive mining companies to reduce costs to protect margins.
Among Fitch-rated companies, Teck Resources (BB+/Positive) has the largest exposure to the metallurgical coal sector, which accounted for 60% of its segment EBITDA in the 12 months to 30 June 2018. The company is among those that have increased use of contractors and rented more mining equipment to raise short-term output, which has pushed up marginal costs. Nevertheless, Teck is still in the lower half of the global cost curve (FOB port) and its costs remain lower in US dollar terms than in 2014. Teck has also taken advantage of strong margins and cash flow to reduce leverage. The main credit issue facing the company is the prospect of continued project spending and its funding resulting in weaker cash flows and higher financial leverage.
BHP Billiton (A/Stable) and Anglo American (BBB-/Stable) also have significant metallurgical coal assets, mostly located in Australia, where coal mines are generally relatively low cost by global standards. BHP and Anglo also have diversified operations, with metallurgical coal accounting for only around 16% of BHP Billiton’s revenue and 17% of Anglo’s in the financial year ending June 2017. There could be increased focus on improving efficiency in the Australian coal sector, as already signalled by some companies, but CRU and the Australian government expect production to continue to grow strongly over the next four years.
Meanwhile, mining service companies and earthmoving equipment manufacturers should continue to benefit from rising demand and a better pricing environment as miners continue with new projects and increase production. Emeco (B/Stable), which has the largest exposure to metallurgical coal among Fitch-rated companies, reported improved EBITDA margin as the commodity sector recovered. It also improved its leverage position. Further leverage improvements are likely in 2019-2021 due to equity-funded acquisitions and a tight rental equipment market in Australia.
Source: Fitch Ratings
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Tuesday, 24 July 18
TANKER MARKET : IN TERMS OF TRADE, THE STEPS THAT WERE SLOWLY BEING TAKEN BY OPEC AND RUSSIA - GEORGE LAZARIDIS
Despite the fact that the tanker market still seems to be in the midst of a perfect storm, there are still strong indicators that better sailing da ...
Thursday, 19 July 18
VINACOMIN PRODUCES OVER 20 MLN TONNES OF RAW COAL FROM YEAR'S START - VNA
The Vietnam National Coal and Mineral Industries Group (Vinacomin) has produced over 20 million tonnes of raw coal and 19.3 million of clean coal f ...
Wednesday, 18 July 18
INDONESIA TO AUCTION 16 MINING SITES - JP
Indonesia will soon auction 16 mining sites as no proposal submissions have been submitted by state-owned enterprises (BUMN) and regional administr ...
Wednesday, 18 July 18
SHIPPING MARKET INSIGHT - VASILIS MOIRIS
The new regulations for Chinese flag restricting import of Tier I ships have dominated market sentiment during the past days as buyers have been tr ...
Thursday, 12 July 18
SUPRAMAX: INDO/CHINA COAL RV IS BEING FIXED AROUND USD 10500 BSS SINGAPORE - FEARNLEYS
Capesize
Cape market continue to be extremely volatile says Fearnleys in its latst weekly report.
The further noted that, last week ended wi ...
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- Bukit Makmur.PT - Indonesia
- Indian Oil Corporation Limited
- IEA Clean Coal Centre - UK
- Timah Investasi Mineral - Indoneisa
- Orica Australia Pty. Ltd.
- Coalindo Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Bhatia International Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Maheswari Brothers Coal Limited - India
- Bhushan Steel Limited - India
- Samtan Co., Ltd - South Korea
- Directorate General of MIneral and Coal - Indonesia
- Parliament of New Zealand
- Medco Energi Mining Internasional
- Agrawal Coal Company - India
- SMC Global Power, Philippines
- Latin American Coal - Colombia
- Directorate Of Revenue Intelligence - India
- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- Miang Besar Coal Terminal - Indonesia
- ASAPP Information Group - India
- Vizag Seaport Private Limited - India
- Malabar Cements Ltd - India
- PNOC Exploration Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Rio Tinto Coal - Australia
- Mintek Dendrill Indonesia
- Kapuas Tunggal Persada - Indonesia
- Kideco Jaya Agung - Indonesia
- Price Waterhouse Coopers - Russia
- LBH Netherlands Bv - Netherlands
- McConnell Dowell - Australia
- Wood Mackenzie - Singapore
- Coastal Gujarat Power Limited - India
- Sakthi Sugars Limited - India
- Alfred C Toepfer International GmbH - Germany
- Altura Mining Limited, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Bharathi Cement Corporation - India
- Sindya Power Generating Company Private Ltd
- Videocon Industries ltd - India
- Toyota Tsusho Corporation, Japan
- Grasim Industreis Ltd - India
- Makarim & Taira - Indonesia
- Siam City Cement - Thailand
- Asmin Koalindo Tuhup - Indonesia
- Riau Bara Harum - Indonesia
- SMG Consultants - Indonesia
- Uttam Galva Steels Limited - India
- Australian Coal Association
- GVK Power & Infra Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- The University of Queensland
- Kumho Petrochemical, South Korea
- Kepco SPC Power Corporation, Philippines
- PowerSource Philippines DevCo
- Carbofer General Trading SA - India
- Lanco Infratech Ltd - India
- Jaiprakash Power Ventures ltd
- Antam Resourcindo - Indonesia
