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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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Saturday, 10 August 13
DEMOLITION ACTIVITY TO BE CRUCIAL AGAIN IN PROVIDING SUPPORT TO THE DRY BULK MARKET - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
We appear to have forgotten demolition activity this year, with the Baltic Dry Index gaining traction in the latter part of the second half and emer ...
Friday, 09 August 13
US PRODUCED 4.00 PERCENT LESS COAL ON WEEK
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.00 million short tons (mmst) of ...
Thursday, 08 August 13
HANDY : NO POSITIVE SENTIMENT FOR THE FAR EAST MARKET - FEARNRESEARCH
Handy
No positive sentiment for the Far East market. There are a number of ships coming open in SE Asia this week and owners rating mid/high USD 8k ...
Thursday, 08 August 13
MALAYSIA HOSTS THIRD ANNUAL ASIAN SUB-BITUMINOUS COAL USERS' GROUP CONFERENCE
Press Release : The third Annual Asian Sub-Bituminous Coal Users’ Group (ASBCUG) conference convenes Sept. 30-Oct. 3 at the Eastern & Orie ...
Wednesday, 07 August 13
HANDIES : FINDING IT DIFFICULT TO SUSTAIN THEIR PREVIOUS LEVELS - KONSTANTINOS KONTOMICHIS
Broker's insight
by Konstantinos Kontomichis,
SnP Broker
Entering the most predictable month of the year, as expected the seasonal effects ha ...
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- Karbindo Abesyapradhi - Indoneisa
- Uttam Galva Steels Limited - India
- Larsen & Toubro Limited - India
- Pendopo Energi Batubara - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- South Luzon Thermal Energy Corporation
- Electricity Authority, New Zealand
- Bhushan Steel Limited - India
- PNOC Exploration Corporation - Philippines
- Australian Coal Association
- Bukit Baiduri Energy - Indonesia
- Interocean Group of Companies - India
- Kepco SPC Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Dalmia Cement Bharat India
- Banpu Public Company Limited - Thailand
- Sakthi Sugars Limited - India
- Indogreen Group - Indonesia
- Semirara Mining Corp, Philippines
- Renaissance Capital - South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bulk Trading Sa - Switzerland
- Malabar Cements Ltd - India
- Central Java Power - Indonesia
- Orica Australia Pty. Ltd.
- Kohat Cement Company Ltd. - Pakistan
- Central Electricity Authority - India
- CIMB Investment Bank - Malaysia
- Singapore Mercantile Exchange
- Attock Cement Pakistan Limited
- Sree Jayajothi Cements Limited - India
- Australian Commodity Traders Exchange
- Straits Asia Resources Limited - Singapore
- Bharathi Cement Corporation - India
- Kaltim Prima Coal - Indonesia
- Parry Sugars Refinery, India
- Siam City Cement PLC, Thailand
- Bangladesh Power Developement Board
- Chettinad Cement Corporation Ltd - India
- Aditya Birla Group - India
- Indo Tambangraya Megah - Indonesia
- Altura Mining Limited, Indonesia
- Mercator Lines Limited - India
- Binh Thuan Hamico - Vietnam
- Eastern Energy - Thailand
- Directorate Of Revenue Intelligence - India
- Vedanta Resources Plc - India
- The University of Queensland
- Grasim Industreis Ltd - India
- Latin American Coal - Colombia
- Vizag Seaport Private Limited - India
- Energy Link Ltd, New Zealand
- GMR Energy Limited - India
- VISA Power Limited - India
- MS Steel International - UAE
- Global Green Power PLC Corporation, Philippines
- Power Finance Corporation Ltd., India
- PowerSource Philippines DevCo
- Indian Oil Corporation Limited
- Global Coal Blending Company Limited - Australia
- Semirara Mining and Power Corporation, Philippines
- Anglo American - United Kingdom
- Siam City Cement - Thailand
- Energy Development Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Price Waterhouse Coopers - Russia
- Port Waratah Coal Services - Australia
- Standard Chartered Bank - UAE
- Billiton Holdings Pty Ltd - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- Georgia Ports Authority, United States
- Coastal Gujarat Power Limited - India
- IHS Mccloskey Coal Group - USA
- Bahari Cakrawala Sebuku - Indonesia
- Bayan Resources Tbk. - Indonesia
- Coalindo Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Kumho Petrochemical, South Korea
- Merrill Lynch Commodities Europe
- Sojitz Corporation - Japan
- Carbofer General Trading SA - India
- Kobexindo Tractors - Indoneisa
- Intertek Mineral Services - Indonesia
- Planning Commission, India
- Parliament of New Zealand
- Mercuria Energy - Indonesia
