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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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Wednesday, 20 October 21
MARKET INSIGHT - INTERMODAL
IMO 2020, Ballast Water Treatment regulations, Green Recycling, GHG emissions, EEXI, CII, ETS, Fit for 55, Carbon price/levy, the Poseidon Principl ...
Tuesday, 19 October 21
SPONGE IRON SECTOR MIGHT REPORT NEGATIVE GROWTH DUE TO COAL CRISIS: SIMA - PTI
The domestic sponge iron industry might report a negative growth in the ongoing December quarter “if the shortage of coal is allowed to conti ...
Tuesday, 19 October 21
COAL INDIA, THE FALL GUY FOR POWER CRISIS - INDIA EXPRESS
The post-Covid economic recovery has led to a major increase in the demand for power, both in India and globally. In India, coal-based power plants ...
Saturday, 16 October 21
SOLAR INSTALLATION SURGE PUTS INDIA ON TRACK TO CAP COAL-FIRED POWER AS EARLY AS 2024 - IEEFA
Recent increase in solar power installations could push coal to peak sooner than expected
If India keeps installing solar capacity a ...
Saturday, 16 October 21
DESPITE HIGHER COAL PRICES, U.S. COAL RECOVERY LOOKS WEAK BY MOST MEASURES - IEEFA
U.S. coal sector is locked into a long-term sectoral decline
Coal prices have surged to the highest level in years in the U.S., and have soare ...
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- Minerals Council of Australia
- Indian Oil Corporation Limited
- Mjunction Services Limited - India
- Leighton Contractors Pty Ltd - Australia
- The Treasury - Australian Government
- Australian Coal Association
- Power Finance Corporation Ltd., India
- Bhatia International Limited - India
- Savvy Resources Ltd - HongKong
- TNB Fuel Sdn Bhd - Malaysia
- Petron Corporation, Philippines
- Renaissance Capital - South Africa
- Vizag Seaport Private Limited - India
- Ambuja Cements Ltd - India
- Ministry of Mines - Canada
- Intertek Mineral Services - Indonesia
- Sojitz Corporation - Japan
- Aboitiz Power Corporation - Philippines
- Globalindo Alam Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- Manunggal Multi Energi - Indonesia
- Essar Steel Hazira Ltd - India
- ASAPP Information Group - India
- London Commodity Brokers - England
- Energy Link Ltd, New Zealand
- McConnell Dowell - Australia
- White Energy Company Limited
- Asmin Koalindo Tuhup - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Uttam Galva Steels Limited - India
- Holcim Trading Pte Ltd - Singapore
- Attock Cement Pakistan Limited
- Deloitte Consulting - India
- Kaltim Prima Coal - Indonesia
- Price Waterhouse Coopers - Russia
- GN Power Mariveles Coal Plant, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Kalimantan Lumbung Energi - Indonesia
- Economic Council, Georgia
- Formosa Plastics Group - Taiwan
- GMR Energy Limited - India
- Kideco Jaya Agung - Indonesia
- Independent Power Producers Association of India
- Medco Energi Mining Internasional
- Sree Jayajothi Cements Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Tamil Nadu electricity Board
- Bangladesh Power Developement Board
- Coastal Gujarat Power Limited - India
- Mercator Lines Limited - India
- South Luzon Thermal Energy Corporation
- Carbofer General Trading SA - India
- Kapuas Tunggal Persada - Indonesia
- Riau Bara Harum - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Indian Energy Exchange, India
- Timah Investasi Mineral - Indoneisa
- Grasim Industreis Ltd - India
- Iligan Light & Power Inc, Philippines
- Mintek Dendrill Indonesia
- Heidelberg Cement - Germany
- Wilmar Investment Holdings
- Gujarat Mineral Development Corp Ltd - India
- Ministry of Transport, Egypt
- Ministry of Finance - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Semirara Mining Corp, Philippines
- India Bulls Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Parry Sugars Refinery, India
- Bhushan Steel Limited - India
- Indonesian Coal Mining Association
- PowerSource Philippines DevCo
- Australian Commodity Traders Exchange
- Siam City Cement PLC, Thailand
- New Zealand Coal & Carbon
- Toyota Tsusho Corporation, Japan
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Central Electricity Authority - India
- LBH Netherlands Bv - Netherlands
- Jorong Barutama Greston.PT - Indonesia
- Thiess Contractors Indonesia
- Indogreen Group - Indonesia
- Oldendorff Carriers - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Borneo Indobara - Indonesia
