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Wednesday, 03 November 21
HIGHER COKING COAL PRICES TO PARE PROFITABILITY OF STEELMAKERS IN SECOND HALF OF FY22 - CRISIL RATINGS
The operating margin of primary steelmakers will reduce by a third to 24-26% in the second half of this fiscal versus the first half as input cost soars owing to a more than 2x rise in coking coal prices since July.
However, for the full fiscal, the operating margin will average a robust 31-32%, a good ~400 basis points (bps) higher than in last fiscal, due to a strong first half that saw healthy steel prices and moderate input costs.
The consequent robust accruals will support increased capital expenditure, continued deleveraging and strengthening of balance sheets, a CRISIL study of the top five steelmakers, which account for 58% of domestic production, shows. Global coking coal prices have rallied strongly since July, rising from ~$175 per tonne in June to ~$400 per tonne in October, mainly due to disruptions in the Australian and Chinese mines, and logistical issues such as freight and container unavailability, amid healthy demand from global steel producers, especially ex-China.
The prices are expected to ease only gradually as supply takes time to ramp up. Given that domestic primary steel producers rely mainly on imported coking coal, their production costs will rise sharply.
In contrast, iron ore, the other key raw material that accounts for 15-20% of the cost of production, is entirely met from domestic sources (captive plus merchant supplies). Although global iron ore prices have fallen ~60% between July and October, domestic prices have fallen only ~ 30% as supply continues to be tight.
Says Naveen Vaidyanathan, Director, CRISIL Ratings, “The surge in coking coal prices, which account for about a third of the total cost of production, will materially elevate cost pressures for domestic primary steel makers. At the same time, the fall in domestic iron ore prices has been significantly lower than the increase in coking coal prices, thereby providing limited cushion. These factors will lead to an overall increase in cost of production by ~ 30% for domestic steelmakers in the second half of the fiscal.”
Global steel prices after rallying in the first half of this fiscal by ~1.8x the average price last fiscal are expected to remain healthy in the second half. While prices were supported by strong demand and costlier iron ore in the first half, the second half will see more supply cuts in China as part of green initiatives there, and higher coal costs. Prices are expected to average $850-900 per tonne this fiscal, more than 60% higher on-year.
Domestic steel prices, which are significantly driven by the landed cost of imports, have also continued to be strong despite some moderation in the second quarter of this fiscal due to weak domestic demand amid the second wave.
Further, healthy global realisations, strong domestic demand growth (14-16% on-year this fiscal), high export potential and increased cost of production are expected to prop domestic prices during second half of the fiscal.
Says Ankush Tyagi, Team Leader, CRISIL Ratings, “Although domestic steel prices are expected to remain strong, further upside from current levels could be limited because the discount of domestic steel prices to the landed cost of imports has already reduced to ~15% in October from ~ 25% at the beginning of the fiscal.
Also, players could witness challenges in taking steep price hikes in the domestic market due to the nascent economic recovery. This, along with increased cost of production, could reduce operating margins to 24-26% in the second half against an estimated 35-37% in the first half. That said, the average operating margin for the fiscal could still be 350-400 bps higher than ~27.5% last fiscal.”
Healthy annual accruals should support planned capex towards capacity expansion and also strengthen the balance sheet of the players. Net debt-to-Ebitda is expected to be less than 1 time this fiscal against 1.9 times last fiscal, whereas interest cover will increase to more than 8.5 times, almost double from last fiscal.
A sharper-than-expected correction in global steel prices, weaker global demand, significantly higher-than-expected input costs would be the key monitorables from here.
Source: IIFL
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Thursday, 26 August 21
INDIA IMPORTED 17.06 MLN TONNES OF LPG IN 2020; UP 11.5% Y-O-Y
Global LPG trade remained fairly positive in 2020, despite the global economic impact from COVID-19, and surged strongly in the first half of 2021. ...
Thursday, 26 August 21
MARKET INSIGHT - INTERMODAL
24th of August 2021, the Baltic Dry Index reached 4,201, a YTD high and the highest since May 2010.
Cape 5TC daily average @ 51,472
...
