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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, 08 November 12
LARGE ECO SUPRA : INDO - INDIA NOW FIXED AT USD 11K FOR DELIVERY SINGAPORE - FEARNLEYS
Handy
The Atlantic market continues to remain weak with rates further softening on FH. Rates from USG to Feast were around USD 14k and Black Sea to ...
Thursday, 08 November 12
DRY BULK MARKET RETREATS AGAIN ON HIGHER SHIP SUPPLY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
In further evidence of a latest round of dry bulk shipping misery, the industry's benchmark fell for the 11th straight session yesterday, as the in ...
Thursday, 08 November 12
JOIN CHINA STEAM COAL SUPPLY - DEMAND FORUM
Join China Steam Coal Supply-Demand Forum & Visit Shenhua Yudean Zhuhai Port Coal Terminal
Press Release - Organized by CBI BIZ and suppo ...
Wednesday, 07 November 12
NEWBUILDING ORDERING ACTIVITY ON A STEADY PACE PRIOR TO THE END OF THE YEAR - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Newbuilding orders, which to many involved in the shipping industry, are the main reason of today's low freight rates and subsequent financial prob ...
Tuesday, 06 November 12
NOVEMBER 2012 HBA $35.21 LOWER THAN A YEAR AGO
COALspot.com - The Indonesian government’s declared coal reference price for November’ 12 has lost US$ 4.60 per MT M-o-M.
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Showing 4511 to 4515 news of total 6871 |
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- Jindal Steel & Power Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- LBH Netherlands Bv - Netherlands
- IEA Clean Coal Centre - UK
- Parry Sugars Refinery, India
- Madhucon Powers Ltd - India
- Romanian Commodities Exchange
- Toyota Tsusho Corporation, Japan
- Alfred C Toepfer International GmbH - Germany
- Indo Tambangraya Megah - Indonesia
- Singapore Mercantile Exchange
- Agrawal Coal Company - India
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Transport, Egypt
- Central Electricity Authority - India
- Bhatia International Limited - India
- Indonesian Coal Mining Association
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Maharashtra Electricity Regulatory Commission - India
- Krishnapatnam Port Company Ltd. - India
- San Jose City I Power Corp, Philippines
- Kumho Petrochemical, South Korea
- Indika Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Carbofer General Trading SA - India
- Medco Energi Mining Internasional
- Coal and Oil Company - UAE
- Ministry of Mines - Canada
- Sinarmas Energy and Mining - Indonesia
- Baramulti Group, Indonesia
- Vizag Seaport Private Limited - India
- Kobexindo Tractors - Indoneisa
- Cement Manufacturers Association - India
- Commonwealth Bank - Australia
- Ind-Barath Power Infra Limited - India
- Petron Corporation, Philippines
- Parliament of New Zealand
- White Energy Company Limited
- Oldendorff Carriers - Singapore
- Lanco Infratech Ltd - India
- Sarangani Energy Corporation, Philippines
- Thai Mozambique Logistica
- The Treasury - Australian Government
- Posco Energy - South Korea
- Africa Commodities Group - South Africa
- Manunggal Multi Energi - Indonesia
- Bangladesh Power Developement Board
- Asmin Koalindo Tuhup - Indonesia
- MS Steel International - UAE
- Interocean Group of Companies - India
- New Zealand Coal & Carbon
- Wilmar Investment Holdings
- TNB Fuel Sdn Bhd - Malaysia
- PTC India Limited - India
- GAC Shipping (India) Pvt Ltd
- Maheswari Brothers Coal Limited - India
- Formosa Plastics Group - Taiwan
- Bukit Asam (Persero) Tbk - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Star Paper Mills Limited - India
- ASAPP Information Group - India
- McConnell Dowell - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Renaissance Capital - South Africa
- Mercator Lines Limited - India
- Mercuria Energy - Indonesia
- Videocon Industries ltd - India
- The State Trading Corporation of India Ltd
- Anglo American - United Kingdom
- Energy Development Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Karbindo Abesyapradhi - Indoneisa
- Grasim Industreis Ltd - India
- Xindia Steels Limited - India
- Cigading International Bulk Terminal - Indonesia
- Power Finance Corporation Ltd., India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Eastern Coal Council - USA
- South Luzon Thermal Energy Corporation
- Globalindo Alam Lestari - Indonesia
- GMR Energy Limited - India
- Trasteel International SA, Italy
- Latin American Coal - Colombia
- Sojitz Corporation - Japan
- PetroVietnam Power Coal Import and Supply Company
