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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, 04 November 21
FASTER DECARBONISATION: BACK TO BASICS FOR THE MINING INDUSTRY? - WOOD MACKENZIE
To the uninitiated, rugby is a technical and complicated game. As young schoolboys it was all a wee bit confusing and we invariably ended up on the ...
Wednesday, 03 November 21
CHINA TO LAUNCH NEW DATA MONITORING SYSTEM, TARGETING COAL MARKET SPECULATION, HOARDING - GLOBAL TIMES
China’s top economic planner announced on Sunday a new data system for supervising the implementation of medium- and long-term contracts of c ...
Wednesday, 03 November 21
CHINA’S STATE PLANNER SAYS COAL SUPPLY IMPROVING, PRICES STABILISING - REUTERS
China’s coal supply situation has seen significant improvement with joint efforts from coal producers, logistics and downstream users, while ...
Wednesday, 03 November 21
MARKET INSIGHT - INTERMODAL
November is here and soon the all time seasonal favorite “all I want or Christmas is you” by Mariah Carey will be played in radio stati ...
Monday, 01 November 21
COAL PRICES HAVE FURTHER ROOM TO DROP: TOP ECONOMIC PLANNER - GLOBAL TIMES
China’s top economic planner said coal prices have further room to drop on Friday, as the most traded coal futures dropped to below 1,000 yua ...
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- Ind-Barath Power Infra Limited - India
- Price Waterhouse Coopers - Russia
- Intertek Mineral Services - Indonesia
- Deloitte Consulting - India
- Aditya Birla Group - India
- Karaikal Port Pvt Ltd - India
- Madhucon Powers Ltd - India
- SMG Consultants - Indonesia
- Independent Power Producers Association of India
- Australian Coal Association
- Petrochimia International Co. Ltd.- Taiwan
- Banpu Public Company Limited - Thailand
- Ministry of Finance - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Bukit Makmur.PT - Indonesia
- European Bulk Services B.V. - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- The Treasury - Australian Government
- Therma Luzon, Inc, Philippines
- South Luzon Thermal Energy Corporation
- Formosa Plastics Group - Taiwan
- CNBM International Corporation - China
- Kartika Selabumi Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Semirara Mining and Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Standard Chartered Bank - UAE
- Planning Commission, India
- Bukit Baiduri Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Mintek Dendrill Indonesia
- Indo Tambangraya Megah - Indonesia
- Global Green Power PLC Corporation, Philippines
- PowerSource Philippines DevCo
- Tata Chemicals Ltd - India
- Tamil Nadu electricity Board
- Cement Manufacturers Association - India
- Singapore Mercantile Exchange
- Kaltim Prima Coal - Indonesia
- Agrawal Coal Company - India
- Indian Energy Exchange, India
- TeaM Sual Corporation - Philippines
- Star Paper Mills Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- IHS Mccloskey Coal Group - USA
- Savvy Resources Ltd - HongKong
- Sarangani Energy Corporation, Philippines
- Electricity Generating Authority of Thailand
- Indogreen Group - Indonesia
- International Coal Ventures Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Jindal Steel & Power Ltd - India
- IEA Clean Coal Centre - UK
- Kohat Cement Company Ltd. - Pakistan
- Bahari Cakrawala Sebuku - Indonesia
- Thai Mozambique Logistica
- Indonesian Coal Mining Association
- Minerals Council of Australia
- Merrill Lynch Commodities Europe
- London Commodity Brokers - England
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Petron Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coastal Gujarat Power Limited - India
- Trasteel International SA, Italy
- Marubeni Corporation - India
- Medco Energi Mining Internasional
- Altura Mining Limited, Indonesia
- Sical Logistics Limited - India
- Oldendorff Carriers - Singapore
- Economic Council, Georgia
- Sindya Power Generating Company Private Ltd
- Neyveli Lignite Corporation Ltd, - India
- Malabar Cements Ltd - India
- Vizag Seaport Private Limited - India
- Energy Development Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- Essar Steel Hazira Ltd - India
- PTC India Limited - India
- Bangladesh Power Developement Board
- Edison Trading Spa - Italy
- Wood Mackenzie - Singapore
- Bulk Trading Sa - Switzerland
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhushan Steel Limited - India
- Meralco Power Generation, Philippines
- Global Business Power Corporation, Philippines
