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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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Thursday, 14 March 13
DRY BULK MARKET KEEPS ON RISING MOMENTUM - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has maintained its rising momentum, on the back of increased cargo availability. According to yesterday's figures, the industry ...
Thursday, 14 March 13
SHIPPERS AND CARRIERS NEED GREATER COMMUNICATION AND MUTUAL UNDERSTANDING
Press Release – Shippers and shipping lines both need to raise their game if global container supply chains are not to be habitually subject t ...
Wednesday, 13 March 13
NEWBUILDING PRICES EXHIBIT NO FALL IN PAST SIX MONTHS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Despite the fact that oversupply has been the key plague of the shipping markets in recent years and newbuilding ordering activity has receded subst ...
Tuesday, 12 March 13
COAL MINING PRIVATIZATION IN INDIA: MUST - SUNIL K KUMBHAT
COALspot.com - India has the one of the richest coal reserves in the world and the country should have shown significant progress and gained the pos ...
Tuesday, 12 March 13
NEWCASTLE PORT SHIPPED 2.47 MILLION TONS OF COAL W/E 11 MARCH 2013
COALspot.com - Newcastle port in Australia has loaded 2,471,080 MT of thermal and coking coal for week ended 0700 hours 11 March 2013, Newcast ...
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Showing 4351 to 4355 news of total 6871 |
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- Orica Australia Pty. Ltd.
- Bayan Resources Tbk. - Indonesia
- Ambuja Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Altura Mining Limited, Indonesia
- SN Aboitiz Power Inc, Philippines
- Kaltim Prima Coal - Indonesia
- Manunggal Multi Energi - Indonesia
- ICICI Bank Limited - India
- Lanco Infratech Ltd - India
- Ministry of Transport, Egypt
- Jorong Barutama Greston.PT - Indonesia
- San Jose City I Power Corp, Philippines
- Malabar Cements Ltd - India
- Wilmar Investment Holdings
- Singapore Mercantile Exchange
- Goldman Sachs - Singapore
- Indonesian Coal Mining Association
- Bukit Baiduri Energy - Indonesia
- White Energy Company Limited
- Barasentosa Lestari - Indonesia
- Makarim & Taira - Indonesia
- Petron Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Jaiprakash Power Ventures ltd
- PNOC Exploration Corporation - Philippines
- OPG Power Generation Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Posco Energy - South Korea
- Xindia Steels Limited - India
- Banpu Public Company Limited - Thailand
- Uttam Galva Steels Limited - India
- Carbofer General Trading SA - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhoruka Overseas - Indonesia
- Antam Resourcindo - Indonesia
- Larsen & Toubro Limited - India
- Alfred C Toepfer International GmbH - Germany
- Anglo American - United Kingdom
- Sical Logistics Limited - India
- CNBM International Corporation - China
- Australian Commodity Traders Exchange
- Madhucon Powers Ltd - India
- Straits Asia Resources Limited - Singapore
- India Bulls Power Limited - India
- Bangladesh Power Developement Board
- Simpson Spence & Young - Indonesia
- Bukit Makmur.PT - Indonesia
- Ministry of Finance - Indonesia
- Rio Tinto Coal - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Riau Bara Harum - Indonesia
- Standard Chartered Bank - UAE
- Latin American Coal - Colombia
- Eastern Energy - Thailand
- Indo Tambangraya Megah - Indonesia
- Interocean Group of Companies - India
- Directorate Of Revenue Intelligence - India
- Vedanta Resources Plc - India
- The Treasury - Australian Government
- Semirara Mining Corp, Philippines
- GMR Energy Limited - India
- Mintek Dendrill Indonesia
- Kartika Selabumi Mining - Indonesia
- Georgia Ports Authority, United States
- McConnell Dowell - Australia
- Gujarat Electricity Regulatory Commission - India
- Thiess Contractors Indonesia
- Parry Sugars Refinery, India
- Binh Thuan Hamico - Vietnam
- Medco Energi Mining Internasional
- Jindal Steel & Power Ltd - India
- Minerals Council of Australia
- Asmin Koalindo Tuhup - Indonesia
- European Bulk Services B.V. - Netherlands
- GAC Shipping (India) Pvt Ltd
- Meenaskhi Energy Private Limited - India
- The University of Queensland
- Billiton Holdings Pty Ltd - Australia
- Vizag Seaport Private Limited - India
- Planning Commission, India
- Krishnapatnam Port Company Ltd. - India
- Energy Development Corp, Philippines
- Savvy Resources Ltd - HongKong
- Thai Mozambique Logistica
- New Zealand Coal & Carbon
- Neyveli Lignite Corporation Ltd, - India
- Essar Steel Hazira Ltd - India
