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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, 29 October 12
US COAL EXPORTS ARE EXPECTED TO REACH 125 MILLION TONS THIS YEAR - EIA
COALspot.com - US coal exports are expected to reach 125 million tons this year, surpassing the old record of about 113 million tons set in 1981, sa ...
Sunday, 28 October 12
SUB-BIT INDONESIA COAL SWAPS (FOB ) FOR DECEMBER 2012 DELIVERY STAYED FLAT D-D
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for December 2012 delivery flat on D-D but gained 0.38 percent on W-W on Friday, 26 October 2012, ...
Sunday, 28 October 12
INDONESIA TO INDIA SUPRAMAX FREIGHT MARKET FAIRLY STEADY - VISTAAR
COALspot.com - The Cape size sector continued to remain active with iron ore movement being steady. All other sectors were down.
The BDI was up b ...
Friday, 26 October 12
SHIPPING MARKETS HEADING FOR DIVISION AND MULTI-TIER WILL BECOME THE NORM - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
It seems that something is expected to be fundamentally different in the way that the shipping markets will be operating in the future, according to ...
Friday, 26 October 12
DRY BULK MARKET FALLS ON WORRIES THAT RECENT RALLY WILL BE SHORTLIVED - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market retreated yesterday as a result of a plunge of the Capesize dry bulk carriers' segment, after their latest rally. As a result, ...
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Showing 4526 to 4530 news of total 6871 |
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- Kumho Petrochemical, South Korea
- Coastal Gujarat Power Limited - India
- Gujarat Sidhee Cement - India
- Petron Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- GMR Energy Limited - India
- The State Trading Corporation of India Ltd
- Sinarmas Energy and Mining - Indonesia
- Formosa Plastics Group - Taiwan
- Thai Mozambique Logistica
- Energy Development Corp, Philippines
- Eastern Energy - Thailand
- Independent Power Producers Association of India
- Directorate Of Revenue Intelligence - India
- ICICI Bank Limited - India
- Borneo Indobara - Indonesia
- Indika Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Ind-Barath Power Infra Limited - India
- SMC Global Power, Philippines
- Minerals Council of Australia
- Bahari Cakrawala Sebuku - Indonesia
- Mintek Dendrill Indonesia
- European Bulk Services B.V. - Netherlands
- Krishnapatnam Port Company Ltd. - India
- Indian Energy Exchange, India
- Straits Asia Resources Limited - Singapore
- Bhatia International Limited - India
- Semirara Mining Corp, Philippines
- CIMB Investment Bank - Malaysia
- White Energy Company Limited
- Price Waterhouse Coopers - Russia
- VISA Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Mercator Lines Limited - India
- Baramulti Group, Indonesia
- South Luzon Thermal Energy Corporation
- Agrawal Coal Company - India
- AsiaOL BioFuels Corp., Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Economic Council, Georgia
- Antam Resourcindo - Indonesia
- Cement Manufacturers Association - India
- Merrill Lynch Commodities Europe
- International Coal Ventures Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Wood Mackenzie - Singapore
- Ministry of Transport, Egypt
- Sarangani Energy Corporation, Philippines
- Australian Commodity Traders Exchange
- Coalindo Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- Madhucon Powers Ltd - India
- Makarim & Taira - Indonesia
- Manunggal Multi Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Ministry of Mines - Canada
- Ambuja Cements Ltd - India
- New Zealand Coal & Carbon
- Iligan Light & Power Inc, Philippines
- Star Paper Mills Limited - India
- Georgia Ports Authority, United States
- Petrochimia International Co. Ltd.- Taiwan
- Cigading International Bulk Terminal - Indonesia
- Anglo American - United Kingdom
- Intertek Mineral Services - Indonesia
- Sindya Power Generating Company Private Ltd
- Parry Sugars Refinery, India
- Bangladesh Power Developement Board
- Port Waratah Coal Services - Australia
- Indonesian Coal Mining Association
- Attock Cement Pakistan Limited
- Aditya Birla Group - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kalimantan Lumbung Energi - Indonesia
- Global Green Power PLC Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Leighton Contractors Pty Ltd - Australia
- Karbindo Abesyapradhi - Indoneisa
- Siam City Cement - Thailand
- Meenaskhi Energy Private Limited - India
- Sojitz Corporation - Japan
- Indian Oil Corporation Limited
- Miang Besar Coal Terminal - Indonesia
- Jindal Steel & Power Ltd - India
