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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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Saturday, 11 September 21
RECORD CHINESE COAL FUTURES SIGNAL NEED TO BOOST OUTPUT - REUTERS
China’s coal prices have climbed to a record high, signaling the need for more production in the short term, even as the government tries to ...
Saturday, 11 September 21
IN 2022, EIA EXPECTS U.S. COAL PRODUCTION TO INCREASE BY 47 MMST TO 648 MMST
U.S. Coal production accordng to EIA's forecast, totals 601 million short tons (MMst) in 2021, 66 MMst more than in 2020, EIA's Short-Term ...
Wednesday, 08 September 21
FITCH RATINGS RAISES THERMAL COAL PRICE ASSUMPTIONS ON TIGHT SUPPLY
Fitch Ratings has increased all its Qinhuangdao 5,500kcal/kg price assumptions and short- and medium-term Newcastle 6,000kcal/kg price assumptions ...
Wednesday, 08 September 21
COAL IS STILL KING; INDONESIAN COAL PRICE REFERENCE ABOVE $150 FOR FIRST TIME IN HISTORY
COALspot.com: The Indonesian Coal Price Reference rose dramatically from US$ 127.05 in February 2011, to a peak of US$ 150.03 in September 2021, be ...
Wednesday, 08 September 21
MARKET INSIGHT - INTERMODAL
Last August was extremely hot in the dry bulk market with rates rising at levels that we have years to witness. The dry bulk index exceeded the 4,0 ...
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- Cigading International Bulk Terminal - Indonesia
- Jaiprakash Power Ventures ltd
- PowerSource Philippines DevCo
- Siam City Cement - Thailand
- London Commodity Brokers - England
- Global Business Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Essar Steel Hazira Ltd - India
- Simpson Spence & Young - Indonesia
- Videocon Industries ltd - India
- GVK Power & Infra Limited - India
- Minerals Council of Australia
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- Ministry of Transport, Egypt
- Thiess Contractors Indonesia
- CNBM International Corporation - China
- Kepco SPC Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CIMB Investment Bank - Malaysia
- Bhoruka Overseas - Indonesia
- Bhushan Steel Limited - India
- Salva Resources Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Merrill Lynch Commodities Europe
- Sindya Power Generating Company Private Ltd
- Baramulti Group, Indonesia
- Ministry of Mines - Canada
- ICICI Bank Limited - India
- Therma Luzon, Inc, Philippines
- Sakthi Sugars Limited - India
- Grasim Industreis Ltd - India
- Borneo Indobara - Indonesia
- South Luzon Thermal Energy Corporation
- Vizag Seaport Private Limited - India
- Central Java Power - Indonesia
- Central Electricity Authority - India
- Maheswari Brothers Coal Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Vijayanagar Sugar Pvt Ltd - India
- Mjunction Services Limited - India
- Maharashtra Electricity Regulatory Commission - India
- International Coal Ventures Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Georgia Ports Authority, United States
- Bangladesh Power Developement Board
- Planning Commission, India
- Metalloyd Limited - United Kingdom
- Larsen & Toubro Limited - India
- Alfred C Toepfer International GmbH - Germany
- Kapuas Tunggal Persada - Indonesia
- Romanian Commodities Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Posco Energy - South Korea
- Indian Energy Exchange, India
- Sree Jayajothi Cements Limited - India
- VISA Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Energy Link Ltd, New Zealand
- Malabar Cements Ltd - India
- Eastern Coal Council - USA
- Aboitiz Power Corporation - Philippines
- Power Finance Corporation Ltd., India
- Australian Coal Association
- Goldman Sachs - Singapore
- Vedanta Resources Plc - India
- Semirara Mining and Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Standard Chartered Bank - UAE
- Bayan Resources Tbk. - Indonesia
- Australian Commodity Traders Exchange
- Antam Resourcindo - Indonesia
- Directorate Of Revenue Intelligence - India
- Bukit Makmur.PT - Indonesia
- Singapore Mercantile Exchange
- Coastal Gujarat Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- OPG Power Generation Pvt Ltd - India
- Indika Energy - Indonesia
- Independent Power Producers Association of India
- Orica Australia Pty. Ltd.
