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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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Tuesday, 05 October 21
CAPESIZE MARKET WAS IN A STEEP CLIMB FOR MOST OF THIS WEEK - BALTIC EXCHANGE
Capesize
The Capesize market was in a steep climb for most of this week as it reached a pinnacle of $74,786 Wednesday before stalling, regather ...
Wednesday, 29 September 21
THE WRITING IS ON THE WALL: AUSTRALIA’S COAL ERA IS OVER - YAHOO!FINANCE
As the fringe of Australian politics strives to pump up the coal industry, facts show that coal production has started its long run decline.
&n ...
Wednesday, 29 September 21
SURGING COAL PRICES SPLIT ASIAN BUYERS INTO RICH AND POOR - REUTERS
As seaborne coal in Asia trades at, or near, record highs, there are early signs of demand destruction, especially among price-sensitive buyers suc ...
Wednesday, 29 September 21
MARKET INSIGHT - INTERMODAL
Tanker Asset values have surprised to the upside, despite the downward pressure on the freight market. Tanker rates have been hovering close to the ...
Tuesday, 28 September 21
THE MAIDEN EDITION OF DIVE TECHNOLOGY SUMMIT 2021 CONCLUDES SUCCESSFULLY
Press Release: DIVE TECHNOLOGY SUMMIT 2021, a one-day conference on the recent technological advancements in the Industrial Diving industry conclud ...
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- Australian Coal Association
- Cigading International Bulk Terminal - Indonesia
- Directorate Of Revenue Intelligence - India
- Directorate General of MIneral and Coal - Indonesia
- Tata Chemicals Ltd - India
- New Zealand Coal & Carbon
- Chettinad Cement Corporation Ltd - India
- Kideco Jaya Agung - Indonesia
- London Commodity Brokers - England
- Binh Thuan Hamico - Vietnam
- Medco Energi Mining Internasional
- Kobexindo Tractors - Indoneisa
- Bayan Resources Tbk. - Indonesia
- CNBM International Corporation - China
- Global Coal Blending Company Limited - Australia
- Mercuria Energy - Indonesia
- Parry Sugars Refinery, India
- India Bulls Power Limited - India
- Central Electricity Authority - India
- McConnell Dowell - Australia
- Energy Link Ltd, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Price Waterhouse Coopers - Russia
- Xindia Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Posco Energy - South Korea
- Romanian Commodities Exchange
- Edison Trading Spa - Italy
- Energy Development Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Aditya Birla Group - India
- Petron Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Bhushan Steel Limited - India
- Global Business Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Alfred C Toepfer International GmbH - Germany
- Ind-Barath Power Infra Limited - India
- Grasim Industreis Ltd - India
- Planning Commission, India
- Carbofer General Trading SA - India
- Goldman Sachs - Singapore
- Standard Chartered Bank - UAE
- Indika Energy - Indonesia
- Orica Mining Services - Indonesia
- Straits Asia Resources Limited - Singapore
- Altura Mining Limited, Indonesia
- SMC Global Power, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Commonwealth Bank - Australia
- Coastal Gujarat Power Limited - India
- Deloitte Consulting - India
- ICICI Bank Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Vedanta Resources Plc - India
- Orica Australia Pty. Ltd.
