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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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Friday, 04 February 22
RENEWABLES ON THE RISE, COAL CONTINUOUSLY FALLING - EUROPEAN COMMISSION
Although oil (34.5%) and natural gas (23.7%) were still the most important fuel sources in the EU energy mix in 2020, renewable energy’s shar ...
Thursday, 03 February 22
COAL SHORTAGE NOW AT ALARMING LEVELS, SAY ALUMINIUM PRODUCERS - IANS
With no relief in sight despite coal stocks running critically low and production disruptions looming across the Indian aluminium sector, the Alumi ...
Wednesday, 02 February 22
HIGH COKING COAL PRICES PROVIDE GLIMPSE INTO STEELMAKING'S FUTURE - MCKINSEY
Last year was a volatile one in global commodity markets. Demand for coking coal, an essential raw material in the production of steel, was extreme ...
Wednesday, 02 February 22
INDONESIA'S RESTRICTIONS ON COMMODITIES RATTLE MARKETS, MORE MOVES LIKELY - REUTERS
In just the first month of this year, Indonesian policymakers have rattled global markets with restrictions on some of its biggest commodities expo ...
Wednesday, 02 February 22
CHINA'S TOP COAL PRODUCER FORECASTS 28 PCT PROFIT GROWTH IN 2021 - XINHUA
China Shenhua Energy Company Limited, one of the country’s biggest coal producers, said its net profits are expected to jump by 28 percent in ...
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- Bayan Resources Tbk. - Indonesia
- Directorate Of Revenue Intelligence - India
- Timah Investasi Mineral - Indoneisa
- Bangladesh Power Developement Board
- Bukit Baiduri Energy - Indonesia
- Interocean Group of Companies - India
- Holcim Trading Pte Ltd - Singapore
- Bharathi Cement Corporation - India
- Directorate General of MIneral and Coal - Indonesia
- Wilmar Investment Holdings
- Intertek Mineral Services - Indonesia
- Bhushan Steel Limited - India
- Kapuas Tunggal Persada - Indonesia
- The Treasury - Australian Government
- Essar Steel Hazira Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Parry Sugars Refinery, India
- Binh Thuan Hamico - Vietnam
- Sical Logistics Limited - India
- Banpu Public Company Limited - Thailand
- Romanian Commodities Exchange
- Miang Besar Coal Terminal - Indonesia
- Sakthi Sugars Limited - India
- Central Electricity Authority - India
- Australian Commodity Traders Exchange
- Metalloyd Limited - United Kingdom
- Makarim & Taira - Indonesia
- PowerSource Philippines DevCo
- South Luzon Thermal Energy Corporation
- GVK Power & Infra Limited - India
- Kideco Jaya Agung - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Merrill Lynch Commodities Europe
- Riau Bara Harum - Indonesia
- Economic Council, Georgia
- Electricity Generating Authority of Thailand
- Savvy Resources Ltd - HongKong
- OPG Power Generation Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- London Commodity Brokers - England
- McConnell Dowell - Australia
- Globalindo Alam Lestari - Indonesia
- Sindya Power Generating Company Private Ltd
- Jorong Barutama Greston.PT - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Mintek Dendrill Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meralco Power Generation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jaiprakash Power Ventures ltd
- Thiess Contractors Indonesia
- Malabar Cements Ltd - India
- Grasim Industreis Ltd - India
- Pendopo Energi Batubara - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Deloitte Consulting - India
- Manunggal Multi Energi - Indonesia
- Power Finance Corporation Ltd., India
- Larsen & Toubro Limited - India
- Ministry of Mines - Canada
- Attock Cement Pakistan Limited
- CNBM International Corporation - China
- The University of Queensland
- Commonwealth Bank - Australia
- Energy Link Ltd, New Zealand
- LBH Netherlands Bv - Netherlands
- Planning Commission, India
- ICICI Bank Limited - India
- Kartika Selabumi Mining - Indonesia
- Ind-Barath Power Infra Limited - India
- Aboitiz Power Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- Karbindo Abesyapradhi - Indoneisa
- Bhatia International Limited - India
- Indika Energy - Indonesia
- Marubeni Corporation - India
- PTC India Limited - India
- Lanco Infratech Ltd - India
- Eastern Coal Council - USA
- Price Waterhouse Coopers - Russia
- Mjunction Services Limited - India
- Aditya Birla Group - India
- IHS Mccloskey Coal Group - USA
- Vizag Seaport Private Limited - India