- Goldman Sachs - Singapore
- Coalindo Energy - Indonesia
- New Zealand Coal & Carbon
- Manunggal Multi Energi - Indonesia
- Iligan Light & Power Inc, Philippines
- McConnell Dowell - Australia
- Lanco Infratech Ltd - India
- Commonwealth Bank - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ambuja Cements Ltd - India
- Vedanta Resources Plc - India
- Africa Commodities Group - South Africa
- Sojitz Corporation - Japan
- Globalindo Alam Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Heidelberg Cement - Germany
- Videocon Industries ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Posco Energy - South Korea
- Meenaskhi Energy Private Limited - India
- Straits Asia Resources Limited - Singapore
- Carbofer General Trading SA - India
- Chettinad Cement Corporation Ltd - India
- Mercuria Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- Samtan Co., Ltd - South Korea
- GVK Power & Infra Limited - India
- MS Steel International - UAE
- Indika Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Bharathi Cement Corporation - India
- Toyota Tsusho Corporation, Japan
- Kalimantan Lumbung Energi - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Parry Sugars Refinery, India
- India Bulls Power Limited - India
- Ministry of Transport, Egypt
- Kumho Petrochemical, South Korea
- The University of Queensland
- Holcim Trading Pte Ltd - Singapore
- Simpson Spence & Young - Indonesia
- Uttam Galva Steels Limited - India
- Makarim & Taira - Indonesia
- Global Coal Blending Company Limited - Australia
- Eastern Coal Council - USA
- Grasim Industreis Ltd - India
- Latin American Coal - Colombia
- Kideco Jaya Agung - Indonesia
- Dalmia Cement Bharat India
- SMC Global Power, Philippines
- Ceylon Electricity Board - Sri Lanka
- Eastern Energy - Thailand
- Renaissance Capital - South Africa
- Barasentosa Lestari - Indonesia
- Georgia Ports Authority, United States
- Siam City Cement PLC, Thailand
- Central Electricity Authority - India
- Power Finance Corporation Ltd., India
- Australian Commodity Traders Exchange
- Bhatia International Limited - India
- Coal and Oil Company - UAE
- Pendopo Energi Batubara - Indonesia
- Bhoruka Overseas - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Thiess Contractors Indonesia
- Anglo American - United Kingdom
- White Energy Company Limited
- Attock Cement Pakistan Limited
- GMR Energy Limited - India
- Central Java Power - Indonesia
- Mjunction Services Limited - India
- Miang Besar Coal Terminal - Indonesia
- Orica Australia Pty. Ltd.
- ICICI Bank Limited - India
- Aboitiz Power Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Xindia Steels Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Mines - Canada
- Jaiprakash Power Ventures ltd
- Leighton Contractors Pty Ltd - Australia
- Electricity Authority, New Zealand
- Directorate Of Revenue Intelligence - India
- San Jose City I Power Corp, Philippines
- Semirara Mining Corp, Philippines
- CIMB Investment Bank - Malaysia
- Metalloyd Limited - United Kingdom
- Larsen & Toubro Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The State Trading Corporation of India Ltd
- Karbindo Abesyapradhi - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- Sree Jayajothi Cements Limited - India
- Maharashtra Electricity Regulatory Commission - India
- LBH Netherlands Bv - Netherlands
- Romanian Commodities Exchange
- Energy Link Ltd, New Zealand
- Alfred C Toepfer International GmbH - Germany
- Maheswari Brothers Coal Limited - India
- GAC Shipping (India) Pvt Ltd
- Wilmar Investment Holdings
- Baramulti Group, Indonesia
- Kobexindo Tractors - Indoneisa
- Indian Oil Corporation Limited
- Port Waratah Coal Services - Australia
- Timah Investasi Mineral - Indoneisa
- Gujarat Sidhee Cement - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rio Tinto Coal - Australia
- Jorong Barutama Greston.PT - Indonesia
- Parliament of New Zealand
- GN Power Mariveles Coal Plant, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Orica Mining Services - Indonesia
- Interocean Group of Companies - India
- VISA Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Siam City Cement - Thailand
- Antam Resourcindo - Indonesia
- Riau Bara Harum - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Borneo Indobara - Indonesia
- ASAPP Information Group - India
- Chamber of Mines of South Africa
- Sakthi Sugars Limited - India
- SN Aboitiz Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
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