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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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Sunday, 04 November 12
SUB-BIT INDONESIA COAL SWAPS FOR DECEMBER' 12 DELIVERY FALLS TO $ 59.78
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for December 2012 delivery fell -1.02 percent on WoW but gained 0.08 percent on D-D on Friday, 2 ...
Saturday, 03 November 12
THE SUPRAMAX FREIGHT EXPECTED TO BE SOFT NEXT WEEK - VISTAAR
COALspot.com - This week the market remained soft with all the sectors soft.
The BDI and was down by 6 pct closing at 986 points. The cape index ...
Saturday, 03 November 12
DEMOLITION IS THE KEY FOR DRY BULK SHIPPING'S RECOVERY SAYS SHIPBROKER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
With the number of new building deliveries so far in 2012 already having surpassed the total of 2011, it's more than clear that the dry bulk sector ...
Thursday, 01 November 12
INDONESIA HAS REVISED DOWN ITS 2012 DOMESTIC MARKET OBLIGATION REQUIREMENT FOR COAL
COALspot.com - Minister of Energy and Mineral Resources of Indonesia has revised down its 2012 domestic market obligation requirement due to lower d ...
Thursday, 01 November 12
SOUTH KOREAN POWER UTILITY EWP TO PURCHASE 670,000 MT OF COAL FOR JAN - FEB 2013 DELIVERY
COALspot.com: Korea East-West Power Co. Ltd. on behalf of Korea South-East Power Co. Ltd., Korea Southern Power Co. Ltd., Korea Midland Power Co. Lt ...
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Showing 4516 to 4520 news of total 6871 |
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- Anglo American - United Kingdom
- Karbindo Abesyapradhi - Indoneisa
- Orica Mining Services - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Toyota Tsusho Corporation, Japan
- Kaltim Prima Coal - Indonesia
- Meenaskhi Energy Private Limited - India
- Orica Australia Pty. Ltd.
- Standard Chartered Bank - UAE
- Goldman Sachs - Singapore
- PowerSource Philippines DevCo
- Straits Asia Resources Limited - Singapore
- Bukit Makmur.PT - Indonesia
- Kumho Petrochemical, South Korea
- Kobexindo Tractors - Indoneisa
- Aboitiz Power Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sinarmas Energy and Mining - Indonesia
- GAC Shipping (India) Pvt Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indika Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Tamil Nadu electricity Board
- Sarangani Energy Corporation, Philippines
- SMG Consultants - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PTC India Limited - India
- Gujarat Sidhee Cement - India
- The University of Queensland
- Ministry of Mines - Canada
- Dalmia Cement Bharat India
- Indian Energy Exchange, India
- Iligan Light & Power Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Independent Power Producers Association of India
- Deloitte Consulting - India
- Ind-Barath Power Infra Limited - India
- Chamber of Mines of South Africa
- Malabar Cements Ltd - India
- ASAPP Information Group - India
- Cement Manufacturers Association - India
- Electricity Authority, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Economic Council, Georgia
- Wilmar Investment Holdings
- Bukit Baiduri Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Bharathi Cement Corporation - India
- Grasim Industreis Ltd - India
- CNBM International Corporation - China
- Agrawal Coal Company - India
- Directorate General of MIneral and Coal - Indonesia
- South Luzon Thermal Energy Corporation
- London Commodity Brokers - England
- GMR Energy Limited - India
- Global Green Power PLC Corporation, Philippines
- Australian Commodity Traders Exchange
- Sojitz Corporation - Japan
- Heidelberg Cement - Germany
- Thai Mozambique Logistica
- Bangladesh Power Developement Board
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- IEA Clean Coal Centre - UK
- San Jose City I Power Corp, Philippines
- Port Waratah Coal Services - Australia
- Thiess Contractors Indonesia
- Mjunction Services Limited - India
- Leighton Contractors Pty Ltd - Australia
- Salva Resources Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- McConnell Dowell - Australia
- Essar Steel Hazira Ltd - India
- Central Java Power - Indonesia
- Singapore Mercantile Exchange
- European Bulk Services B.V. - Netherlands
- SN Aboitiz Power Inc, Philippines
- Eastern Energy - Thailand
- Semirara Mining and Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- VISA Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Australian Coal Association
- Pipit Mutiara Jaya. PT, Indonesia
- Indogreen Group - Indonesia