Tuesday, 24 August 21
COAL PRICE RALLY TO PRESSURE CHINESE POWER GENCOS’ MARGINS FITCH RATINGS
Fitch Ratings expects the pressure on Chinese power generation companies’ (gencos) profit from the recent coal price surge to weaken their cr ...
Tuesday, 24 August 21
TIGHT POWER SUPPLY IN CHINA AMID STRONG DEMAND, HIGH COAL PRICES - FITCH RATINGS
China experienced tight power supply in 1H21 on stronger than expected power demand as economic activity continued to recover, Fitch Ratings says i ...
Monday, 23 August 21
CHINESE COAL PRODUCTION RISES 4.9 PCT IN 1ST 7 MONTHS OF 2021 - NBS
Official figures demonstrated that the Chinese raw coal production surged 4.9 percent annually to 2.26 billion tonnes in the January-July period of ...
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- Oldendorff Carriers - Singapore
- Therma Luzon, Inc, Philippines
- New Zealand Coal & Carbon
- Videocon Industries ltd - India
- Global Coal Blending Company Limited - Australia
- Aboitiz Power Corporation - Philippines
- Edison Trading Spa - Italy
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement PLC, Thailand
- Commonwealth Bank - Australia
- Maharashtra Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Semirara Mining and Power Corporation, Philippines
- The Treasury - Australian Government
- Minerals Council of Australia
- Coastal Gujarat Power Limited - India
- Marubeni Corporation - India
- Coal and Oil Company - UAE
- International Coal Ventures Pvt Ltd - India
- Ministry of Finance - Indonesia
- Standard Chartered Bank - UAE
- Sinarmas Energy and Mining - Indonesia
- Singapore Mercantile Exchange
- Meralco Power Generation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Anglo American - United Kingdom
- Samtan Co., Ltd - South Korea
- Kohat Cement Company Ltd. - Pakistan
- Agrawal Coal Company - India
- PowerSource Philippines DevCo
- Jaiprakash Power Ventures ltd
- Vedanta Resources Plc - India
- OPG Power Generation Pvt Ltd - India
- Independent Power Producers Association of India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Alfred C Toepfer International GmbH - Germany
- Altura Mining Limited, Indonesia
- Antam Resourcindo - Indonesia
- Semirara Mining Corp, Philippines
- AsiaOL BioFuels Corp., Philippines
- Asmin Koalindo Tuhup - Indonesia
- Carbofer General Trading SA - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Electricity Generating Authority of Thailand
- The University of Queensland
- Sakthi Sugars Limited - India
- Renaissance Capital - South Africa
- Banpu Public Company Limited - Thailand
- Dalmia Cement Bharat India
- India Bulls Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- McConnell Dowell - Australia
- Sical Logistics Limited - India
- CNBM International Corporation - China
- Metalloyd Limited - United Kingdom
- The State Trading Corporation of India Ltd
- Parry Sugars Refinery, India
- Mercuria Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Tata Chemicals Ltd - India
- Mjunction Services Limited - India
- European Bulk Services B.V. - Netherlands
- TNB Fuel Sdn Bhd - Malaysia
- SN Aboitiz Power Inc, Philippines
- Riau Bara Harum - Indonesia
- Larsen & Toubro Limited - India
- Power Finance Corporation Ltd., India
- Thiess Contractors Indonesia
- Ministry of Transport, Egypt
- Sindya Power Generating Company Private Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Straits Asia Resources Limited - Singapore
- Goldman Sachs - Singapore
- Bukit Makmur.PT - Indonesia
- Posco Energy - South Korea
- Kartika Selabumi Mining - Indonesia
- Baramulti Group, Indonesia
- Petron Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- San Jose City I Power Corp, Philippines
- Gujarat Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- MS Steel International - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Medco Energi Mining Internasional
- Cigading International Bulk Terminal - Indonesia
- White Energy Company Limited
- Holcim Trading Pte Ltd - Singapore
- Thai Mozambique Logistica
- Eastern Coal Council - USA
- Bhatia International Limited - India
- Central Java Power - Indonesia
- Heidelberg Cement - Germany
- Bayan Resources Tbk. - Indonesia
- Toyota Tsusho Corporation, Japan
