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Wednesday, 18 September 13
IRON ORE AND ZINC ARE BEST PERFORMING MINING SECTORS IN CURRENT LOW PRICE, HIGH COST ENVIRONMENT - WOOD MACKENZIE
 With the fall in commodity prices, cash margins in the mining industry have come under pressure. Accordingly, producers and investors are placing intense focus on both operating and capital costs. Wood Mackenzie's report titled 'Who hurts most' analyses cash costs and margins across the bulk commodities as well as base and precious metals. The report reveals that the iron ore and zinc sectors will perform best on average; while copper, export metallurgical coal and gold will be most challenged. Based on this, companies may have to make important decisions to protect their overall margins.
Wood Mackenzie finds that amongst the bulk commodities, iron ore stands above the rest. Despite pulling back from 2012 levels with a 19% cash margin decline, iron ore still has a very strong average industry margin of US$49/tonne (52% of average price) in 2014, enabling continued large cash generation in this high volume business. This supports the on-going focus by the major producers like Rio Tinto, BHP Billiton and Vale, on pushing ahead with expansions at their low cost iron ore operations. It is also in stark contrast to coal and bauxite, both of which have average margins of less than 25% in 2013 - the outlook is particularly bleak for export thermal coal with an average margin of only 19% in 2014.
Mr Steve Hulton, Principal Mining Analyst for Wood Mackenzie, says, "The sectors that fare the worst, with biggest average falls in margins from 2012 to 2014 are copper, export metallurgical coal and gold. Nickel has the lowest average industry margin of only 13% of price in 2013. This rises slightly in 2014, but it is still the worst of all commodities studied. As such, the nickel industry is under severe pressure. In 2012, one-third of industry production generated negative margins after taking into account total cash and sustaining capex costs."
The zinc mining sector has a very high average margin as a percentage of the metal price due to the large contribution of by-product credits like copper, lead, silver and gold, which offset operating costs. While remaining relatively high, the average zinc margin is expected to decrease to 83% in 2014, even with a rising zinc price, due to the lower value of by-product revenue in this polymetallic sector.
For the copper and gold industries, lower prices will continue to put pressure on overall operational cash-flow. In Wood Mackenzie's analysis, average industry margins in 2014 fall to 39% for copper and 44% for gold, down from 49% and 50% respectively from 2012. In export met coal, margins in 2014 are only 25% of average price, down from 30% in 2012.
Mr Hulton explains the importance of this analysis to producers, "Operating costs in the mining industry have risen rapidly over recent years, but now that prices have dropped there is a renewed focus from mining companies on reducing costs and trying to protect margins."
"To compare overall operating margins, we examine total cash cost plus sustaining capital. For producers to accurately assess cash margins at the mine level, just examining the basic C1™ operating cost can be misleading. Total cash cost plus sustaining capital is a better full cash cost measure. This comprises the C1™ operating cash cost plus indirect cash costs such as royalties & levies, and the cash spend on capital required to sustain production." The industry standard C1™ cost is the direct cash cost of mining, processing and offsite realisation costs, including any by-product credits. It is primarily used to compare the relative underlying cost efficiency of production between mines.
Mr Hulton concludes, "Individual mining companies will be variously affected depending on their exposure to the different commodities, and where their particular mines sit on the respective industry cost/margin curves. As price takers, there are limited tunes the producers can play and one of them will be to slow down on capital spend, and prioritise the commodities that have the best returns."
*Note: The base and precious metals commodities covered in the analysis are copper, nickel, zinc and gold. The bulk commodities covered in the analysis are metallurgical export coal, thermal export coal, bauxite and iron ore.
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Friday, 20 September 13
DRY BULK MARKET REACHES NEW HEIGHTS THIS WEEK STANDING AT THREE-YEAR HIGH - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The biggest rally of the dry bulk market in more than three years have brought back joy among ship owners, especially those active in the Capesize m ...
Friday, 20 September 13
US COAL PRODUCTION SLIGHTLY UP WEEK ON WEEK
COALspot.com – United States the world’s second largest coal producer produced totalled approximately 20.30 million short tons (mmst) of ...