- Central Java Power - Indonesia
- Videocon Industries ltd - India
- PNOC Exploration Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Barasentosa Lestari - Indonesia
- Maheswari Brothers Coal Limited - India
- Star Paper Mills Limited - India
- Vedanta Resources Plc - India
- CIMB Investment Bank - Malaysia
- Altura Mining Limited, Indonesia
- Kepco SPC Power Corporation, Philippines
- Singapore Mercantile Exchange
- Kohat Cement Company Ltd. - Pakistan
- Formosa Plastics Group - Taiwan
- Global Green Power PLC Corporation, Philippines
- Posco Energy - South Korea
- IEA Clean Coal Centre - UK
- Bulk Trading Sa - Switzerland
- Carbofer General Trading SA - India
- Karaikal Port Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Madhucon Powers Ltd - India
- Coastal Gujarat Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Chettinad Cement Corporation Ltd - India
- Port Waratah Coal Services - Australia
- Sarangani Energy Corporation, Philippines
- Independent Power Producers Association of India
- Sinarmas Energy and Mining - Indonesia
- Chamber of Mines of South Africa
- Gujarat Sidhee Cement - India
- GAC Shipping (India) Pvt Ltd
- Maharashtra Electricity Regulatory Commission - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- MS Steel International - UAE
- Dalmia Cement Bharat India
- Heidelberg Cement - Germany
- Jindal Steel & Power Ltd - India
- Ministry of Transport, Egypt
- Iligan Light & Power Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Kaltim Prima Coal - Indonesia
- Tamil Nadu electricity Board
- Borneo Indobara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- International Coal Ventures Pvt Ltd - India
- Coalindo Energy - Indonesia
- Uttam Galva Steels Limited - India
- San Jose City I Power Corp, Philippines
- Xindia Steels Limited - India
- Agrawal Coal Company - India
- Salva Resources Pvt Ltd - India
- India Bulls Power Limited - India
- Georgia Ports Authority, United States
- Petron Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Sojitz Corporation - Japan
- Kalimantan Lumbung Energi - Indonesia
- Global Business Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Renaissance Capital - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Tata Chemicals Ltd - India
- Rio Tinto Coal - Australia
- Rashtriya Ispat Nigam Limited - India
- Oldendorff Carriers - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Electricity Authority, New Zealand
- Indian Energy Exchange, India
- Kobexindo Tractors - Indoneisa
- New Zealand Coal & Carbon
- VISA Power Limited - India
- Coal and Oil Company - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Australia Pty. Ltd.
- Indo Tambangraya Megah - Indonesia
- Mercator Lines Limited - India
- SN Aboitiz Power Inc, Philippines
- Africa Commodities Group - South Africa
- Goldman Sachs - Singapore
- The State Trading Corporation of India Ltd
- Baramulti Group, Indonesia
- Minerals Council of Australia
- Thai Mozambique Logistica
- Wood Mackenzie - Singapore
- Orica Mining Services - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Indonesian Coal Mining Association
- Ministry of Finance - Indonesia
- Eastern Energy - Thailand
- Simpson Spence & Young - Indonesia
- SMG Consultants - Indonesia
- Antam Resourcindo - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Sree Jayajothi Cements Limited - India
- Bhoruka Overseas - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Billiton Holdings Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- ASAPP Information Group - India
- SMC Global Power, Philippines
- Kumho Petrochemical, South Korea
- Cement Manufacturers Association - India
- Therma Luzon, Inc, Philippines
- Mercuria Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Anglo American - United Kingdom
- GMR Energy Limited - India
- European Bulk Services B.V. - Netherlands
- TeaM Sual Corporation - Philippines
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement - Thailand
- Krishnapatnam Port Company Ltd. - India
- Edison Trading Spa - Italy
- Indian Oil Corporation Limited
- Indogreen Group - Indonesia
- Trasteel International SA, Italy
- Ambuja Cements Ltd - India
- White Energy Company Limited
- Semirara Mining Corp, Philippines
- Australian Coal Association
- Latin American Coal - Colombia
- Medco Energi Mining Internasional
- Samtan Co., Ltd - South Korea
- Parliament of New Zealand
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