We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Friday, 07 December 12
A NEW PHASE FOR AUSTRALIAN RESOURCES - A FITCH STREET INTERVIEW
 This week Matt Jamieson spoke with Andrew Colquhoun in Fitch's Asian sovereign rating team, and Vicky Melbourne, Fitch's commodity analyst based in Sydney, about the outlook for the Australian resources sector. Andrew and Vicky commented that Australia's resources sector is likely to enter a new phase based on sustainable volume growth, and that a high AUD/USD exchange rate is likely to persist with potentially negative implications for the non-resource economy. In this context Australia's large miners are likely to benefit from ongoing growth in commodity exports to China, notwithstanding lower commodity prices. Matt is Head of APAC Research in Fitch's Corporate Ratings Group.
Matt: Back in August 2012, Australia's Resources and Energy Minister made a comment to the effect that Australia's resources boom is over. Does Fitch agree with this view?
Vicky: No, we wouldn't subscribe to such a simplified view. Rather we believe the sector is entering a new and, perhaps, more sustainable growth phase focused on volumes, as opposed to the previous period of growth and investment based on high commodity prices. At the same time we believe that commodity prices are unlikely to return to previous high levels, and with mining cost inflation remaining stubbornly high, this may force the exit or consolidation of those miners with high-cost structures. This will result in a lower level of investment growth in the mining sector over the medium-to long-term, and related industries will be negatively impacted.
However, at least for the short-term, absolute investment levels are still growing. According to the Australian Bureau of Statistics's September capex survey, nominal spend in mining for 2012-13 is expected to increase 17.1% to AUD109bn which is only 3.5% lower than their estimate at the start of the year.
Matt: What will be impact of lower commodity prices and lower investment over the medium-to long-term on the Australian mining sector, and particularly for the larger players rated by Fitch?
Vicky: For the larger and more cost-efficient players, such as BHP Billiton Limited/Plc (BHP; 'A+'/Stable) and Rio Tinto Limited/Plc ( 'A-'/Stable), what they may lose in price, they are likely to make up for in terms of volume, particularly given their expansion over the past two to three years. Although these large miners have announced some curtailment to their expansion in light of China's slowdown, the potential for volume growth remains. Their free cash flow generation is also likely to increase as a result of a containment in operating costs and lower capex. Fortescue Metals Group Limited (Fortescue; 'BB+'/Negative), on the other hand, will benefit from a step-change in production volume and from becoming a lower cost iron ore producer from 2013 as its new Solomon Hub comes on line.
Matt: To what extent will the Australian economy be negatively impacted by the miners' likely reduction in investments and capital expenditure?
Vicky: Not substantially. At present, there are 87 mining industry projects committed and/or underway worth AUD268bn, with the majority of these in liquefied natural gas, and the balance in iron ore and coal. This represents a significant pipeline of investments despite the capex reductions announced by several entities. The bulk of this spending will peak in 2014 because of long lead times on projects, which means they will continue to provide a meaningful contribution to the Australian economy for at least two more years.
The main reduction in planned investments is related to uncommitted/not yet approved projects such as BHP's Olympic Dam, which now look unattractive given the current stage of the commodity cycle and the greater focus on capital allocations.
Matt: Andrew, what's your perspective on this? With China's economic growth slowing, does it not follow that Australia's resources sector is likely to face weakening demand?
Andrew: To the contrary, we think demand for Australia's resources from China will remain robust, although it is unlikely to grow as strongly in the next 10 years as it did in the previous decade. The chance of a Chinese "hard landing" in the near term appears to be diminishing and is certainly not Fitch's base case. Fitch still expects China to grow in the 7%-8% range over the next two to three years, albeit slower than the 9%-10% level achieved over 2009 to 2011. Importantly the size of China's economy is now around 40% greater than it was in 2008.
Under new leadership China will face the challenge of rebalancing its economy away from investment towards consumption. Even if the rate of China's growth in investment is not as strong as was the case historically, nonetheless a significant amount of investment still remains to occur. Its urbanisation rate is well below that of advanced countries, meaning that there is still a substantial amount of buildings and infrastructure to be built.
Matt: So Fitch actually expects demand for Australian resources to continue growing over the next two to three years?
Andrew: Yes. Chinese demand for key commodities including iron ore and coal will continue to grow in an absolute sense over the next two to three years, supported by government programmes to expand infrastructure and social housing construction. So while there may be fluctuations in China's demand for Australian resources in the short term, demand should continue growing over the long term.
Moreover, there is the rest of emerging Asia to consider. For example India took 6% of Australia's exports in 2011, well below China's 27% but up from 2% in 2001, and India is at an earlier stage of development than China.
Matt: Despite a lot of negative news on China's slowdown, and declines in commodity prices, the AUD/USD exchange rate has not significantly depreciated. What's behind this?
Andrew: It is partly a function of the continued strength in Australia's terms of trade due to still high commodity prices, and partly owing to the AUD gaining "reserve currency" status to some extent as global investors seek to diversify out of USD and EUR assets. The Australian sovereign is rated 'AAA' and the AUD is now the world's fifth-most traded currency.