Friday, 20 September 13
COLOMBIA SHIPPED 31.14 MILLION TONS OF THERMAL COAL IN H1
COALspot.com : Colombia’s coal exports fell by 20.59 percent in June 2013 compared to Colombia’s May's export of 7,633,579 MT.
Colom ...
Thursday, 19 September 13
CAPESIZE : AVERAGE DAILY EARNINGS HAVE GAINED ALMOST USD 6K WOW - FEARNLEYS
Handy
The rates in Feast are still firm this week even the activity calmed down a bit as chrtrs are not in a rush to cover even their end Sept carg ...
Wednesday, 18 September 13
DRY BULK MARKET CONTINUED TO ADVANCE - INTERMODAL
Chartering (Wet: Stable- / Dry: Firm+ )
The Dry Bulk market continued to advance at a very fast pace, with the BDI closing off the week north ...
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- Karbindo Abesyapradhi - Indoneisa
- Semirara Mining and Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Edison Trading Spa - Italy
- Oldendorff Carriers - Singapore
- Interocean Group of Companies - India
- Bahari Cakrawala Sebuku - Indonesia
- GVK Power & Infra Limited - India
- Gujarat Sidhee Cement - India
- Ministry of Mines - Canada
- Romanian Commodities Exchange
- Latin American Coal - Colombia
- Salva Resources Pvt Ltd - India
- Parry Sugars Refinery, India
- Chettinad Cement Corporation Ltd - India
- GMR Energy Limited - India
- Bharathi Cement Corporation - India
- Metalloyd Limited - United Kingdom
- Straits Asia Resources Limited - Singapore
- Independent Power Producers Association of India
- Mjunction Services Limited - India
- Sindya Power Generating Company Private Ltd
- Kohat Cement Company Ltd. - Pakistan
- Global Business Power Corporation, Philippines
- Vedanta Resources Plc - India
- Attock Cement Pakistan Limited
- Ceylon Electricity Board - Sri Lanka
- ASAPP Information Group - India
- Sakthi Sugars Limited - India
- Orica Australia Pty. Ltd.
- Eastern Coal Council - USA
- The University of Queensland
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Essar Steel Hazira Ltd - India
- Bhoruka Overseas - Indonesia
- Sojitz Corporation - Japan
- Ministry of Transport, Egypt
- Simpson Spence & Young - Indonesia
- Thai Mozambique Logistica
- CNBM International Corporation - China
- Sical Logistics Limited - India
- Indika Energy - Indonesia
- Agrawal Coal Company - India
- IEA Clean Coal Centre - UK
- Petron Corporation, Philippines
- Chamber of Mines of South Africa
- Africa Commodities Group - South Africa
- Directorate General of MIneral and Coal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Grasim Industreis Ltd - India
- Sinarmas Energy and Mining - Indonesia
- OPG Power Generation Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Larsen & Toubro Limited - India
- Jindal Steel & Power Ltd - India
- Aditya Birla Group - India
- Meralco Power Generation, Philippines
- Iligan Light & Power Inc, Philippines
- Bhatia International Limited - India
- Kalimantan Lumbung Energi - Indonesia
- TeaM Sual Corporation - Philippines
- The Treasury - Australian Government
- AsiaOL BioFuels Corp., Philippines
- Ambuja Cements Ltd - India
- VISA Power Limited - India
- Coastal Gujarat Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indonesian Coal Mining Association
- SMG Consultants - Indonesia
- Xindia Steels Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Karaikal Port Pvt Ltd - India
- Central Electricity Authority - India
- Bulk Trading Sa - Switzerland
- Antam Resourcindo - Indonesia
- Meenaskhi Energy Private Limited - India
- Planning Commission, India
- Kumho Petrochemical, South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rio Tinto Coal - Australia
- San Jose City I Power Corp, Philippines
- Indian Oil Corporation Limited
- Electricity Authority, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Riau Bara Harum - Indonesia
- Global Coal Blending Company Limited - Australia
- Singapore Mercantile Exchange
- Samtan Co., Ltd - South Korea
- Thiess Contractors Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kepco SPC Power Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- MS Steel International - UAE
- Tamil Nadu electricity Board
- Baramulti Group, Indonesia
- GAC Shipping (India) Pvt Ltd
- Maheswari Brothers Coal Limited - India