- Bulk Trading Sa - Switzerland
- Barasentosa Lestari - Indonesia
- Bharathi Cement Corporation - India
- OPG Power Generation Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- The University of Queensland
- Straits Asia Resources Limited - Singapore
- Bukit Makmur.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Mercuria Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Therma Luzon, Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Binh Thuan Hamico - Vietnam
- Vedanta Resources Plc - India
- Meralco Power Generation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- GVK Power & Infra Limited - India
- Africa Commodities Group - South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Metalloyd Limited - United Kingdom
- Baramulti Group, Indonesia
- Malabar Cements Ltd - India
- The State Trading Corporation of India Ltd
- Merrill Lynch Commodities Europe
- IEA Clean Coal Centre - UK
- International Coal Ventures Pvt Ltd - India
- Coalindo Energy - Indonesia
- Star Paper Mills Limited - India
- SMG Consultants - Indonesia
- Bayan Resources Tbk. - Indonesia
- PTC India Limited - India
- Gujarat Sidhee Cement - India
- Anglo American - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sindya Power Generating Company Private Ltd
- Global Green Power PLC Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Energy Development Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chamber of Mines of South Africa
- Posco Energy - South Korea
- Karaikal Port Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Sical Logistics Limited - India
- Global Business Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- Cement Manufacturers Association - India
- IHS Mccloskey Coal Group - USA
- Thai Mozambique Logistica
- Goldman Sachs - Singapore
- Eastern Coal Council - USA
- Ind-Barath Power Infra Limited - India
- Xindia Steels Limited - India
- Coal and Oil Company - UAE
- Interocean Group of Companies - India
- Edison Trading Spa - Italy
- VISA Power Limited - India
- CIMB Investment Bank - Malaysia
- Chettinad Cement Corporation Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- SN Aboitiz Power Inc, Philippines
- Port Waratah Coal Services - Australia
- Maheswari Brothers Coal Limited - India
- Lanco Infratech Ltd - India
- Siam City Cement - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Parliament of New Zealand
- Commonwealth Bank - Australia
- TeaM Sual Corporation - Philippines
- Trasteel International SA, Italy
- Standard Chartered Bank - UAE
- Tata Chemicals Ltd - India
- Banpu Public Company Limited - Thailand
- Cigading International Bulk Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Aditya Birla Group - India
- Electricity Authority, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PNOC Exploration Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Videocon Industries ltd - India
- Romanian Commodities Exchange
- Planning Commission, India
- ICICI Bank Limited - India
- Georgia Ports Authority, United States
- CNBM International Corporation - China
- Latin American Coal - Colombia
- Samtan Co., Ltd - South Korea
- Orica Australia Pty. Ltd.
- Sakthi Sugars Limited - India
- Bukit Baiduri Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Orica Mining Services - Indonesia
- Meenaskhi Energy Private Limited - India
- Rio Tinto Coal - Australia
- SMC Global Power, Philippines
- Simpson Spence & Young - Indonesia
- Jindal Steel & Power Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Agrawal Coal Company - India
- MS Steel International - UAE
- Kobexindo Tractors - Indoneisa
- Rashtriya Ispat Nigam Limited - India
- Indika Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Larsen & Toubro Limited - India
- Krishnapatnam Port Company Ltd. - India
- Indo Tambangraya Megah - Indonesia
- Eastern Energy - Thailand
- Ceylon Electricity Board - Sri Lanka
- Electricity Generating Authority of Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Marubeni Corporation - India
- Antam Resourcindo - Indonesia
- GAC Shipping (India) Pvt Ltd
- Central Java Power - Indonesia
- Singapore Mercantile Exchange
- Madhucon Powers Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Dalmia Cement Bharat India
- Kartika Selabumi Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate Of Revenue Intelligence - India
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