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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, 01 September 21
KOMIPO TO BUY 1.56 MILLION TONS OF 5600 NAR COAL OF AUSTRALIA OR SOUTH AFRICAN ORIGIN FOR 2022 - 2024
COALspot.com: Korea Midland Power Co., Ltd (KOMIPO) has issued an international tender for total 1,560,000 MT of Bituminous Coal to be used a ...
Wednesday, 01 September 21
MARKET INSIGHT - INTERMODAL
As the summer season is coming to an end, the dry bulk market continues to rally. The confidence that the outstanding freight market performance ha ...
Monday, 30 August 21
68% OF U.S. COAL FLEET RETIREMENTS SINCE 2011 WERE PLANTS FUELED BY BITUMINOUS COAL - EIA
In 2011, the United States had 317.6 gigawatts (GW) of coal-fired electric generation capacity. About 88.7 GW of that capacity was retired in the d ...
Friday, 27 August 21
ALL YOU NEED TO KNOW ABOUT COAL'S MASSIVE RALLY AND NEAR-TERM OUTLOOK - CNBCTV18
Australia’s thermal coal at Newcastle Port, the benchmark for the vast Asian market, has surged over 100 percent this year to trade above $16 ...
Friday, 27 August 21
THE ECONOMICS OF INDONESIA’S DIESEL POWER PLANT TO GAS CONVERSION PLAN ARE PROBLEMATIC - IEEFA
Deploying new small-scale LNG is an uphill battle for PGN
Indonesian gas is currently in a precarious position, where the government needs to ...
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Therma Luzon, Inc, Philippines
- Baramulti Group, Indonesia
- Petron Corporation, Philippines
- Planning Commission, India
- Chettinad Cement Corporation Ltd - India
- Manunggal Multi Energi - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Mintek Dendrill Indonesia
- Essar Steel Hazira Ltd - India
- Jindal Steel & Power Ltd - India
- Tata Chemicals Ltd - India
- London Commodity Brokers - England
- TNB Fuel Sdn Bhd - Malaysia
- SN Aboitiz Power Inc, Philippines
- Coastal Gujarat Power Limited - India
- Kobexindo Tractors - Indoneisa
- Salva Resources Pvt Ltd - India
- SMC Global Power, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- The State Trading Corporation of India Ltd
- San Jose City I Power Corp, Philippines
- Ministry of Finance - Indonesia
- Directorate Of Revenue Intelligence - India
- MS Steel International - UAE
- PNOC Exploration Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- GVK Power & Infra Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Star Paper Mills Limited - India
- Barasentosa Lestari - Indonesia
- Globalindo Alam Lestari - Indonesia
- Makarim & Taira - Indonesia
- Metalloyd Limited - United Kingdom
- Energy Link Ltd, New Zealand
- Malabar Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Port Waratah Coal Services - Australia
- White Energy Company Limited
- McConnell Dowell - Australia
- Kepco SPC Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Lanco Infratech Ltd - India
- Central Electricity Authority - India
- Samtan Co., Ltd - South Korea
- Kumho Petrochemical, South Korea
- Semirara Mining Corp, Philippines
- Bhoruka Overseas - Indonesia
- Rio Tinto Coal - Australia
- Straits Asia Resources Limited - Singapore
- Indonesian Coal Mining Association
- Antam Resourcindo - Indonesia
- IEA Clean Coal Centre - UK
- Vizag Seaport Private Limited - India
- Trasteel International SA, Italy
- Cement Manufacturers Association - India
- The University of Queensland
- PetroVietnam Power Coal Import and Supply Company
- Jorong Barutama Greston.PT - Indonesia
- Siam City Cement - Thailand
- Sinarmas Energy and Mining - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Posco Energy - South Korea
- Australian Commodity Traders Exchange
- Jaiprakash Power Ventures ltd
- Attock Cement Pakistan Limited
- Sree Jayajothi Cements Limited - India
- Gujarat Electricity Regulatory Commission - India
- Petrochimia International Co. Ltd.- Taiwan
- Xindia Steels Limited - India
- Gujarat Sidhee Cement - India
- Kideco Jaya Agung - Indonesia
- LBH Netherlands Bv - Netherlands
- Orica Australia Pty. Ltd.