- Minerals Council of Australia
- Miang Besar Coal Terminal - Indonesia
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- Dalmia Cement Bharat India
- Siam City Cement - Thailand
- Straits Asia Resources Limited - Singapore
- Kartika Selabumi Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Georgia Ports Authority, United States
- Global Business Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Indogreen Group - Indonesia
- Simpson Spence & Young - Indonesia
- Aboitiz Power Corporation - Philippines
- Savvy Resources Ltd - HongKong
- Iligan Light & Power Inc, Philippines
- Gujarat Sidhee Cement - India
- Kepco SPC Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Altura Mining Limited, Indonesia
- PowerSource Philippines DevCo
- Barasentosa Lestari - Indonesia
- Borneo Indobara - Indonesia
- Therma Luzon, Inc, Philippines
- Salva Resources Pvt Ltd - India
- Sical Logistics Limited - India
- Siam City Cement PLC, Thailand
- Riau Bara Harum - Indonesia
- Bharathi Cement Corporation - India
- Indian Oil Corporation Limited
- Central Java Power - Indonesia
- Edison Trading Spa - Italy
- Australian Coal Association
- Electricity Authority, New Zealand
- Ceylon Electricity Board - Sri Lanka
- Meralco Power Generation, Philippines
- Sindya Power Generating Company Private Ltd
- Billiton Holdings Pty Ltd - Australia
- Timah Investasi Mineral - Indoneisa
- Directorate Of Revenue Intelligence - India
- Bhoruka Overseas - Indonesia
- Global Coal Blending Company Limited - Australia
- Meenaskhi Energy Private Limited - India
- Economic Council, Georgia
- Chettinad Cement Corporation Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Ambuja Cements Ltd - India
- GVK Power & Infra Limited - India
- IHS Mccloskey Coal Group - USA
- Energy Link Ltd, New Zealand
- Binh Thuan Hamico - Vietnam
- Malabar Cements Ltd - India
- Wood Mackenzie - Singapore
- Merrill Lynch Commodities Europe
- Tamil Nadu electricity Board
- Aditya Birla Group - India
- Australian Commodity Traders Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bulk Trading Sa - Switzerland
- Offshore Bulk Terminal Pte Ltd, Singapore
- European Bulk Services B.V. - Netherlands
- Standard Chartered Bank - UAE
- Makarim & Taira - Indonesia
- Bayan Resources Tbk. - Indonesia
- Ministry of Finance - Indonesia
- Kideco Jaya Agung - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Orica Australia Pty. Ltd.
- CNBM International Corporation - China
- Larsen & Toubro Limited - India
- Tata Chemicals Ltd - India
- Pendopo Energi Batubara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Deloitte Consulting - India
- Antam Resourcindo - Indonesia
- London Commodity Brokers - England
- Gujarat Electricity Regulatory Commission - India
- SMG Consultants - Indonesia
- Orica Mining Services - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Price Waterhouse Coopers - Russia
- Heidelberg Cement - Germany
- Metalloyd Limited - United Kingdom
- Essar Steel Hazira Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Uttam Galva Steels Limited - India
- SMC Global Power, Philippines
- Global Green Power PLC Corporation, Philippines
- VISA Power Limited - India
- Independent Power Producers Association of India
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Makmur.PT - Indonesia
- Planning Commission, India
- Vijayanagar Sugar Pvt Ltd - India
- Marubeni Corporation - India
- ICICI Bank Limited - India
- Coastal Gujarat Power Limited - India
- Rio Tinto Coal - Australia
- Attock Cement Pakistan Limited
- Chamber of Mines of South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- PNOC Exploration Corporation - Philippines
- Port Waratah Coal Services - Australia
- India Bulls Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Bhushan Steel Limited - India
- Indian Energy Exchange, India
- SN Aboitiz Power Inc, Philippines
- CIMB Investment Bank - Malaysia
- Kaltim Prima Coal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Thiess Contractors Indonesia
- TeaM Sual Corporation - Philippines
- Mintek Dendrill Indonesia
- International Coal Ventures Pvt Ltd - India
- Coalindo Energy - Indonesia
- Eastern Energy - Thailand
- Vedanta Resources Plc - India
- Leighton Contractors Pty Ltd - Australia
- Goldman Sachs - Singapore
- The University of Queensland
- Mjunction Services Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Sakthi Sugars Limited - India
- Jaiprakash Power Ventures ltd
- Banpu Public Company Limited - Thailand
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