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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
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Tuesday, 26 March 13
NEWCASTLE PORT SHIPPED 2.39 MMT OF COAL W/E 25 MARCH 2013
COALspot.com - Newcastle port in Australia has loaded 2.396 million tons of thermal and coking coal for week ended 0700 hours 25 March 2013, N ...
Monday, 25 March 13
BUNKER FUELS ARE ABOUT TO GET CLEANER, BUT AT WHAT COST? - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The cost of bunkers is nowadays the driving force behind most ship owners' major decisions, with regulations bound to change in many parts of the w ...
Sunday, 24 March 13
THE SUB-BIT INDONESIA'S COAL SWAPS FOR Q2 DELIVERY PRICE LOST 7.47 PERCENT PMT M-O-M
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for average Q2’ 2013 delivery has lost 3.39 percent and CFR South China coal shipment 2.65 ...
Sunday, 24 March 13
FREIGHT MARKETS CONTINUED TO FIRM - VISTAAR
COALspot.com - This freight market continued to remain firm in all segments except for cape index which softened slightly.
The BDI was up by 4.60 ...
Sunday, 24 March 13
DRY BULK MARKET PROSPECTS OFFER ROOM FOR RESTRAINED OPTIMISM SAYS SHIP OWNER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
In its announcement regarding its annual performance, ship owner Frontline offered some useful insight on the future prospects of both the dry bulk ...
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Showing 4336 to 4340 news of total 6871 |
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- Renaissance Capital - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Sree Jayajothi Cements Limited - India
- Kideco Jaya Agung - Indonesia
- Indian Energy Exchange, India
- International Coal Ventures Pvt Ltd - India
- Ministry of Transport, Egypt
- Kaltim Prima Coal - Indonesia
- Kumho Petrochemical, South Korea
- Eastern Energy - Thailand
- Indonesian Coal Mining Association
- Jaiprakash Power Ventures ltd
- Miang Besar Coal Terminal - Indonesia
- Coastal Gujarat Power Limited - India
- Ambuja Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- Bukit Baiduri Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Sakthi Sugars Limited - India
- Australian Commodity Traders Exchange
- Siam City Cement PLC, Thailand
- Sojitz Corporation - Japan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jindal Steel & Power Ltd - India
- Electricity Generating Authority of Thailand
- GN Power Mariveles Coal Plant, Philippines
- Malabar Cements Ltd - India
- Mercuria Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Siam City Cement - Thailand
- PowerSource Philippines DevCo
- Aditya Birla Group - India
- IEA Clean Coal Centre - UK
- Interocean Group of Companies - India
- GMR Energy Limited - India
- Barasentosa Lestari - Indonesia
- Vedanta Resources Plc - India
- Krishnapatnam Port Company Ltd. - India
- Eastern Coal Council - USA
- Intertek Mineral Services - Indonesia
- Directorate Of Revenue Intelligence - India
- ASAPP Information Group - India
- Wood Mackenzie - Singapore
- Thiess Contractors Indonesia
- Romanian Commodities Exchange
- Ministry of Finance - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Metalloyd Limited - United Kingdom
- Anglo American - United Kingdom
- Antam Resourcindo - Indonesia
- Ministry of Mines - Canada
- OPG Power Generation Pvt Ltd - India
- Wilmar Investment Holdings
- Ind-Barath Power Infra Limited - India
- Mjunction Services Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Salva Resources Pvt Ltd - India
- Bhushan Steel Limited - India
- Trasteel International SA, Italy
- Globalindo Alam Lestari - Indonesia
- Planning Commission, India
- MS Steel International - UAE
- Latin American Coal - Colombia
- GVK Power & Infra Limited - India
- Oldendorff Carriers - Singapore
- Pendopo Energi Batubara - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Meralco Power Generation, Philippines
- Bangladesh Power Developement Board
- Heidelberg Cement - Germany
- Orica Australia Pty. Ltd.
