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