- Eastern Energy - Thailand
- Australian Coal Association
- Bukit Asam (Persero) Tbk - Indonesia
- Manunggal Multi Energi - Indonesia
- Trasteel International SA, Italy
- GAC Shipping (India) Pvt Ltd
- Indogreen Group - Indonesia
- GVK Power & Infra Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Georgia Ports Authority, United States
- Bangladesh Power Developement Board
- Pendopo Energi Batubara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Star Paper Mills Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Australian Commodity Traders Exchange
- IHS Mccloskey Coal Group - USA
- Simpson Spence & Young - Indonesia
- Malabar Cements Ltd - India
- ICICI Bank Limited - India
- GMR Energy Limited - India
- Kapuas Tunggal Persada - Indonesia
- Grasim Industreis Ltd - India
- Planning Commission, India
- Coalindo Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Sarangani Energy Corporation, Philippines
- Economic Council, Georgia
- Karbindo Abesyapradhi - Indoneisa
- Savvy Resources Ltd - HongKong
- Indian Oil Corporation Limited
- VISA Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- PTC India Limited - India
- Meenaskhi Energy Private Limited - India
- Iligan Light & Power Inc, Philippines
- Kaltim Prima Coal - Indonesia
- Tamil Nadu electricity Board
- Attock Cement Pakistan Limited
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Mines - Canada
- Indo Tambangraya Megah - Indonesia
- Cement Manufacturers Association - India
- Directorate General of MIneral and Coal - Indonesia
- IEA Clean Coal Centre - UK
- Rashtriya Ispat Nigam Limited - India
- Sree Jayajothi Cements Limited - India
- Merrill Lynch Commodities Europe
- Central Electricity Authority - India
- Ceylon Electricity Board - Sri Lanka
- Ambuja Cements Ltd - India
- Africa Commodities Group - South Africa
- PNOC Exploration Corporation - Philippines
- Indonesian Coal Mining Association
- Orica Mining Services - Indonesia
- Essar Steel Hazira Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Bulk Trading Sa - Switzerland
- Energy Development Corp, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Globalindo Alam Lestari - Indonesia
- Kideco Jaya Agung - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Port Waratah Coal Services - Australia
- Aditya Birla Group - India
- Price Waterhouse Coopers - Russia
- Bharathi Cement Corporation - India
- Formosa Plastics Group - Taiwan
- Salva Resources Pvt Ltd - India
- Indian Energy Exchange, India
- Madhucon Powers Ltd - India
- ASAPP Information Group - India
- South Luzon Thermal Energy Corporation
- Neyveli Lignite Corporation Ltd, - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mintek Dendrill Indonesia
- Makarim & Taira - Indonesia
- Barasentosa Lestari - Indonesia
- Global Business Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Bukit Baiduri Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Kepco SPC Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- LBH Netherlands Bv - Netherlands
- Timah Investasi Mineral - Indoneisa
- Orica Australia Pty. Ltd.
- Kumho Petrochemical, South Korea
- Maheswari Brothers Coal Limited - India
- London Commodity Brokers - England
- Rio Tinto Coal - Australia
- Bhushan Steel Limited - India
- Mercator Lines Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Energy Link Ltd, New Zealand
- Electricity Authority, New Zealand
- Siam City Cement - Thailand
- SMG Consultants - Indonesia
- Indika Energy - Indonesia
- Deloitte Consulting - India
- Romanian Commodities Exchange
- Borneo Indobara - Indonesia
- Lanco Infratech Ltd - India
- CIMB Investment Bank - Malaysia
- Parliament of New Zealand
- Latin American Coal - Colombia
- Wood Mackenzie - Singapore
- Global Green Power PLC Corporation, Philippines
- Uttam Galva Steels Limited - India
- Intertek Mineral Services - Indonesia
- Interocean Group of Companies - India
- Sojitz Corporation - Japan
- Gujarat Sidhee Cement - India
- Wilmar Investment Holdings
- Chamber of Mines of South Africa
- Xindia Steels Limited - India
- TeaM Sual Corporation - Philippines
- SMC Global Power, Philippines
- Jindal Steel & Power Ltd - India
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