- The State Trading Corporation of India Ltd
- Tata Chemicals Ltd - India
- Binh Thuan Hamico - Vietnam
- CIMB Investment Bank - Malaysia
- Holcim Trading Pte Ltd - Singapore
- Coalindo Energy - Indonesia
- Ministry of Finance - Indonesia
- Orica Mining Services - Indonesia
- Medco Energi Mining Internasional
- Star Paper Mills Limited - India
- ICICI Bank Limited - India
- Georgia Ports Authority, United States
- Leighton Contractors Pty Ltd - Australia
- Savvy Resources Ltd - HongKong
- Global Green Power PLC Corporation, Philippines
- Indian Energy Exchange, India
- Bayan Resources Tbk. - Indonesia
- Manunggal Multi Energi - Indonesia
- Videocon Industries ltd - India
- Intertek Mineral Services - Indonesia
- Port Waratah Coal Services - Australia
- Sarangani Energy Corporation, Philippines
- Banpu Public Company Limited - Thailand
- London Commodity Brokers - England
- Coal and Oil Company - UAE
- Wood Mackenzie - Singapore
- Heidelberg Cement - Germany
- Aboitiz Power Corporation - Philippines
- Siam City Cement PLC, Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Ind-Barath Power Infra Limited - India
- Power Finance Corporation Ltd., India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Asmin Koalindo Tuhup - Indonesia
- SN Aboitiz Power Inc, Philippines
- Goldman Sachs - Singapore
- Wilmar Investment Holdings
- Formosa Plastics Group - Taiwan
- South Luzon Thermal Energy Corporation
- Toyota Tsusho Corporation, Japan
- Jaiprakash Power Ventures ltd
- PNOC Exploration Corporation - Philippines
- Deloitte Consulting - India
- PetroVietnam Power Coal Import and Supply Company
- Billiton Holdings Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- SMC Global Power, Philippines
- Madhucon Powers Ltd - India
- Dalmia Cement Bharat India
- PowerSource Philippines DevCo
- Barasentosa Lestari - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Cement Manufacturers Association - India
- Makarim & Taira - Indonesia
- Minerals Council of Australia
- Gujarat Electricity Regulatory Commission - India
- IHS Mccloskey Coal Group - USA
- Energy Development Corp, Philippines
- Altura Mining Limited, Indonesia
- LBH Netherlands Bv - Netherlands
- Marubeni Corporation - India
- Borneo Indobara - Indonesia
- Uttam Galva Steels Limited - India
- Mercuria Energy - Indonesia
- Commonwealth Bank - Australia
- Neyveli Lignite Corporation Ltd, - India
- Pendopo Energi Batubara - Indonesia
- Semirara Mining Corp, Philippines
- PTC India Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Cigading International Bulk Terminal - Indonesia
- McConnell Dowell - Australia
- Sree Jayajothi Cements Limited - India
- Anglo American - United Kingdom
- Bukit Asam (Persero) Tbk - Indonesia
- Carbofer General Trading SA - India
- Parliament of New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Timah Investasi Mineral - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Jorong Barutama Greston.PT - Indonesia
- Standard Chartered Bank - UAE
- Kobexindo Tractors - Indoneisa
- Indogreen Group - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Economic Council, Georgia
- Malabar Cements Ltd - India
- Mercator Lines Limited - India
- Directorate Of Revenue Intelligence - India
- Bangladesh Power Developement Board
- Posco Energy - South Korea
- Price Waterhouse Coopers - Russia
- Electricity Generating Authority of Thailand
- Australian Commodity Traders Exchange
- Maharashtra Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- India Bulls Power Limited - India
- Renaissance Capital - South Africa
- Central Java Power - Indonesia
- White Energy Company Limited
- Lanco Infratech Ltd - India
- Bhushan Steel Limited - India
- Mintek Dendrill Indonesia
- Australian Coal Association
- Siam City Cement - Thailand
- New Zealand Coal & Carbon
- Trasteel International SA, Italy
- Kideco Jaya Agung - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kartika Selabumi Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- Vizag Seaport Private Limited - India
- Therma Luzon, Inc, Philippines
- Merrill Lynch Commodities Europe
- Rashtriya Ispat Nigam Limited - India
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