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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, 11 October 12
SINGAPORE BASED COAL SOURCE AND SHIPPING BAGS 300K MT IMPORTED COAL SUPPLY CONTRACT FROM TNPL
COALspot.com - India-based paper manufacturer Tamil Nadu Newsprint and Papers Limited has awarded a tender for 300,000 mt of imported steam co ...
Thursday, 11 October 12
PANAMAX : SINCE LAST WEEK RATES HAS FIRMED FOR ALL TRADES - FEARNLEYS AS
Handy
The Atlantic market remains quiet due to lack of cargoes and more supply of ships. Rates from Continent to East Med were around USD 14k and B ...
Thursday, 11 October 12
DRY BULK MARKET STEADY AFTER CHINESE HOLIDAYS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market hasn't yet staged a solid rebound after last week's holidays in China, as many would have expected. Indeed, many analysts were ...
Wednesday, 10 October 12
NEW BUILDING MARKET ON A QUIET WEEK, DUE TO ASIAN HOLIDAYS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The newbuilding ordering activity has been more than quite during the course of the past week, as a result of holidays in both Korea and China. Acco ...
Wednesday, 10 October 12
TAPPING OPPORTUNITIES WITHIN GLOBAL ECONOMIC PERSPECTIVE
Press Release: Mining sector will continue to play a significant role in supporting industrial and economic development in Indonesia which is curren ...
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Showing 4541 to 4545 news of total 6871 |
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- Chamber of Mines of South Africa
- The Treasury - Australian Government
- Africa Commodities Group - South Africa
- New Zealand Coal & Carbon
- Rio Tinto Coal - Australia
- Salva Resources Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Energy Link Ltd, New Zealand
- Pendopo Energi Batubara - Indonesia
- Mercuria Energy - Indonesia
- Intertek Mineral Services - Indonesia
- Tamil Nadu electricity Board
- Planning Commission, India
- Indonesian Coal Mining Association
- Miang Besar Coal Terminal - Indonesia
- Bhatia International Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Barasentosa Lestari - Indonesia
- Posco Energy - South Korea
- Neyveli Lignite Corporation Ltd, - India
- SN Aboitiz Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Ambuja Cements Ltd - India
- India Bulls Power Limited - India
- PowerSource Philippines DevCo
- Attock Cement Pakistan Limited
- Jorong Barutama Greston.PT - Indonesia
- Medco Energi Mining Internasional
- Globalindo Alam Lestari - Indonesia
- Kumho Petrochemical, South Korea
- IEA Clean Coal Centre - UK
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement - Thailand
- European Bulk Services B.V. - Netherlands
- Vizag Seaport Private Limited - India
- San Jose City I Power Corp, Philippines
- Riau Bara Harum - Indonesia
- Oldendorff Carriers - Singapore
- Eastern Energy - Thailand
- Commonwealth Bank - Australia
- Ceylon Electricity Board - Sri Lanka
- Mintek Dendrill Indonesia
- Deloitte Consulting - India
- CNBM International Corporation - China
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kohat Cement Company Ltd. - Pakistan
- Wilmar Investment Holdings
- Simpson Spence & Young - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Metalloyd Limited - United Kingdom
- Essar Steel Hazira Ltd - India
- Sindya Power Generating Company Private Ltd
- Minerals Council of Australia
- Indo Tambangraya Megah - Indonesia
- Goldman Sachs - Singapore
- SMG Consultants - Indonesia
- IHS Mccloskey Coal Group - USA
- South Luzon Thermal Energy Corporation
- International Coal Ventures Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- SMC Global Power, Philippines
- Orica Mining Services - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Ministry of Finance - Indonesia
- Coalindo Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Parry Sugars Refinery, India
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Economic Council, Georgia
- Sical Logistics Limited - India
- Xindia Steels Limited - India
- The State Trading Corporation of India Ltd
- Holcim Trading Pte Ltd - Singapore
- Singapore Mercantile Exchange
- VISA Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Borneo Indobara - Indonesia
- Jaiprakash Power Ventures ltd
- Ind-Barath Power Infra Limited - India
- Krishnapatnam Port Company Ltd. - India
- Aditya Birla Group - India
- Bayan Resources Tbk. - Indonesia
- Anglo American - United Kingdom
