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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, 10 January 13
DRY BULK PANAMAX MARKET HEAVILY OVERSUPPLIED, UNLIKELY TO FIND SUPPORT IN 2013 - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Despite positive indication for a significant surge of dry bulk demand this year, the oversupply problems of the market, will continue to weigh heav ...
Tuesday, 08 January 13
HOLIDAY ACTIVITY SCARCE IN THE MARKET OF SECOND HAND VESSELS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Although the market for second hand vessel purchasing was quite lull during the Holiday period, as is usually the case, the first days of the New Ye ...
Tuesday, 08 January 13
NEWCASTLE PORT SHIPPED 3.197 MILLION MT OF COAL W/E 7 JANUARY 2013
COALspot.com - Newcastle port in Australia has loaded 3,197,580 MT of thermal and coking coal for week ended 0700 hours 7 January 2013, Newcas ...
Sunday, 06 January 13
CFR SOUTH CHINA COAL: 2014 DELIVERY CLOSED US$ 6.80 HIGHER THAN Q1 '13 PRICE
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for average Q1’ 2013 delivery has gained 0.37 percent WoW and CFR South China coal sh ...
Sunday, 06 January 13
COAL BOOM: WAKE-UP CALL FOR INDIA & INDONESIA! - SUNIL K KUMBHAT
COALspot.com - Coal Boom : Scenario, Now & later!
Coal has been the dominant fuel for power generating plants in developed countries since th ...
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Showing 4431 to 4435 news of total 6871 |
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- McConnell Dowell - Australia
- South Luzon Thermal Energy Corporation
- Ambuja Cements Ltd - India
- Port Waratah Coal Services - Australia
- Bharathi Cement Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- Binh Thuan Hamico - Vietnam
- Rio Tinto Coal - Australia
- Coastal Gujarat Power Limited - India
- Uttam Galva Steels Limited - India
- Salva Resources Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Central Electricity Authority - India
- Jorong Barutama Greston.PT - Indonesia
- Commonwealth Bank - Australia
- Singapore Mercantile Exchange
- Riau Bara Harum - Indonesia
- Bhoruka Overseas - Indonesia
- Interocean Group of Companies - India
- Energy Link Ltd, New Zealand
- Thiess Contractors Indonesia
- Indian Oil Corporation Limited
- Posco Energy - South Korea
- Indian Energy Exchange, India
- Maharashtra Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- Banpu Public Company Limited - Thailand
- Carbofer General Trading SA - India
- Sical Logistics Limited - India
- Renaissance Capital - South Africa
- Agrawal Coal Company - India
- Vizag Seaport Private Limited - India
- International Coal Ventures Pvt Ltd - India
- Goldman Sachs - Singapore
- Toyota Tsusho Corporation, Japan
- Krishnapatnam Port Company Ltd. - India
- Makarim & Taira - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Merrill Lynch Commodities Europe
- Wilmar Investment Holdings
- Kideco Jaya Agung - Indonesia
- PNOC Exploration Corporation - Philippines
- Mjunction Services Limited - India
- Kaltim Prima Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Ministry of Finance - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Iligan Light & Power Inc, Philippines
- Deloitte Consulting - India
- Power Finance Corporation Ltd., India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Xindia Steels Limited - India
- Global Business Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- TeaM Sual Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
- Kepco SPC Power Corporation, Philippines
- Sojitz Corporation - Japan
- Dalmia Cement Bharat India
- GN Power Mariveles Coal Plant, Philippines
- Oldendorff Carriers - Singapore
- Energy Development Corp, Philippines
- CIMB Investment Bank - Malaysia
- GMR Energy Limited - India
- Kapuas Tunggal Persada - Indonesia
- Madhucon Powers Ltd - India
- Savvy Resources Ltd - HongKong
- Baramulti Group, Indonesia
- Bangladesh Power Developement Board
- The University of Queensland
- Gujarat Mineral Development Corp Ltd - India
- VISA Power Limited - India
- PTC India Limited - India
- New Zealand Coal & Carbon
- London Commodity Brokers - England
- Bulk Trading Sa - Switzerland
- SN Aboitiz Power Inc, Philippines
- Trasteel International SA, Italy
- PetroVietnam Power Coal Import and Supply Company
- MS Steel International - UAE
- Minerals Council of Australia
- Heidelberg Cement - Germany
- Semirara Mining and Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Coalindo Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Orica Australia Pty. Ltd.