- Electricity Generating Authority of Thailand
- Bhatia International Limited - India
- Cement Manufacturers Association - India
- Wood Mackenzie - Singapore
- Commonwealth Bank - Australia
- Chettinad Cement Corporation Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Mjunction Services Limited - India
- Heidelberg Cement - Germany
- Attock Cement Pakistan Limited
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining and Power Corporation, Philippines
- Edison Trading Spa - Italy
- Sinarmas Energy and Mining - Indonesia
- IHS Mccloskey Coal Group - USA
- Directorate General of MIneral and Coal - Indonesia
- SMG Consultants - Indonesia
- Port Waratah Coal Services - Australia
- Australian Coal Association
- Ministry of Mines - Canada
- Rashtriya Ispat Nigam Limited - India
- Gujarat Sidhee Cement - India
- Bulk Trading Sa - Switzerland
- Leighton Contractors Pty Ltd - Australia
- Sakthi Sugars Limited - India
- Bhushan Steel Limited - India
- Central Electricity Authority - India
- Kideco Jaya Agung - Indonesia
- Independent Power Producers Association of India
- Mercuria Energy - Indonesia
- PTC India Limited - India
- Electricity Authority, New Zealand
- Baramulti Group, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Economic Council, Georgia
- MS Steel International - UAE
- Kobexindo Tractors - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- Indian Oil Corporation Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- TNB Fuel Sdn Bhd - Malaysia
- Sree Jayajothi Cements Limited - India
- Iligan Light & Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Parliament of New Zealand
- Energy Link Ltd, New Zealand
- Sindya Power Generating Company Private Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coalindo Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Power Finance Corporation Ltd., India
- Tamil Nadu electricity Board
- Trasteel International SA, Italy
- Cigading International Bulk Terminal - Indonesia
- Intertek Mineral Services - Indonesia
- Toyota Tsusho Corporation, Japan
- Africa Commodities Group - South Africa
- Renaissance Capital - South Africa
- The State Trading Corporation of India Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Miang Besar Coal Terminal - Indonesia
- London Commodity Brokers - England
- GN Power Mariveles Coal Plant, Philippines
- Timah Investasi Mineral - Indoneisa
- Ind-Barath Power Infra Limited - India
- Aditya Birla Group - India
- Salva Resources Pvt Ltd - India
- ASAPP Information Group - India
- Formosa Plastics Group - Taiwan
- AsiaOL BioFuels Corp., Philippines
- Sojitz Corporation - Japan
- Globalindo Alam Lestari - Indonesia
- Kepco SPC Power Corporation, Philippines
- Marubeni Corporation - India
- Pendopo Energi Batubara - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Orica Mining Services - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Ceylon Electricity Board - Sri Lanka
- Central Java Power - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- GVK Power & Infra Limited - India
- Grasim Industreis Ltd - India
- Tata Chemicals Ltd - India
- Siam City Cement PLC, Thailand
- Kapuas Tunggal Persada - Indonesia
- Maheswari Brothers Coal Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Indika Energy - Indonesia
- Coal and Oil Company - UAE
- Kumho Petrochemical, South Korea
- VISA Power Limited - India
- CIMB Investment Bank - Malaysia
- Merrill Lynch Commodities Europe
- Holcim Trading Pte Ltd - Singapore
- Samtan Co., Ltd - South Korea
- Borneo Indobara - Indonesia
- SMC Global Power, Philippines
- Deloitte Consulting - India
- IEA Clean Coal Centre - UK
- Oldendorff Carriers - Singapore
- Romanian Commodities Exchange
- Indian Energy Exchange, India
- International Coal Ventures Pvt Ltd - India
- Siam City Cement - Thailand
- Karaikal Port Pvt Ltd - India
- Mercator Lines Limited - India
- Eastern Coal Council - USA
- Chamber of Mines of South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meralco Power Generation, Philippines
- Therma Luzon, Inc, Philippines
- Dalmia Cement Bharat India
- Videocon Industries ltd - India
- TeaM Sual Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Global Business Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Bharathi Cement Corporation - India
- Star Paper Mills Limited - India
- Indogreen Group - Indonesia
- Agrawal Coal Company - India
- Price Waterhouse Coopers - Russia
- Karbindo Abesyapradhi - Indoneisa
- South Luzon Thermal Energy Corporation
- Coastal Gujarat Power Limited - India
- PowerSource Philippines DevCo
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