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Madhucon Powers Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Port Waratah Coal Services - Australia
- Bhoruka Overseas - Indonesia
- Parliament of New Zealand
- TeaM Sual Corporation - Philippines
- Manunggal Multi Energi - Indonesia
- Jindal Steel & Power Ltd - India
- Bulk Trading Sa - Switzerland
- Tata Chemicals Ltd - India
- Thai Mozambique Logistica
- Australian Commodity Traders Exchange
- PNOC Exploration Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Interocean Group of Companies - India
- GN Power Mariveles Coal Plant, Philippines
- Central Electricity Authority - India
- Maharashtra Electricity Regulatory Commission - India
- Indika Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- GMR Energy Limited - India
- Marubeni Corporation - India
- Meralco Power Generation, Philippines
- Romanian Commodities Exchange
- Baramulti Group, Indonesia
- Global Green Power PLC Corporation, Philippines
- Mjunction Services Limited - India
- Sree Jayajothi Cements Limited - India
- Aboitiz Power Corporation - Philippines
- Global Business Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Thiess Contractors Indonesia
- Carbofer General Trading SA - India
- Kartika Selabumi Mining - Indonesia
- Larsen & Toubro Limited - India
- McConnell Dowell - Australia
- Billiton Holdings Pty Ltd - Australia
- Georgia Ports Authority, United States
- Indogreen Group - Indonesia
- Kobexindo Tractors - Indoneisa
- Standard Chartered Bank - UAE
- Latin American Coal - Colombia
- Global Coal Blending Company Limited - Australia
- Edison Trading Spa - Italy
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Independent Power Producers Association of India
- Binh Thuan Hamico - Vietnam
- Coal and Oil Company - UAE
- Kepco SPC Power Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Dalmia Cement Bharat India
- AsiaOL BioFuels Corp., Philippines
- Grasim Industreis Ltd - India
- Energy Development Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Lanco Infratech Ltd - India
- Indian Energy Exchange, India
- Merrill Lynch Commodities Europe
- Gujarat Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- Renaissance Capital - South Africa
- Meenaskhi Energy Private Limited - India
- Kaltim Prima Coal - Indonesia
- CIMB Investment Bank - Malaysia
- Bharathi Cement Corporation - India
- Sojitz Corporation - Japan
- Petron Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Timah Investasi Mineral - Indoneisa
- Banpu Public Company Limited - Thailand
- Bangladesh Power Developement Board
- MS Steel International - UAE
- Electricity Authority, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Transport, Egypt
- Toyota Tsusho Corporation, Japan
- White Energy Company Limited
- Vedanta Resources Plc - India
- Ministry of Mines - Canada
- Kideco Jaya Agung - Indonesia
- Samtan Co., Ltd - South Korea
- Petrochimia International Co. Ltd.- Taiwan
- Central Java Power - Indonesia
- Chettinad Cement Corporation Ltd - India
- ICICI Bank Limited - India
- Australian Coal Association
- PTC India Limited - India
- Straits Asia Resources Limited - Singapore
- Electricity Generating Authority of Thailand
- Siam City Cement PLC, Thailand
- Semirara Mining Corp, Philippines
- London Commodity Brokers - England
- Indian Oil Corporation Limited
- Bukit Makmur.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Price Waterhouse Coopers - Russia
- Bahari Cakrawala Sebuku - Indonesia
- Eastern Coal Council - USA
- Maheswari Brothers Coal Limited - India
- ASAPP Information Group - India
- TNB Fuel Sdn Bhd - Malaysia
- Agrawal Coal Company - India
- Altura Mining Limited, Indonesia
- Antam Resourcindo - Indonesia
- GVK Power & Infra Limited - India
- Sakthi Sugars Limited - India
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Trasteel International SA, Italy
- Cement Manufacturers Association - India
- Bhushan Steel Limited - India
- Bukit Baiduri Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- The University of Queensland
- OPG Power Generation Pvt Ltd - India
- Star Paper Mills Limited - India
- Leighton Contractors Pty Ltd - Australia
- Mercator Lines Limited - India
- Videocon Industries ltd - India
- Orica Australia Pty. Ltd.
- Uttam Galva Steels Limited - India
- LBH Netherlands Bv - Netherlands
- Formosa Plastics Group - Taiwan
- Savvy Resources Ltd - HongKong
- Kapuas Tunggal Persada - Indonesia
- Sarangani Energy Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
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