- Cement Manufacturers Association - India
- Bukit Asam (Persero) Tbk - Indonesia
- Karaikal Port Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Eastern Coal Council - USA
- Star Paper Mills Limited - India
- Chamber of Mines of South Africa
- Krishnapatnam Port Company Ltd. - India
- TeaM Sual Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Petron Corporation, Philippines
- Agrawal Coal Company - India
- Borneo Indobara - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Xindia Steels Limited - India
- Samtan Co., Ltd - South Korea
- Manunggal Multi Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Lanco Infratech Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Sindya Power Generating Company Private Ltd
- Barasentosa Lestari - Indonesia
- Medco Energi Mining Internasional
- Mjunction Services Limited - India
- Deloitte Consulting - India
- Miang Besar Coal Terminal - Indonesia
- Kideco Jaya Agung - Indonesia
- Toyota Tsusho Corporation, Japan
- PTC India Limited - India
- Simpson Spence & Young - Indonesia
- New Zealand Coal & Carbon
- Independent Power Producers Association of India
- Iligan Light & Power Inc, Philippines
- Oldendorff Carriers - Singapore
- IEA Clean Coal Centre - UK
- Riau Bara Harum - Indonesia
- Makarim & Taira - Indonesia
- Wilmar Investment Holdings
- Ministry of Finance - Indonesia
- LBH Netherlands Bv - Netherlands
- Formosa Plastics Group - Taiwan
- Kalimantan Lumbung Energi - Indonesia
- Baramulti Group, Indonesia
- Neyveli Lignite Corporation Ltd, - India
- San Jose City I Power Corp, Philippines
- Heidelberg Cement - Germany
- Rio Tinto Coal - Australia
- Ministry of Transport, Egypt
- GAC Shipping (India) Pvt Ltd
- Petrochimia International Co. Ltd.- Taiwan
- SMC Global Power, Philippines
- Indika Energy - Indonesia
- Indian Energy Exchange, India
- Alfred C Toepfer International GmbH - Germany
- Sical Logistics Limited - India
- Gujarat Sidhee Cement - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thiess Contractors Indonesia
- Antam Resourcindo - Indonesia
- Ministry of Mines - Canada
- Bhatia International Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jaiprakash Power Ventures ltd
- GN Power Mariveles Coal Plant, Philippines
- The Treasury - Australian Government
- Romanian Commodities Exchange
- Bukit Makmur.PT - Indonesia
- White Energy Company Limited
- GVK Power & Infra Limited - India
- Coal and Oil Company - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- London Commodity Brokers - England
- Edison Trading Spa - Italy
- Tata Chemicals Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Commonwealth Bank - Australia
- Indonesian Coal Mining Association
- Essar Steel Hazira Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Africa Commodities Group - South Africa
- The State Trading Corporation of India Ltd
- SMG Consultants - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Economic Council, Georgia
- Sinarmas Energy and Mining - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- ASAPP Information Group - India
- Minerals Council of Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Posco Energy - South Korea
- Madhucon Powers Ltd - India
- CNBM International Corporation - China
- Maharashtra Electricity Regulatory Commission - India
- Thai Mozambique Logistica
- Goldman Sachs - Singapore
- Kartika Selabumi Mining - Indonesia
- Trasteel International SA, Italy
- Electricity Generating Authority of Thailand
- PetroVietnam Power Coal Import and Supply Company
- Rashtriya Ispat Nigam Limited - India
- Ambuja Cements Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Wood Mackenzie - Singapore
- Meralco Power Generation, Philippines
- Orica Mining Services - Indonesia
- Mintek Dendrill Indonesia
- SN Aboitiz Power Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Cigading International Bulk Terminal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- McConnell Dowell - Australia
- India Bulls Power Limited - India
- Maheswari Brothers Coal Limited - India
- Marubeni Corporation - India
- Savvy Resources Ltd - HongKong
- Directorate General of MIneral and Coal - Indonesia
- ICICI Bank Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Tamil Nadu electricity Board
- Ind-Barath Power Infra Limited - India
- Videocon Industries ltd - India
- OPG Power Generation Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- International Coal Ventures Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
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