- Sical Logistics Limited - India
- Bulk Trading Sa - Switzerland
- Parry Sugars Refinery, India
- Kideco Jaya Agung - Indonesia
- Sarangani Energy Corporation, Philippines
- Ambuja Cements Ltd - India
- LBH Netherlands Bv - Netherlands
- Gujarat Sidhee Cement - India
- Energy Development Corp, Philippines
- Indogreen Group - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Riau Bara Harum - Indonesia
- Oldendorff Carriers - Singapore
- Altura Mining Limited, Indonesia
- Agrawal Coal Company - India
- Iligan Light & Power Inc, Philippines
- Tamil Nadu electricity Board
- Uttam Galva Steels Limited - India
- The State Trading Corporation of India Ltd
- Binh Thuan Hamico - Vietnam
- PTC India Limited - India
- The Treasury - Australian Government
- IEA Clean Coal Centre - UK
- Indonesian Coal Mining Association
- Gujarat Electricity Regulatory Commission - India
- Edison Trading Spa - Italy
- Kartika Selabumi Mining - Indonesia
- Lanco Infratech Ltd - India
- Globalindo Alam Lestari - Indonesia
- Wood Mackenzie - Singapore
- Krishnapatnam Port Company Ltd. - India
- Semirara Mining Corp, Philippines
- Electricity Authority, New Zealand
- Mercator Lines Limited - India
- Rashtriya Ispat Nigam Limited - India
- Thai Mozambique Logistica
- Sinarmas Energy and Mining - Indonesia
- Wilmar Investment Holdings
- AsiaOL BioFuels Corp., Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Petron Corporation, Philippines
- Bharathi Cement Corporation - India
- Karbindo Abesyapradhi - Indoneisa
- Pendopo Energi Batubara - Indonesia
- Sojitz Corporation - Japan
- Orica Mining Services - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- MS Steel International - UAE
- Price Waterhouse Coopers - Russia
- Formosa Plastics Group - Taiwan
- Medco Energi Mining Internasional
- Coalindo Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Indian Oil Corporation Limited
- Kumho Petrochemical, South Korea
- New Zealand Coal & Carbon
- Africa Commodities Group - South Africa
- Leighton Contractors Pty Ltd - Australia
- Global Green Power PLC Corporation, Philippines
- SMC Global Power, Philippines
- Carbofer General Trading SA - India
- Meralco Power Generation, Philippines
- GAC Shipping (India) Pvt Ltd
- Straits Asia Resources Limited - Singapore
- Miang Besar Coal Terminal - Indonesia
- Samtan Co., Ltd - South Korea
- Rio Tinto Coal - Australia
- Star Paper Mills Limited - India
- Manunggal Multi Energi - Indonesia
- McConnell Dowell - Australia
- Deloitte Consulting - India
- Makarim & Taira - Indonesia
- Timah Investasi Mineral - Indoneisa
- ASAPP Information Group - India
- Jindal Steel & Power Ltd - India
- Tata Chemicals Ltd - India
- Trasteel International SA, Italy
- Kaltim Prima Coal - Indonesia
- Chamber of Mines of South Africa
- Gujarat Mineral Development Corp Ltd - India
- European Bulk Services B.V. - Netherlands
- Bhatia International Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Finance - Indonesia
- Bukit Baiduri Energy - Indonesia
- White Energy Company Limited
- Marubeni Corporation - India
- San Jose City I Power Corp, Philippines
- Barasentosa Lestari - Indonesia
- Meenaskhi Energy Private Limited - India
- GN Power Mariveles Coal Plant, Philippines
- IHS Mccloskey Coal Group - USA
- The University of Queensland
- TeaM Sual Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Karaikal Port Pvt Ltd - India
- Anglo American - United Kingdom
- Madhucon Powers Ltd - India
- Eastern Energy - Thailand
- Xindia Steels Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Attock Cement Pakistan Limited
- Interocean Group of Companies - India
- Petrochimia International Co. Ltd.- Taiwan
- Savvy Resources Ltd - HongKong
- Heidelberg Cement - Germany
- Ind-Barath Power Infra Limited - India
- Economic Council, Georgia
- GMR Energy Limited - India
- Dalmia Cement Bharat India
- Global Coal Blending Company Limited - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kobexindo Tractors - Indoneisa
- Renaissance Capital - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Port Waratah Coal Services - Australia
- Cement Manufacturers Association - India
- Toyota Tsusho Corporation, Japan
- Intertek Mineral Services - Indonesia
- Holcim Trading Pte Ltd - Singapore
- SN Aboitiz Power Inc, Philippines
- Coal and Oil Company - UAE
- SMG Consultants - Indonesia
- Commonwealth Bank - Australia
- Parliament of New Zealand
- Banpu Public Company Limited - Thailand
- India Bulls Power Limited - India
- Latin American Coal - Colombia
- Chettinad Cement Corporation Ltd - India
- Aditya Birla Group - India
- Mercuria Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
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