- White Energy Company Limited
- Meenaskhi Energy Private Limited - India
- ICICI Bank Limited - India
- CNBM International Corporation - China
- Price Waterhouse Coopers - Russia
- Electricity Generating Authority of Thailand
- Barasentosa Lestari - Indonesia
- Standard Chartered Bank - UAE
- Orica Mining Services - Indonesia
- Simpson Spence & Young - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Aditya Birla Group - India
- Alfred C Toepfer International GmbH - Germany
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PowerSource Philippines DevCo
- Chamber of Mines of South Africa
- IHS Mccloskey Coal Group - USA
- Marubeni Corporation - India
- Bukit Baiduri Energy - Indonesia
- Siam City Cement PLC, Thailand
- Jindal Steel & Power Ltd - India
- Indonesian Coal Mining Association
- Grasim Industreis Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Indo Tambangraya Megah - Indonesia
- Parry Sugars Refinery, India
- Tamil Nadu electricity Board
- Meralco Power Generation, Philippines
- Manunggal Multi Energi - Indonesia
- Vedanta Resources Plc - India
- Formosa Plastics Group - Taiwan
- Edison Trading Spa - Italy
- Kobexindo Tractors - Indoneisa
- Star Paper Mills Limited - India
- San Jose City I Power Corp, Philippines
- Bhatia International Limited - India
- Straits Asia Resources Limited - Singapore
- GAC Shipping (India) Pvt Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Latin American Coal - Colombia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bhushan Steel Limited - India
- Global Coal Blending Company Limited - Australia
- Sindya Power Generating Company Private Ltd
- Intertek Mineral Services - Indonesia
- Ministry of Transport, Egypt
- Directorate Of Revenue Intelligence - India
- Wood Mackenzie - Singapore
- Coal and Oil Company - UAE
- Globalindo Alam Lestari - Indonesia
- Eastern Energy - Thailand
- AsiaOL BioFuels Corp., Philippines
- Samtan Co., Ltd - South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Electricity Authority, New Zealand
- Indogreen Group - Indonesia
- Timah Investasi Mineral - Indoneisa
- Medco Energi Mining Internasional
- Vijayanagar Sugar Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- India Bulls Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement - Thailand
- Pendopo Energi Batubara - Indonesia
- Sakthi Sugars Limited - India
- Parliament of New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Semirara Mining Corp, Philippines
- SMC Global Power, Philippines
- Ceylon Electricity Board - Sri Lanka
- Videocon Industries ltd - India
- Mercator Lines Limited - India
- Romanian Commodities Exchange
- Larsen & Toubro Limited - India
- ASAPP Information Group - India
- Directorate General of MIneral and Coal - Indonesia
- Cement Manufacturers Association - India
- Australian Coal Association
- Bukit Makmur.PT - Indonesia
- OPG Power Generation Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Metalloyd Limited - United Kingdom
- Asmin Koalindo Tuhup - Indonesia
- Thai Mozambique Logistica
- Anglo American - United Kingdom
- GVK Power & Infra Limited - India
- Australian Commodity Traders Exchange
- Indika Energy - Indonesia
- Lanco Infratech Ltd - India
- Attock Cement Pakistan Limited
- Maheswari Brothers Coal Limited - India
- Tata Chemicals Ltd - India
- Bayan Resources Tbk. - Indonesia
- Planning Commission, India
- Therma Luzon, Inc, Philippines
- Mercuria Energy - Indonesia
- Africa Commodities Group - South Africa
- Economic Council, Georgia
- Mintek Dendrill Indonesia
- Petron Corporation, Philippines
- SMG Consultants - Indonesia
- Central Java Power - Indonesia
- Gujarat Sidhee Cement - India
- Jaiprakash Power Ventures ltd
- Sree Jayajothi Cements Limited - India
- Karaikal Port Pvt Ltd - India
- The Treasury - Australian Government
- Global Green Power PLC Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Ministry of Mines - Canada
- Leighton Contractors Pty Ltd - Australia
- Borneo Indobara - Indonesia
- The State Trading Corporation of India Ltd
- Eastern Coal Council - USA
- Sinarmas Energy and Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Kumho Petrochemical, South Korea
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- Antam Resourcindo - Indonesia
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