- ASAPP Information Group - India
- Bhoruka Overseas - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Medco Energi Mining Internasional
- Ceylon Electricity Board - Sri Lanka
- Kideco Jaya Agung - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- San Jose City I Power Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Central Java Power - Indonesia
- India Bulls Power Limited - India
- Romanian Commodities Exchange
- Malabar Cements Ltd - India
- Altura Mining Limited, Indonesia
- OPG Power Generation Pvt Ltd - India
- Heidelberg Cement - Germany
- Kepco SPC Power Corporation, Philippines
- Mjunction Services Limited - India
- Larsen & Toubro Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- Standard Chartered Bank - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Carbofer General Trading SA - India
- McConnell Dowell - Australia
- Singapore Mercantile Exchange
- Coal and Oil Company - UAE
- GVK Power & Infra Limited - India
- Mercuria Energy - Indonesia
- Siam City Cement PLC, Thailand
- The University of Queensland
- GAC Shipping (India) Pvt Ltd
- Xindia Steels Limited - India
- Tata Chemicals Ltd - India
- Lanco Infratech Ltd - India
- Interocean Group of Companies - India
- Oldendorff Carriers - Singapore
- Meralco Power Generation, Philippines
- Aboitiz Power Corporation - Philippines
- Thiess Contractors Indonesia
- Indogreen Group - Indonesia
- Parliament of New Zealand
- Bukit Makmur.PT - Indonesia
- Vizag Seaport Private Limited - India
- Rio Tinto Coal - Australia
- Samtan Co., Ltd - South Korea
- Salva Resources Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Sical Logistics Limited - India
- Ministry of Finance - Indonesia
- Essar Steel Hazira Ltd - India
- PTC India Limited - India
- Bukit Baiduri Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Power Finance Corporation Ltd., India
- Semirara Mining and Power Corporation, Philippines
- Deloitte Consulting - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Posco Energy - South Korea
- Savvy Resources Ltd - HongKong
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- London Commodity Brokers - England
- Central Electricity Authority - India
- Bulk Trading Sa - Switzerland
- Kaltim Prima Coal - Indonesia
- Orica Australia Pty. Ltd.
- Binh Thuan Hamico - Vietnam
- Trasteel International SA, Italy
- IHS Mccloskey Coal Group - USA
- Wilmar Investment Holdings
- Marubeni Corporation - India
- The Treasury - Australian Government
- Global Business Power Corporation, Philippines
- Dalmia Cement Bharat India
- Videocon Industries ltd - India
- Bharathi Cement Corporation - India
- Bhushan Steel Limited - India
- Holcim Trading Pte Ltd - Singapore
- Bayan Resources Tbk. - Indonesia
- Electricity Authority, New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- LBH Netherlands Bv - Netherlands
- Toyota Tsusho Corporation, Japan
- Sakthi Sugars Limited - India
- PowerSource Philippines DevCo
- TNB Fuel Sdn Bhd - Malaysia
- Goldman Sachs - Singapore
- Latin American Coal - Colombia
- Kohat Cement Company Ltd. - Pakistan
- Sree Jayajothi Cements Limited - India
- Tamil Nadu electricity Board
- Rashtriya Ispat Nigam Limited - India
- Pendopo Energi Batubara - Indonesia
- Energy Link Ltd, New Zealand
- Eastern Coal Council - USA
- Commonwealth Bank - Australia
- Uttam Galva Steels Limited - India
- Banpu Public Company Limited - Thailand
- Edison Trading Spa - Italy
- Vedanta Resources Plc - India
- SMG Consultants - Indonesia
- Gujarat Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- Barasentosa Lestari - Indonesia
- SN Aboitiz Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Grasim Industreis Ltd - India
- Chamber of Mines of South Africa
- Africa Commodities Group - South Africa
- Planning Commission, India
- Orica Mining Services - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Australian Coal Association
- CNBM International Corporation - China
- PNOC Exploration Corporation - Philippines
- Metalloyd Limited - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Timah Investasi Mineral - Indoneisa
- Electricity Generating Authority of Thailand
- GN Power Mariveles Coal Plant, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Kobexindo Tractors - Indoneisa
- Global Coal Blending Company Limited - Australia
- Simpson Spence & Young - Indonesia
- Jaiprakash Power Ventures ltd
- MS Steel International - UAE
- Renaissance Capital - South Africa
- Maheswari Brothers Coal Limited - India
- IEA Clean Coal Centre - UK
- Jorong Barutama Greston.PT - Indonesia
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