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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, 24 January 13
INDO - INDIA NOW AT APS $ 8K + BB USD 90000 - FEARNLEYS AS
Handy
The Atlantic market remains stable as supply of tonnage is still in excess of demand. USG- Far east fixed at $18k and CONT-FEAST at $ 11k. Pa ...
Thursday, 24 January 13
DRY BULK MARKET FALLS ON TROPICAL CYCLONE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has been on the downside during the past couple of days, mainly as a result of the tropical storm which forced ports to close do ...
Tuesday, 22 January 13
PORT OF ANTWERP HANDLES 7.0 PERCENT MORE COAL IN 2012 Y-Y
COALspot.com - The port of Antwerp handled 184,134,516 tonnes of freight last year.
This represents a drop of 1.6% compared with 2011, when the v ...
Monday, 21 January 13
NEWCASTLE PORT SHIPPED 10.21 PERCENT LESS COAL W/E 21 JANUARY 2013
COALspot.com - Newcastle port in Australia has loaded 2,804,152 MT of thermal and coking coal for week ended 0700 hours 21 January 2013, Newca ...
Monday, 21 January 13
PANAMAX DRY BULK CARRIERS AND AFRAMAX TANKERS PROVED TO BE THE "WEAPON OF CHOICE" FOR MOST SHIP OWNERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
With ship financing getting ever so difficult to procure during the past year or so, ship owners had to get creative in order to persuade banks and ...
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Showing 4411 to 4415 news of total 6871 |
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- Gujarat Mineral Development Corp Ltd - India
- Alfred C Toepfer International GmbH - Germany
- The University of Queensland
- Bangladesh Power Developement Board
- Rio Tinto Coal - Australia
- India Bulls Power Limited - India
- Borneo Indobara - Indonesia
- IEA Clean Coal Centre - UK
- Cigading International Bulk Terminal - Indonesia
- Electricity Authority, New Zealand
- Minerals Council of Australia
- Central Java Power - Indonesia
- McConnell Dowell - Australia
- Metalloyd Limited - United Kingdom
- Lanco Infratech Ltd - India
- Maheswari Brothers Coal Limited - India
- Ind-Barath Power Infra Limited - India
- AsiaOL BioFuels Corp., Philippines
- ASAPP Information Group - India
- Aditya Birla Group - India
- Billiton Holdings Pty Ltd - Australia
- Mercator Lines Limited - India
- Leighton Contractors Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- Karbindo Abesyapradhi - Indoneisa
- Bhoruka Overseas - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- International Coal Ventures Pvt Ltd - India
- Baramulti Group, Indonesia
- Australian Coal Association
- Global Business Power Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Planning Commission, India
- Miang Besar Coal Terminal - Indonesia
- Sical Logistics Limited - India
- Ministry of Finance - Indonesia
- Coal and Oil Company - UAE
- Singapore Mercantile Exchange
- Siam City Cement - Thailand
- Larsen & Toubro Limited - India
- Semirara Mining Corp, Philippines
- GMR Energy Limited - India
- Georgia Ports Authority, United States
- Cement Manufacturers Association - India
- Kepco SPC Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- Dalmia Cement Bharat India
- Parry Sugars Refinery, India
- Altura Mining Limited, Indonesia
- Madhucon Powers Ltd - India
- Attock Cement Pakistan Limited
- Karaikal Port Pvt Ltd - India
- Bhatia International Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Indian Oil Corporation Limited
- Carbofer General Trading SA - India
- Simpson Spence & Young - Indonesia
- Pendopo Energi Batubara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- Tamil Nadu electricity Board
- London Commodity Brokers - England
- Ceylon Electricity Board - Sri Lanka
- Indonesian Coal Mining Association
- Meralco Power Generation, Philippines
- Wood Mackenzie - Singapore
- Binh Thuan Hamico - Vietnam
- SMC Global Power, Philippines
- Marubeni Corporation - India
- MS Steel International - UAE
- Videocon Industries ltd - India
- Jindal Steel & Power Ltd - India
- Indogreen Group - Indonesia
- Therma Luzon, Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Deloitte Consulting - India
- Xindia Steels Limited - India
- Sarangani Energy Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- CIMB Investment Bank - Malaysia
- Grasim Industreis Ltd - India
- The Treasury - Australian Government
- Banpu Public Company Limited - Thailand
- Semirara Mining and Power Corporation, Philippines
- Romanian Commodities Exchange
- Orica Australia Pty. Ltd.