- Bukit Makmur.PT - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Eastern Energy - Thailand
- Chamber of Mines of South Africa
- Georgia Ports Authority, United States
- TeaM Sual Corporation - Philippines
- Timah Investasi Mineral - Indoneisa
- Karaikal Port Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Intertek Mineral Services - Indonesia
- SMG Consultants - Indonesia
- Parry Sugars Refinery, India
- Kohat Cement Company Ltd. - Pakistan
- Ambuja Cements Ltd - India
- Price Waterhouse Coopers - Russia
- PTC India Limited - India
- Mjunction Services Limited - India
- Edison Trading Spa - Italy
- Bukit Asam (Persero) Tbk - Indonesia
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Indogreen Group - Indonesia
- Savvy Resources Ltd - HongKong
- Carbofer General Trading SA - India
- Leighton Contractors Pty Ltd - Australia
- Vedanta Resources Plc - India
- Altura Mining Limited, Indonesia
- Latin American Coal - Colombia
- The Treasury - Australian Government
- Global Coal Blending Company Limited - Australia
- ASAPP Information Group - India
- Energy Development Corp, Philippines
- Power Finance Corporation Ltd., India
- Romanian Commodities Exchange
- Wood Mackenzie - Singapore
- PowerSource Philippines DevCo
- Deloitte Consulting - India
- Grasim Industreis Ltd - India
- Bayan Resources Tbk. - Indonesia
- Wilmar Investment Holdings
- Economic Council, Georgia
- New Zealand Coal & Carbon
- Renaissance Capital - South Africa
- Bangladesh Power Developement Board
- Bahari Cakrawala Sebuku - Indonesia
- Maheswari Brothers Coal Limited - India
- Coalindo Energy - Indonesia
- Coal and Oil Company - UAE
- South Luzon Thermal Energy Corporation
- Thiess Contractors Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Toyota Tsusho Corporation, Japan
- Directorate General of MIneral and Coal - Indonesia
- Medco Energi Mining Internasional
- Indian Oil Corporation Limited
- Pendopo Energi Batubara - Indonesia
- Bharathi Cement Corporation - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Bukit Baiduri Energy - Indonesia
- Goldman Sachs - Singapore
- Simpson Spence & Young - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Interocean Group of Companies - India
- Dalmia Cement Bharat India
- Independent Power Producers Association of India
- Agrawal Coal Company - India
- Kaltim Prima Coal - Indonesia
- Oldendorff Carriers - Singapore
- IHS Mccloskey Coal Group - USA
- VISA Power Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Neyveli Lignite Corporation Ltd, - India
- Indo Tambangraya Megah - Indonesia
- Indika Energy - Indonesia
- Aditya Birla Group - India
- Sakthi Sugars Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Mines - Canada
- CNBM International Corporation - China
- Meenaskhi Energy Private Limited - India
- Uttam Galva Steels Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Kartika Selabumi Mining - Indonesia
- Mercator Lines Limited - India
- Meralco Power Generation, Philippines
- Anglo American - United Kingdom
- Banpu Public Company Limited - Thailand
- Bhushan Steel Limited - India
- Ind-Barath Power Infra Limited - India
- Semirara Mining and Power Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Orica Mining Services - Indonesia
- Global Business Power Corporation, Philippines
- Eastern Coal Council - USA
- European Bulk Services B.V. - Netherlands
- Kalimantan Lumbung Energi - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bhatia International Limited - India
- Electricity Authority, New Zealand
- CIMB Investment Bank - Malaysia
- Krishnapatnam Port Company Ltd. - India
- India Bulls Power Limited - India
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Bulk Trading Sa - Switzerland
- Marubeni Corporation - India
- OPG Power Generation Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Central Java Power - Indonesia
- GMR Energy Limited - India
- Thai Mozambique Logistica
- Electricity Generating Authority of Thailand
- Sical Logistics Limited - India
- Parliament of New Zealand
- Formosa Plastics Group - Taiwan
- Heidelberg Cement - Germany
- Singapore Mercantile Exchange
- Iligan Light & Power Inc, Philippines
- Tamil Nadu electricity Board
- Sarangani Energy Corporation, Philippines
- ICICI Bank Limited - India
- Borneo Indobara - Indonesia
- Siam City Cement PLC, Thailand
- GN Power Mariveles Coal Plant, Philippines
- Commonwealth Bank - Australia
- Africa Commodities Group - South Africa
- Sindya Power Generating Company Private Ltd
- International Coal Ventures Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Madhucon Powers Ltd - India
- Mercuria Energy - Indonesia
- Indian Energy Exchange, India
- Binh Thuan Hamico - Vietnam
- Videocon Industries ltd - India
- Sojitz Corporation - Japan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Australian Coal Association
- Ministry of Transport, Egypt
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