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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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Monday, 12 November 12
DRILLING COMPLETED AT THE MOORLANDS DEPOSIT, WEST BOWEN PROJECT
Press Release - Cuesta Coal Limited (ASX: CQC) (“Cuesta”) is pleased to announce it has completed its exploration activities at the Moor ...
Monday, 12 November 12
BARGE-LOAD OF 5K TONNES OF COAL FROM THE ADK JOINT VENTURE SHIPPED LAST WEEK
COALspot.com - Orpheus Energy (ASX:OEG) has announced that, it has successfully shipped a 5,000 tonne of ADK thermal coal to an Indonesian trading g ...
Sunday, 11 November 12
AN OPTIMISTIC WEEK FOR INDONESIAN SUB-BIT COAL
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for January 2013 delivery gains 2.08 percent WoW and 1.28 percent DoD on Friday, 9 November ...
Sunday, 11 November 12
THE IRON ORE AND COAL PRICES MOVEMENTS REMAINS LOW - VISTAAR
COALspot.com The market remained soft with all the sectors soft.
The BDI and was down by 4.67 pct closing at 940 points, on Friday 9 Novemb ...
Friday, 09 November 12
SHIP OWNERS TURN TO SECOND HAND VESSELS, WHICH COME AT ATTRACTIVE PRICES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The attractiveness of modern second hand vessels, which are often priced aggressively can't be ignored by cash-rich ship owners, who are taking adv ...
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Showing 4506 to 4510 news of total 6871 |
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- PetroVietnam Power Coal Import and Supply Company
- Attock Cement Pakistan Limited
- Ministry of Finance - Indonesia
- Eastern Energy - Thailand
- Bhushan Steel Limited - India
- Deloitte Consulting - India
- Videocon Industries ltd - India
- Kapuas Tunggal Persada - Indonesia
- Coastal Gujarat Power Limited - India
- IHS Mccloskey Coal Group - USA
- Directorate General of MIneral and Coal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- GMR Energy Limited - India
- Siam City Cement PLC, Thailand
- Carbofer General Trading SA - India
- Toyota Tsusho Corporation, Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Orica Mining Services - Indonesia
- Sree Jayajothi Cements Limited - India
- Sojitz Corporation - Japan
- Mercuria Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Minerals Council of Australia
- Karbindo Abesyapradhi - Indoneisa
- Sakthi Sugars Limited - India
- Sical Logistics Limited - India
- McConnell Dowell - Australia
- The University of Queensland
- Indika Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Bulk Trading Sa - Switzerland
- Central Electricity Authority - India
- GAC Shipping (India) Pvt Ltd
- Banpu Public Company Limited - Thailand
- Agrawal Coal Company - India
- Renaissance Capital - South Africa
- Cement Manufacturers Association - India
- Altura Mining Limited, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Manunggal Multi Energi - Indonesia
- Power Finance Corporation Ltd., India
- Kobexindo Tractors - Indoneisa
- Bukit Makmur.PT - Indonesia
- CNBM International Corporation - China
- Thiess Contractors Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Aditya Birla Group - India
- Chamber of Mines of South Africa
- Iligan Light & Power Inc, Philippines
- Heidelberg Cement - Germany
- Indo Tambangraya Megah - Indonesia
- Sindya Power Generating Company Private Ltd
- Intertek Mineral Services - Indonesia
- Independent Power Producers Association of India
- Standard Chartered Bank - UAE
- Ceylon Electricity Board - Sri Lanka
- CIMB Investment Bank - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Planning Commission, India
- Energy Link Ltd, New Zealand
- Asmin Koalindo Tuhup - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Globalindo Alam Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- Essar Steel Hazira Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Latin American Coal - Colombia
- SN Aboitiz Power Inc, Philippines
- PowerSource Philippines DevCo
- Indogreen Group - Indonesia
- Australian Commodity Traders Exchange
- Medco Energi Mining Internasional
- Pendopo Energi Batubara - Indonesia
- Formosa Plastics Group - Taiwan
- Kumho Petrochemical, South Korea
- Parry Sugars Refinery, India
- Africa Commodities Group - South Africa
- GN Power Mariveles Coal Plant, Philippines
- Xindia Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- India Bulls Power Limited - India
- Economic Council, Georgia
- Meralco Power Generation, Philippines