Matt: These factors suggest that the AUD effective exchange rate could remain high even if commodity prices weaken, particularly if overall demand for Australia's resources remains strong. How will the rest of Australia's economy be able to cope?
Andrew: It will be a big challenge, but non-resource sectors will have to remain competitive by strengthening productivity to compete globally. The alternative, if companies cannot increase their productivity, is higher unemployment. The most likely outcome is probably a bit of both, depending on the particular industry and on government structural policies.
Matt: Vicky, a final question then. In light of Andrew's comments, outside of the resources industry what corporate sectors in Australia are most at risk to a higher effective exchange rate?
Vicky: The impact on the non-resource economy is significant, particularly on Australia's tourism industry, both local and inbound, on the country's export-reliant agriculture sector, and on its retail and manufacturing sectors. A higher cost base attributed to the strong AUD continues to negatively impact Australia's auto sector - and that is despite government subsidies. The Australian Industry Group's measure of manufacturing activity showed a ninth straight month of contraction in November as firms complained of soft demand, higher energy costs and a strong Australian dollar. Moreover, with most key industries under pressure, the negative spillover facing Australia's small-and-medium sized enterprises is significant.
Australia's retail sector and discretionary spending feed off the tourism industry, particularly in states like Queensland. The retail sector is already struggling from the proliferation of online shopping, and hence additional pressure due to a high exchange rate only compounds their difficulties. A high exchange rate also makes it more attractive for the larger supermarkets to source their own-brand foods and products from overseas as opposed to local producers, as they look to deliver on their "everyday low prices" campaigns. Finally, a weak retail sector has a knock-on effect on the commercial property sector.
Vicky Melbourne - Head of Industrials - South-East Asia & Australasia
Andrew Colquhoun - Head of APAC Sovereign Ratings, Hong Kong
Matt Jamieson - Head of APAC Research - Corporate Ratings Group, Seoul
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Tuesday, 11 April 23
OIL RISES ON CHINA STIMULUS EXPECTATIONS, WEAKER DOLLAR - REUTERS
Oil prices rose on Tuesday on expectations of potential economic stimulus by China, healthy demand in the rest of Asia and a drop in U.S. crude sto ...
Sunday, 09 April 23
CHINA’S BUSINESS INCOME REBOUND POINTS TO IMPROVING ECONOMY: OFFICIAL - XINHUA
Chinese businesses have posted a strong rebound in sales revenue since the beginning of this year in the latest signal of an improving economy.
...
Sunday, 09 April 23
COAL INDIA TO BOOST SUPPLIES TO INDUSTRIES AS UTILITIES’ INVENTORIES RISE - REUTERS
Coal India Ltd will increase supplies to industries, the world’s largest coal miner said on Wednesday as fuel inventories at utilities run by ...
Thursday, 06 April 23
MARKET INSIGHT - INTERMODAL
LNG Current Supply/Demand Dynamics
This year, LNG supply will likely exceed demand, so prices will need to decline to levels that will encourag ...
Sunday, 26 March 23
EUROPE’S RUSH TO LNG COULD TURN INTO 'WORLD’S MOST EXPENSIVE AND UNNECESSARY INSURANCE POLICY'- CNBC
Europe’s rapid buildout of liquefied natural gas infrastructure is on track to far exceed demand by the end of the decade, according to new r ...
|
|
|
Showing 111 to 115 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Finance - Indonesia
- Chamber of Mines of South Africa
- Africa Commodities Group - South Africa
- OPG Power Generation Pvt Ltd - India
- New Zealand Coal & Carbon
- Coastal Gujarat Power Limited - India
- Posco Energy - South Korea
- Aditya Birla Group - India
- Uttam Galva Steels Limited - India
- Sinarmas Energy and Mining - Indonesia
- White Energy Company Limited
- Indonesian Coal Mining Association
- Ministry of Mines - Canada
- Sarangani Energy Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Binh Thuan Hamico - Vietnam
- Kartika Selabumi Mining - Indonesia
- Formosa Plastics Group - Taiwan
- Bharathi Cement Corporation - India
- Electricity Generating Authority of Thailand
- Renaissance Capital - South Africa
- Straits Asia Resources Limited - Singapore
- Pendopo Energi Batubara - Indonesia
- PTC India Limited - India
- Cigading International Bulk Terminal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Deloitte Consulting - India
- Borneo Indobara - Indonesia
- Jaiprakash Power Ventures ltd
- ICICI Bank Limited - India
- Singapore Mercantile Exchange
- CIMB Investment Bank - Malaysia
- Alfred C Toepfer International GmbH - Germany
- Mjunction Services Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- Aboitiz Power Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Coalindo Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Orica Australia Pty. Ltd.
