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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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- Tamil Nadu electricity Board
- Bayan Resources Tbk. - Indonesia
- Wood Mackenzie - Singapore
- Coalindo Energy - Indonesia
- Renaissance Capital - South Africa
- Lanco Infratech Ltd - India
- Energy Link Ltd, New Zealand
- Uttam Galva Steels Limited - India
- CNBM International Corporation - China
- Grasim Industreis Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- The State Trading Corporation of India Ltd
- India Bulls Power Limited - India
- Kaltim Prima Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- Price Waterhouse Coopers - Russia
- Interocean Group of Companies - India
- Altura Mining Limited, Indonesia
- Sarangani Energy Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Directorate Of Revenue Intelligence - India
- Krishnapatnam Port Company Ltd. - India
- Xindia Steels Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- PTC India Limited - India
- Thai Mozambique Logistica
- Port Waratah Coal Services - Australia
- Savvy Resources Ltd - HongKong
- GN Power Mariveles Coal Plant, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Globalindo Alam Lestari - Indonesia
- Standard Chartered Bank - UAE
- Electricity Generating Authority of Thailand
- Orica Australia Pty. Ltd.
- TNB Fuel Sdn Bhd - Malaysia
- VISA Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Meralco Power Generation, Philippines
- PNOC Exploration Corporation - Philippines
- Medco Energi Mining Internasional
- IEA Clean Coal Centre - UK
- Malabar Cements Ltd - India
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- Vijayanagar Sugar Pvt Ltd - India
- SMG Consultants - Indonesia
- Bukit Baiduri Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Deloitte Consulting - India
- Coastal Gujarat Power Limited - India
- Indonesian Coal Mining Association
- Borneo Indobara - Indonesia
- Bhushan Steel Limited - India
- Mercator Lines Limited - India
- Holcim Trading Pte Ltd - Singapore
- Maheswari Brothers Coal Limited - India
- Agrawal Coal Company - India
- Economic Council, Georgia
- Carbofer General Trading SA - India
- Leighton Contractors Pty Ltd - Australia
- Eastern Coal Council - USA
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Minerals Council of Australia
- London Commodity Brokers - England
- Sindya Power Generating Company Private Ltd
- Sical Logistics Limited - India
- Iligan Light & Power Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Ambuja Cements Ltd - India
- Ministry of Finance - Indonesia
- Riau Bara Harum - Indonesia
- The University of Queensland
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement - Thailand
- Samtan Co., Ltd - South Korea
- Romanian Commodities Exchange
- Bharathi Cement Corporation - India
- Eastern Energy - Thailand
- White Energy Company Limited
- Goldman Sachs - Singapore
- Larsen & Toubro Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Chamber of Mines of South Africa
- Cement Manufacturers Association - India
- Bhoruka Overseas - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Neyveli Lignite Corporation Ltd, - India
- Makarim & Taira - Indonesia
- Simpson Spence & Young - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Dalmia Cement Bharat India
- Petrochimia International Co. Ltd.- Taiwan
- SN Aboitiz Power Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Kobexindo Tractors - Indoneisa
- Rashtriya Ispat Nigam Limited - India
- South Luzon Thermal Energy Corporation
- Rio Tinto Coal - Australia
- Star Paper Mills Limited - India
- Attock Cement Pakistan Limited
- Petron Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Karaikal Port Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Formosa Plastics Group - Taiwan
- Indo Tambangraya Megah - Indonesia
- Kumho Petrochemical, South Korea
- Merrill Lynch Commodities Europe
- Gujarat Electricity Regulatory Commission - India
- Marubeni Corporation - India
- Electricity Authority, New Zealand
- Alfred C Toepfer International GmbH - Germany
- Bangladesh Power Developement Board
- Semirara Mining Corp, Philippines
- Heidelberg Cement - Germany
- Banpu Public Company Limited - Thailand
- Ceylon Electricity Board - Sri Lanka
- Sinarmas Energy and Mining - Indonesia
- Tata Chemicals Ltd - India
- GVK Power & Infra Limited - India
- MS Steel International - UAE
- Jindal Steel & Power Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- CIMB Investment Bank - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Toyota Tsusho Corporation, Japan
- Coal and Oil Company - UAE
- Oldendorff Carriers - Singapore
- International Coal Ventures Pvt Ltd - India
- Orica Mining Services - Indonesia
- Ind-Barath Power Infra Limited - India
- The Treasury - Australian Government
- Mercuria Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Business Power Corporation, Philippines
- Africa Commodities Group - South Africa
- Chettinad Cement Corporation Ltd - India
- Sakthi Sugars Limited - India
- GAC Shipping (India) Pvt Ltd
- Indogreen Group - Indonesia
- Aditya Birla Group - India
- IHS Mccloskey Coal Group - USA
- LBH Netherlands Bv - Netherlands
- Mjunction Services Limited - India
- Australian Commodity Traders Exchange
- Kepco SPC Power Corporation, Philippines
- Ministry of Mines - Canada
- Videocon Industries ltd - India
- Vizag Seaport Private Limited - India
- Antam Resourcindo - Indonesia
- Wilmar Investment Holdings
- AsiaOL BioFuels Corp., Philippines
- Baramulti Group, Indonesia
- Siam City Cement PLC, Thailand
- Indian Oil Corporation Limited
- Sojitz Corporation - Japan
- Kideco Jaya Agung - Indonesia
- PowerSource Philippines DevCo
- Vedanta Resources Plc - India
- Australian Coal Association
- Semirara Mining and Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Central Electricity Authority - India
- New Zealand Coal & Carbon
- ASAPP Information Group - India
- Jaiprakash Power Ventures ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Aboitiz Power Corporation - Philippines
- Planning Commission, India
- Pendopo Energi Batubara - Indonesia
- ICICI Bank Limited - India
- Thiess Contractors Indonesia
- Essar Steel Hazira Ltd - India
- Salva Resources Pvt Ltd - India
- Posco Energy - South Korea
- TeaM Sual Corporation - Philippines
- Indika Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Singapore Mercantile Exchange
- Anglo American - United Kingdom
- Commonwealth Bank - Australia
- Georgia Ports Authority, United States
- Bukit Makmur.PT - Indonesia
- Trasteel International SA, Italy
- Bhatia International Limited - India
- Ministry of Transport, Egypt
- Gujarat Sidhee Cement - India
- Latin American Coal - Colombia
- Independent Power Producers Association of India
- Bahari Cakrawala Sebuku - Indonesia
- Straits Asia Resources Limited - Singapore
- Metalloyd Limited - United Kingdom
- Power Finance Corporation Ltd., India
- Barasentosa Lestari - Indonesia
- Energy Development Corp, Philippines
- SMC Global Power, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Timah Investasi Mineral - Indoneisa
- GMR Energy Limited - India
- Global Coal Blending Company Limited - Australia
- McConnell Dowell - Australia
- Kapuas Tunggal Persada - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Edison Trading Spa - Italy
- European Bulk Services B.V. - Netherlands
- Parry Sugars Refinery, India
- OPG Power Generation Pvt Ltd - India
- Mintek Dendrill Indonesia
- Binh Thuan Hamico - Vietnam
- Parliament of New Zealand
- Directorate General of MIneral and Coal - Indonesia
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