- LBH Netherlands Bv - Netherlands
- Pipit Mutiara Jaya. PT, Indonesia
- OPG Power Generation Pvt Ltd - India
- ICICI Bank Limited - India
- Barasentosa Lestari - Indonesia
- Price Waterhouse Coopers - Russia
- Global Coal Blending Company Limited - Australia
- Thai Mozambique Logistica
- Indonesian Coal Mining Association
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Mintek Dendrill Indonesia
- Port Waratah Coal Services - Australia
- Sinarmas Energy and Mining - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Edison Trading Spa - Italy
- Jorong Barutama Greston.PT - Indonesia
- Grasim Industreis Ltd - India
- Interocean Group of Companies - India
- Timah Investasi Mineral - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Savvy Resources Ltd - HongKong
- Miang Besar Coal Terminal - Indonesia
- Bukit Baiduri Energy - Indonesia
- Global Business Power Corporation, Philippines
- Indian Oil Corporation Limited
- Bayan Resources Tbk. - Indonesia
- Electricity Generating Authority of Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Neyveli Lignite Corporation Ltd, - India
- Central Java Power - Indonesia
- Mjunction Services Limited - India
- Bhoruka Overseas - Indonesia
- Antam Resourcindo - Indonesia
- Rio Tinto Coal - Australia
- Tata Chemicals Ltd - India
- Romanian Commodities Exchange
- Singapore Mercantile Exchange
- Sarangani Energy Corporation, Philippines
- Riau Bara Harum - Indonesia
- Coal and Oil Company - UAE
- GVK Power & Infra Limited - India
- Bhatia International Limited - India
- Billiton Holdings Pty Ltd - Australia
- Kideco Jaya Agung - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Dalmia Cement Bharat India
- The Treasury - Australian Government
- Directorate Of Revenue Intelligence - India
- Ambuja Cements Ltd - India
- PTC India Limited - India
- Karaikal Port Pvt Ltd - India
- Lanco Infratech Ltd - India
- Madhucon Powers Ltd - India
- Larsen & Toubro Limited - India
- Gujarat Sidhee Cement - India
- Semirara Mining Corp, Philippines
- Georgia Ports Authority, United States
- South Luzon Thermal Energy Corporation
- Metalloyd Limited - United Kingdom
- Parliament of New Zealand
- SMG Consultants - Indonesia
- Tamil Nadu electricity Board
- Chettinad Cement Corporation Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Malabar Cements Ltd - India
- MS Steel International - UAE
- Anglo American - United Kingdom
- Commonwealth Bank - Australia
- London Commodity Brokers - England
- Samtan Co., Ltd - South Korea
- Leighton Contractors Pty Ltd - Australia
- Baramulti Group, Indonesia
- The State Trading Corporation of India Ltd
- Vedanta Resources Plc - India
- Straits Asia Resources Limited - Singapore
- Simpson Spence & Young - Indonesia
- VISA Power Limited - India
- White Energy Company Limited
- Mercator Lines Limited - India
- Bharathi Cement Corporation - India
- Ministry of Transport, Egypt
- Maheswari Brothers Coal Limited - India
- Makarim & Taira - Indonesia
- Meenaskhi Energy Private Limited - India
- Orica Australia Pty. Ltd.
- Kaltim Prima Coal - Indonesia
- Binh Thuan Hamico - Vietnam
- Rashtriya Ispat Nigam Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Marubeni Corporation - India
- New Zealand Coal & Carbon
- Salva Resources Pvt Ltd - India
- Coalindo Energy - Indonesia
- Siam City Cement - Thailand
- Vizag Seaport Private Limited - India
- Petron Corporation, Philippines
- Eastern Coal Council - USA
- Australian Coal Association
- Wilmar Investment Holdings
- Star Paper Mills Limited - India
- Ind-Barath Power Infra Limited - India
- TeaM Sual Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Posco Energy - South Korea
- PNOC Exploration Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Borneo Indobara - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- Indian Energy Exchange, India
- Electricity Authority, New Zealand
- Goldman Sachs - Singapore
- Merrill Lynch Commodities Europe
- Bangladesh Power Developement Board
- Global Green Power PLC Corporation, Philippines
- ASAPP Information Group - India
- Uttam Galva Steels Limited - India
- SMC Global Power, Philippines
- Therma Luzon, Inc, Philippines
- Ministry of Mines - Canada
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Gujarat Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- Trasteel International SA, Italy
- Oldendorff Carriers - Singapore
- Wood Mackenzie - Singapore
- San Jose City I Power Corp, Philippines
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