- Bangladesh Power Developement Board
- Gujarat Electricity Regulatory Commission - India
- PTC India Limited - India
- Eastern Coal Council - USA
- Indogreen Group - Indonesia
- Minerals Council of Australia
- Semirara Mining and Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Intertek Mineral Services - Indonesia
- Ambuja Cements Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Merrill Lynch Commodities Europe
- Marubeni Corporation - India
- ICICI Bank Limited - India
- International Coal Ventures Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Finance - Indonesia
- Baramulti Group, Indonesia
- Vedanta Resources Plc - India
- White Energy Company Limited
- Larsen & Toubro Limited - India
- Bhoruka Overseas - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Vijayanagar Sugar Pvt Ltd - India
- Mercator Lines Limited - India
- Aditya Birla Group - India
- Bahari Cakrawala Sebuku - Indonesia
- Kaltim Prima Coal - Indonesia
- European Bulk Services B.V. - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Metalloyd Limited - United Kingdom
- Cigading International Bulk Terminal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Straits Asia Resources Limited - Singapore
- Thai Mozambique Logistica
- Karaikal Port Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Savvy Resources Ltd - HongKong
- Barasentosa Lestari - Indonesia
- Parry Sugars Refinery, India
- Economic Council, Georgia
- Manunggal Multi Energi - Indonesia
- Dalmia Cement Bharat India
- Planning Commission, India
- Romanian Commodities Exchange
- Ind-Barath Power Infra Limited - India
- Standard Chartered Bank - UAE
- Port Waratah Coal Services - Australia
- CIMB Investment Bank - Malaysia
- India Bulls Power Limited - India
- Indonesian Coal Mining Association
- Trasteel International SA, Italy
- Commonwealth Bank - Australia
- Wilmar Investment Holdings
- The State Trading Corporation of India Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Transport, Egypt
- Jindal Steel & Power Ltd - India
- Simpson Spence & Young - Indonesia
- Siam City Cement PLC, Thailand
- Bayan Resources Tbk. - Indonesia
- Bulk Trading Sa - Switzerland
- Georgia Ports Authority, United States
- Sree Jayajothi Cements Limited - India
- Ceylon Electricity Board - Sri Lanka
- MS Steel International - UAE
- Petron Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Meenaskhi Energy Private Limited - India
- Star Paper Mills Limited - India
- Ministry of Mines - Canada
- Xindia Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Global Business Power Corporation, Philippines
- Central Java Power - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Mjunction Services Limited - India
- Sinarmas Energy and Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Interocean Group of Companies - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Borneo Indobara - Indonesia
- Sojitz Corporation - Japan
- Africa Commodities Group - South Africa
- Tamil Nadu electricity Board
- Gujarat Mineral Development Corp Ltd - India
- IHS Mccloskey Coal Group - USA
- CNBM International Corporation - China
- Coal and Oil Company - UAE
- Oldendorff Carriers - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Sidhee Cement - India
- London Commodity Brokers - England
- Central Electricity Authority - India
- Thiess Contractors Indonesia
- Deloitte Consulting - India
- Power Finance Corporation Ltd., India
- South Luzon Thermal Energy Corporation
- Semirara Mining Corp, Philippines
- Renaissance Capital - South Africa
- SN Aboitiz Power Inc, Philippines
- Australian Commodity Traders Exchange
- PetroVietnam Power Coal Import and Supply Company
- Tata Chemicals Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Madhucon Powers Ltd - India
- Meralco Power Generation, Philippines
- Indian Energy Exchange, India
- Formosa Plastics Group - Taiwan
- Kobexindo Tractors - Indoneisa
- Binh Thuan Hamico - Vietnam
- Sarangani Energy Corporation, Philippines
- Energy Link Ltd, New Zealand
- Goldman Sachs - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Anglo American - United Kingdom
- Iligan Light & Power Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Sical Logistics Limited - India
- Global Green Power PLC Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Electricity Authority, New Zealand
- Chamber of Mines of South Africa
- Indika Energy - Indonesia
- Orica Mining Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Aboitiz Power Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- The Treasury - Australian Government
- Singapore Mercantile Exchange
- Therma Luzon, Inc, Philippines
- San Jose City I Power Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Pendopo Energi Batubara - Indonesia
- Mercuria Energy - Indonesia
- Independent Power Producers Association of India
- GMR Energy Limited - India
- Essar Steel Hazira Ltd - India
- Edison Trading Spa - Italy
- GAC Shipping (India) Pvt Ltd
- Cement Manufacturers Association - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Salva Resources Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Rashtriya Ispat Nigam Limited - India
- AsiaOL BioFuels Corp., Philippines
- Posco Energy - South Korea
- Heidelberg Cement - Germany
- New Zealand Coal & Carbon
- VISA Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Eastern Energy - Thailand
- Energy Development Corp, Philippines
- TeaM Sual Corporation - Philippines
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