- Maheswari Brothers Coal Limited - India
- Mercator Lines Limited - India
- Indo Tambangraya Megah - Indonesia
- Star Paper Mills Limited - India
- Jindal Steel & Power Ltd - India
- Interocean Group of Companies - India
- Bhatia International Limited - India
- Edison Trading Spa - Italy
- SMC Global Power, Philippines
- Africa Commodities Group - South Africa
- Ministry of Finance - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Merrill Lynch Commodities Europe
- Altura Mining Limited, Indonesia
- CIMB Investment Bank - Malaysia
- Riau Bara Harum - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Coal and Oil Company - UAE
- Uttam Galva Steels Limited - India
- Parry Sugars Refinery, India
- Central Electricity Authority - India
- Kapuas Tunggal Persada - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Maharashtra Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- Baramulti Group, Indonesia
- ICICI Bank Limited - India
- Timah Investasi Mineral - Indoneisa
- Georgia Ports Authority, United States
- Asia Pacific Energy Resources Ventures Inc, Philippines
- White Energy Company Limited
- PNOC Exploration Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- Bhoruka Overseas - Indonesia
- Renaissance Capital - South Africa
- GVK Power & Infra Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Transport, Egypt
- Siam City Cement - Thailand
- Barasentosa Lestari - Indonesia
- Pendopo Energi Batubara - Indonesia
- India Bulls Power Limited - India
- Jaiprakash Power Ventures ltd
- Globalindo Alam Lestari - Indonesia
- Binh Thuan Hamico - Vietnam
- Meralco Power Generation, Philippines
- Trasteel International SA, Italy
- Miang Besar Coal Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Sakthi Sugars Limited - India
- Energy Development Corp, Philippines
- Bulk Trading Sa - Switzerland
- Cigading International Bulk Terminal - Indonesia
- Carbofer General Trading SA - India
- Madhucon Powers Ltd - India
- Vedanta Resources Plc - India
- The State Trading Corporation of India Ltd
- Alfred C Toepfer International GmbH - Germany
- Rio Tinto Coal - Australia
- TeaM Sual Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Aditya Birla Group - India
- Indonesian Coal Mining Association
- IHS Mccloskey Coal Group - USA
- Bhushan Steel Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sree Jayajothi Cements Limited - India
- Karaikal Port Pvt Ltd - India
- Medco Energi Mining Internasional
- Kideco Jaya Agung - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Ambuja Cements Ltd - India
- Romanian Commodities Exchange
- Attock Cement Pakistan Limited
- MS Steel International - UAE
- Directorate Of Revenue Intelligence - India
- Electricity Generating Authority of Thailand
- Simpson Spence & Young - Indonesia
- Global Business Power Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Latin American Coal - Colombia
- Indian Oil Corporation Limited
- Banpu Public Company Limited - Thailand
- Oldendorff Carriers - Singapore
- New Zealand Coal & Carbon
- Sindya Power Generating Company Private Ltd
- LBH Netherlands Bv - Netherlands
- Kartika Selabumi Mining - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Price Waterhouse Coopers - Russia
- Samtan Co., Ltd - South Korea
- Neyveli Lignite Corporation Ltd, - India
- Energy Link Ltd, New Zealand
- Eastern Coal Council - USA
- Posco Energy - South Korea
- Petron Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- AsiaOL BioFuels Corp., Philippines
- Mintek Dendrill Indonesia
- International Coal Ventures Pvt Ltd - India
- Planning Commission, India
- Kalimantan Lumbung Energi - Indonesia
- OPG Power Generation Pvt Ltd - India
- Videocon Industries ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Xindia Steels Limited - India
- Larsen & Toubro Limited - India
- The Treasury - Australian Government
- Therma Luzon, Inc, Philippines
- Lanco Infratech Ltd - India
- Sical Logistics Limited - India
- Borneo Indobara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Minerals Council of Australia
- Coalindo Energy - Indonesia
- Semirara Mining Corp, Philippines
- Tata Chemicals Ltd - India
- Commonwealth Bank - Australia
- Marubeni Corporation - India
- Mercuria Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Antam Resourcindo - Indonesia
- Power Finance Corporation Ltd., India
- Savvy Resources Ltd - HongKong
- Formosa Plastics Group - Taiwan
- Parliament of New Zealand
- Siam City Cement PLC, Thailand
- Gujarat Electricity Regulatory Commission - India
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