- Larsen & Toubro Limited - India
- Sarangani Energy Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Binh Thuan Hamico - Vietnam
- Ceylon Electricity Board - Sri Lanka
- Alfred C Toepfer International GmbH - Germany
- Neyveli Lignite Corporation Ltd, - India
- Savvy Resources Ltd - HongKong
- Global Green Power PLC Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Electricity Authority, New Zealand
- Posco Energy - South Korea
- Kapuas Tunggal Persada - Indonesia
- Coal and Oil Company - UAE
- Global Coal Blending Company Limited - Australia
- Medco Energi Mining Internasional
- Coalindo Energy - Indonesia
- TeaM Sual Corporation - Philippines
- Minerals Council of Australia
- SMC Global Power, Philippines
- ICICI Bank Limited - India
- Bulk Trading Sa - Switzerland
- Toyota Tsusho Corporation, Japan
- Singapore Mercantile Exchange
- Asmin Koalindo Tuhup - Indonesia
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- London Commodity Brokers - England
- Gujarat Electricity Regulatory Commission - India
- The University of Queensland
- Rio Tinto Coal - Australia
- India Bulls Power Limited - India
- Tata Chemicals Ltd - India
- Parry Sugars Refinery, India
- Indian Oil Corporation Limited
- Indogreen Group - Indonesia
- Sindya Power Generating Company Private Ltd
- Price Waterhouse Coopers - Russia
- PNOC Exploration Corporation - Philippines
- Grasim Industreis Ltd - India
- SN Aboitiz Power Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parliament of New Zealand
- Kartika Selabumi Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Samtan Co., Ltd - South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Meenaskhi Energy Private Limited - India
- GAC Shipping (India) Pvt Ltd
- Independent Power Producers Association of India
- Deloitte Consulting - India
- European Bulk Services B.V. - Netherlands
- Vizag Seaport Private Limited - India
- Georgia Ports Authority, United States
- Iligan Light & Power Inc, Philippines
- Bharathi Cement Corporation - India
- Rashtriya Ispat Nigam Limited - India
- Central Java Power - Indonesia
- Port Waratah Coal Services - Australia
- Economic Council, Georgia
- Makarim & Taira - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Global Business Power Corporation, Philippines
- VISA Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Indo Tambangraya Megah - Indonesia
- IHS Mccloskey Coal Group - USA
- Aboitiz Power Corporation - Philippines
- Commonwealth Bank - Australia
- PTC India Limited - India
- Thai Mozambique Logistica
- Sical Logistics Limited - India
- CNBM International Corporation - China
- Mercator Lines Limited - India
- New Zealand Coal & Carbon
- Edison Trading Spa - Italy
- Africa Commodities Group - South Africa
- The State Trading Corporation of India Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Tamil Nadu electricity Board
- Merrill Lynch Commodities Europe
- Directorate General of MIneral and Coal - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Uttam Galva Steels Limited - India
- Dalmia Cement Bharat India
- Bank of Tokyo Mitsubishi UFJ Ltd
- The Treasury - Australian Government
- Banpu Public Company Limited - Thailand
- Gujarat Sidhee Cement - India
- Bhatia International Limited - India
- Borneo Indobara - Indonesia
- Karaikal Port Pvt Ltd - India
- Goldman Sachs - Singapore
- Baramulti Group, Indonesia
- Straits Asia Resources Limited - Singapore
- Australian Coal Association
- AsiaOL BioFuels Corp., Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Chamber of Mines of South Africa
- Petron Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Xindia Steels Limited - India
- Simpson Spence & Young - Indonesia
- Indika Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Madhucon Powers Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Lanco Infratech Ltd - India
- Marubeni Corporation - India
- Essar Steel Hazira Ltd - India
- Cement Manufacturers Association - India
- Agrawal Coal Company - India
- Standard Chartered Bank - UAE
- CIMB Investment Bank - Malaysia
- PetroVietnam Power Coal Import and Supply Company
- Videocon Industries ltd - India
- Star Paper Mills Limited - India
- Manunggal Multi Energi - Indonesia
- Central Electricity Authority - India
- Carbofer General Trading SA - India
- Holcim Trading Pte Ltd - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Attock Cement Pakistan Limited
- South Luzon Thermal Energy Corporation
- SMG Consultants - Indonesia
- Altura Mining Limited, Indonesia
- Bhoruka Overseas - Indonesia
- McConnell Dowell - Australia
- Chettinad Cement Corporation Ltd - India
- Kobexindo Tractors - Indoneisa
- Bukit Makmur.PT - Indonesia
- Mintek Dendrill Indonesia
- Orica Mining Services - Indonesia
- White Energy Company Limited
- Maheswari Brothers Coal Limited - India
- Sinarmas Energy and Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Kepco SPC Power Corporation, Philippines
- Energy Development Corp, Philippines
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