- Kalimantan Lumbung Energi - Indonesia
- Planning Commission, India
- International Coal Ventures Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Mintek Dendrill Indonesia
- London Commodity Brokers - England
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Essar Steel Hazira Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Interocean Group of Companies - India
- VISA Power Limited - India
- TeaM Sual Corporation - Philippines
- Attock Cement Pakistan Limited
- Mercuria Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Eastern Energy - Thailand
- Bhushan Steel Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMC Global Power, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Anglo American - United Kingdom
- Wood Mackenzie - Singapore
- Ceylon Electricity Board - Sri Lanka
- Economic Council, Georgia
- Parry Sugars Refinery, India
- Bukit Baiduri Energy - Indonesia
- Mercator Lines Limited - India
- Latin American Coal - Colombia
- Neyveli Lignite Corporation Ltd, - India
- South Luzon Thermal Energy Corporation
- Port Waratah Coal Services - Australia
- Central Java Power - Indonesia
- Vedanta Resources Plc - India
- Thiess Contractors Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Trasteel International SA, Italy
- India Bulls Power Limited - India
- Bhatia International Limited - India
- Vizag Seaport Private Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bangladesh Power Developement Board
- Ambuja Cements Ltd - India
- Merrill Lynch Commodities Europe
- Bukit Asam (Persero) Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Simpson Spence & Young - Indonesia
- Coal and Oil Company - UAE
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
- Bahari Cakrawala Sebuku - Indonesia
- The State Trading Corporation of India Ltd
- Metalloyd Limited - United Kingdom
- TNB Fuel Sdn Bhd - Malaysia
- Bayan Resources Tbk. - Indonesia
- Makarim & Taira - Indonesia
- Jindal Steel & Power Ltd - India
- Lanco Infratech Ltd - India
- Medco Energi Mining Internasional
- Standard Chartered Bank - UAE
- Carbofer General Trading SA - India
- Chettinad Cement Corporation Ltd - India
- PowerSource Philippines DevCo
- The University of Queensland
- Georgia Ports Authority, United States
- LBH Netherlands Bv - Netherlands
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jorong Barutama Greston.PT - Indonesia
- Bulk Trading Sa - Switzerland
- Timah Investasi Mineral - Indoneisa
- Antam Resourcindo - Indonesia
- Xindia Steels Limited - India
- Semirara Mining and Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Star Paper Mills Limited - India
- Kobexindo Tractors - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- Asmin Koalindo Tuhup - Indonesia
- Wilmar Investment Holdings
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Indian Oil Corporation Limited
- Heidelberg Cement - Germany
- Vijayanagar Sugar Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Thai Mozambique Logistica
- Indogreen Group - Indonesia
- Savvy Resources Ltd - HongKong
- Cement Manufacturers Association - India
- Maheswari Brothers Coal Limited - India
- Eastern Coal Council - USA
- GVK Power & Infra Limited - India
- SMG Consultants - Indonesia
- Ind-Barath Power Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Electricity Authority, New Zealand
- Indika Energy - Indonesia
- Siam City Cement PLC, Thailand
- Oldendorff Carriers - Singapore
- Bukit Makmur.PT - Indonesia
- Malabar Cements Ltd - India
- Energy Development Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Banpu Public Company Limited - Thailand
- European Bulk Services B.V. - Netherlands
- Sojitz Corporation - Japan
- Karbindo Abesyapradhi - Indoneisa
- Global Business Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Riau Bara Harum - Indonesia
- The Treasury - Australian Government
- McConnell Dowell - Australia
- Videocon Industries ltd - India
- Bhoruka Overseas - Indonesia
- Australian Coal Association
- Semirara Mining Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Globalindo Alam Lestari - Indonesia
- Kaltim Prima Coal - Indonesia
- Goldman Sachs - Singapore
- CNBM International Corporation - China
- GMR Energy Limited - India
- Edison Trading Spa - Italy
- Tata Chemicals Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Romanian Commodities Exchange
- Minerals Council of Australia
- PNOC Exploration Corporation - Philippines
- Commonwealth Bank - Australia
- Gujarat Sidhee Cement - India
- ASAPP Information Group - India
- Marubeni Corporation - India
- IEA Clean Coal Centre - UK
- Global Coal Blending Company Limited - Australia
- Gujarat Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- Global Green Power PLC Corporation, Philippines
- Baramulti Group, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Indian Energy Exchange, India
- Sical Logistics Limited - India
- Samtan Co., Ltd - South Korea
- Australian Commodity Traders Exchange
- Independent Power Producers Association of India
- Intertek Mineral Services - Indonesia
- Barasentosa Lestari - Indonesia
- Salva Resources Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Agrawal Coal Company - India
- Orica Mining Services - Indonesia
- Meralco Power Generation, Philippines
- MS Steel International - UAE
- Dalmia Cement Bharat India
- Kumho Petrochemical, South Korea
- Petron Corporation, Philippines
- Ministry of Transport, Egypt
- Kepco SPC Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Therma Luzon, Inc, Philippines
- Directorate Of Revenue Intelligence - India
- Siam City Cement - Thailand
- Leighton Contractors Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Kideco Jaya Agung - Indonesia
- Tamil Nadu electricity Board
- Sakthi Sugars Limited - India
- Parliament of New Zealand
- Kapuas Tunggal Persada - Indonesia
- Energy Link Ltd, New Zealand
- San Jose City I Power Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Rio Tinto Coal - Australia
|
| |
| |
|