- White Energy Company Limited
- Mintek Dendrill Indonesia
- Mercator Lines Limited - India
- Videocon Industries ltd - India
- Heidelberg Cement - Germany
- Maharashtra Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Meenaskhi Energy Private Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Indo Tambangraya Megah - Indonesia
- Uttam Galva Steels Limited - India
- Borneo Indobara - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Sojitz Corporation - Japan
- GMR Energy Limited - India
- Bukit Makmur.PT - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- OPG Power Generation Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Bhoruka Overseas - Indonesia
- PowerSource Philippines DevCo
- Sakthi Sugars Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Attock Cement Pakistan Limited
- Indian Oil Corporation Limited
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Kaltim Prima Coal - Indonesia
- Baramulti Group, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Coalindo Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rio Tinto Coal - Australia
- Bangladesh Power Developement Board
- Siam City Cement - Thailand
- Antam Resourcindo - Indonesia
- Eastern Coal Council - USA
- Bukit Baiduri Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- South Luzon Thermal Energy Corporation
- SMG Consultants - Indonesia
- San Jose City I Power Corp, Philippines
- Trasteel International SA, Italy
- IEA Clean Coal Centre - UK
- Parliament of New Zealand
- Essar Steel Hazira Ltd - India
- Maheswari Brothers Coal Limited - India
- Aboitiz Power Corporation - Philippines
- GVK Power & Infra Limited - India
- Cement Manufacturers Association - India
- Eastern Energy - Thailand
- Mjunction Services Limited - India
- The University of Queensland
- Bulk Trading Sa - Switzerland
- Independent Power Producers Association of India
- Thai Mozambique Logistica
- Agrawal Coal Company - India
- Port Waratah Coal Services - Australia
- Malabar Cements Ltd - India
- The State Trading Corporation of India Ltd
- VISA Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ceylon Electricity Board - Sri Lanka
- Barasentosa Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- Banpu Public Company Limited - Thailand
- Ambuja Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Sical Logistics Limited - India
- Latin American Coal - Colombia
- Economic Council, Georgia
- Pipit Mutiara Jaya. PT, Indonesia
- Georgia Ports Authority, United States
- Jindal Steel & Power Ltd - India
- Larsen & Toubro Limited - India
- Merrill Lynch Commodities Europe
- Metalloyd Limited - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- Therma Luzon, Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GN Power Mariveles Coal Plant, Philippines
- Kapuas Tunggal Persada - Indonesia
- Kumho Petrochemical, South Korea
- Simpson Spence & Young - Indonesia
- Australian Commodity Traders Exchange
- Intertek Mineral Services - Indonesia
- Singapore Mercantile Exchange
- Riau Bara Harum - Indonesia
- Minerals Council of Australia
- Electricity Authority, New Zealand
- Semirara Mining Corp, Philippines
- Ministry of Transport, Egypt
- Interocean Group of Companies - India
- Ministry of Mines - Canada
- Anglo American - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Formosa Plastics Group - Taiwan
- Sree Jayajothi Cements Limited - India
- Iligan Light & Power Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- Salva Resources Pvt Ltd - India
- Ministry of Finance - Indonesia
- Lanco Infratech Ltd - India
- Power Finance Corporation Ltd., India
- International Coal Ventures Pvt Ltd - India
- Indonesian Coal Mining Association
- Kartika Selabumi Mining - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Globalindo Alam Lestari - Indonesia
- Thiess Contractors Indonesia
- Miang Besar Coal Terminal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Marubeni Corporation - India
- Pendopo Energi Batubara - Indonesia
- European Bulk Services B.V. - Netherlands
- Global Green Power PLC Corporation, Philippines
- Oldendorff Carriers - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Bhatia International Limited - India
- PNOC Exploration Corporation - Philippines
- Dalmia Cement Bharat India
- Central Java Power - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Samtan Co., Ltd - South Korea
- Indogreen Group - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Chamber of Mines of South Africa
- GAC Shipping (India) Pvt Ltd
- SN Aboitiz Power Inc, Philippines
- Meralco Power Generation, Philippines
- The Treasury - Australian Government
- Rashtriya Ispat Nigam Limited - India
- IHS Mccloskey Coal Group - USA
- MS Steel International - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Madhucon Powers Ltd - India
- Indian Energy Exchange, India
- Coal and Oil Company - UAE
- PTC India Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Renaissance Capital - South Africa
- Star Paper Mills Limited - India
- Bharathi Cement Corporation - India
- Gujarat Sidhee Cement - India
- TeaM Sual Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- Karaikal Port Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Wilmar Investment Holdings
- Sinarmas Energy and Mining - Indonesia
- CIMB Investment Bank - Malaysia
- Vizag Seaport Private Limited - India
- ASAPP Information Group - India
- Tamil Nadu electricity Board
- Africa Commodities Group - South Africa
- Electricity Generating Authority of Thailand
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