- Chamber of Mines of South Africa
- Petron Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Salva Resources Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- Economic Council, Georgia
- IHS Mccloskey Coal Group - USA
- Agrawal Coal Company - India
- GVK Power & Infra Limited - India
- Star Paper Mills Limited - India
- OPG Power Generation Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Intertek Mineral Services - Indonesia
- Standard Chartered Bank - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Uttam Galva Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Indo Tambangraya Megah - Indonesia
- Anglo American - United Kingdom
- Edison Trading Spa - Italy
- Interocean Group of Companies - India
- Rashtriya Ispat Nigam Limited - India
- Kumho Petrochemical, South Korea
- South Luzon Thermal Energy Corporation
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Africa Commodities Group - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Kaltim Prima Coal - Indonesia
- Mintek Dendrill Indonesia
- Renaissance Capital - South Africa
- Formosa Plastics Group - Taiwan
- White Energy Company Limited
- PNOC Exploration Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Essar Steel Hazira Ltd - India
- Energy Development Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Port Waratah Coal Services - Australia
- Latin American Coal - Colombia
- Global Coal Blending Company Limited - Australia
- Ministry of Transport, Egypt
- Coastal Gujarat Power Limited - India
- Barasentosa Lestari - Indonesia
- Posco Energy - South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mercuria Energy - Indonesia
- Electricity Generating Authority of Thailand
- Oldendorff Carriers - Singapore
- Sojitz Corporation - Japan
- Eastern Energy - Thailand
- Ambuja Cements Ltd - India
- PTC India Limited - India
- Energy Link Ltd, New Zealand
- Malabar Cements Ltd - India
- Thai Mozambique Logistica
- Australian Commodity Traders Exchange
- Wilmar Investment Holdings
- Indika Energy - Indonesia
- Trasteel International SA, Italy
- Indian Energy Exchange, India
- San Jose City I Power Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Central Electricity Authority - India
- Orica Mining Services - Indonesia
- Ministry of Mines - Canada
- Heidelberg Cement - Germany
- SN Aboitiz Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bulk Trading Sa - Switzerland
- GAC Shipping (India) Pvt Ltd
- Sindya Power Generating Company Private Ltd
- Bharathi Cement Corporation - India
- LBH Netherlands Bv - Netherlands
- Savvy Resources Ltd - HongKong
- Thiess Contractors Indonesia
- New Zealand Coal & Carbon
- Makarim & Taira - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Directorate Of Revenue Intelligence - India
- Kobexindo Tractors - Indoneisa
- Merrill Lynch Commodities Europe
- Iligan Light & Power Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Jaiprakash Power Ventures ltd
- Bhushan Steel Limited - India
- Kartika Selabumi Mining - Indonesia
- Independent Power Producers Association of India
- Krishnapatnam Port Company Ltd. - India
- Kideco Jaya Agung - Indonesia
- Siam City Cement PLC, Thailand
- Gujarat Sidhee Cement - India
- Directorate General of MIneral and Coal - Indonesia
- VISA Power Limited - India
- Bayan Resources Tbk. - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Straits Asia Resources Limited - Singapore
- Samtan Co., Ltd - South Korea
- Eastern Coal Council - USA
- PetroVietnam Power Coal Import and Supply Company
- PowerSource Philippines DevCo
- Antam Resourcindo - Indonesia
- SMG Consultants - Indonesia
- Global Green Power PLC Corporation, Philippines
- Power Finance Corporation Ltd., India
- Sinarmas Energy and Mining - Indonesia
- CNBM International Corporation - China
- The State Trading Corporation of India Ltd
- Tata Chemicals Ltd - India
- Riau Bara Harum - Indonesia
- Chettinad Cement Corporation Ltd - India
- ICICI Bank Limited - India
- Sakthi Sugars Limited - India
- Vedanta Resources Plc - India
- Medco Energi Mining Internasional
- Coalindo Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Timah Investasi Mineral - Indoneisa
- TeaM Sual Corporation - Philippines
- Mjunction Services Limited - India
- Commonwealth Bank - Australia
- Goldman Sachs - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Parliament of New Zealand
- Jorong Barutama Greston.PT - Indonesia
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