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Monday, 27 July 09
COKING COAL, IRON-ORE LIKELY TO BENEFIT NON-INTEGRATED STEEL PRODUCERS
 Economictimes reported that, The second half of the financial year 2008-09 was one of the toughest periods for steel companies, especially the non-integrated players without access to captive sources of raw material. The double whammy of falling sales realisation and higher input costs pulled down operating profit margins significantly.
The non-integrated producers continued to pay higher raw material prices as a part of long-term contracts signed during the beginning of the year. However, as old contracts have come to an end and new ones are being signed, these companies are breathing a sigh of relief.
The new contracts have taken into consideration the current market realty. The prices of two key inputs –
–iron ore and coking coal – have come down more than 50% in the spot market. As per reports, steel firms have signed long-term contracts for coking coal at around $110-120 per tonne and iron ore at $65-70 per tonne.
The new contract prices mark a decline of around two-thirds and one-third from their yearago levels for coking coal and iron ore, respectively. Steel prices have also fallen sharply during the same period. Because of these developments, it is essential to understand the impact of the new prices on the profitability of major steel producers, especially the non-integrated ones, for the next few quarters.
Steel prices in a number of countries have been regulated in past year, and India is no exception. Current international steel prices are 50% lower than year-ago levels and in India the decline has been 25-35 %. Accordingly, depending on the company’s market (domestic and overseas) exposure, the impact on profitability of new long-term contract will vary.
Going by international prices, a company with an operating margin of around 25% last year is expected to see a contraction in margin by around 1,000-1 ,300 basis points compared to year-ago levels. It means the fall in steel product prices outweighs the drop in input costs. The only solace for such a company is the improvement in margin from the previous two quarters. Sequentially, there could be an improvement of more than 500-1 ,000 basis points in the operating margin to 10-15 %.
For instance, many international steel producers reported either losses or a 5-8 % operating margin during the Mar ’09 quarter. Such companies are definitely going to see better days ahead. In India, Tata Steel, which has significant operations in Europe, is going to be one of the key beneficiaries. The operating margin of Corus, however, is not expected to exceed 2%. The new pricing will have a bigger impact on domestic companies.
Domestic steel prices have not fallen much due to government intervention and relatively higher domestic demand. Also, coking coal, which accounted for around two-thirds of raw material cost last year, has witnessed a much sharper decline in prices compared to iron ore. And most of the coking coal consumed in India is imported and its pricing depends more on the international environment rather than the domestic market. Hence new coking coal contract prices will capture the poor international market conditions.
The benefit of new long-term contracts for domestic players would depend on factors such as the extent of dependence on external suppliers for raw materials, actual contract prices and the month from which the contract became effective, among others. Higher the dependence on external suppliers, more the benefit.
Of the top five listed steel companies, JSW Steel and Ispat Industries are likely to benefit the most. The average operating margin from the September quarter onwards is expected to expand by around 1,000-1,500 basis points compared to the Mar ’09 quarter. The June quarter, however, will see a partial impact, depending on when the new contracts came into force.
Other top players that are likely to benefit are Steel Authority of India (Sail) and Jindal Steel & Power. Both of them are self-sufficient in iron ore but depend on outside suppliers for coking coal. The positive impact on the operating margin of these companies on account of the new prices would not be more than 500 basis points though.
Source: Economic Times - India Times
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Monday, 27 July 09
ADANI POWER'S $625 MILLION IPO TO GENERATE HOT DEMAND
WSJ reported that, Adani Power, the electricity generating unit of India's Adani Enterprises Ltd., is set raise up to US$625 million in wha ...
Monday, 27 July 09
MIDDLE EAST COAL TO MOVE ON $1B EAST KALIMANTAN PROJECT
The Jakarta globe reported that, Middle East Coal reiterated on Monday that it would push ahead its $1 billion development program for East Kutai Re ...
Monday, 27 July 09
SHORT AND ONE YEAR PERIOD RATES FOR SUPRAMAX WAS FIRM AT AROUND US$ 18, 000 -18,500 PER DAY
COALspot.com (Singapore): The Supramax charter rates up sharply last week (ended 24th July 2009), especially India / Far East region said, Capt ...
Monday, 27 July 09
GMR ENERGY BUYS EMCO POWERGEN SUBSIDIARY
DNA India reported that, Thane-based transformer manufacturer Emco Ltd has sold its stake in unlisted power generation subsidiary Emco Energy to Ban ...
Sunday, 26 July 09
CESC PLANS 2000 MW POWER PLANT IN BIHAR
Jai Bihar reported that, RPG flagship company CESC Ltd on Friday unveiled its plan to set up a 2,000 MW power generation plant at Pirpainti near Bha ...
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- Bulk Trading Sa - Switzerland
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- Georgia Ports Authority, United States
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- OPG Power Generation Pvt Ltd - India
- Ministry of Mines - Canada
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- Bhatia International Limited - India
- Latin American Coal - Colombia
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- San Jose City I Power Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Indonesian Coal Mining Association
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- Merrill Lynch Commodities Europe
- Tata Chemicals Ltd - India
- VISA Power Limited - India
- Binh Thuan Hamico - Vietnam
- Power Finance Corporation Ltd., India
- Mintek Dendrill Indonesia
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- Eastern Energy - Thailand
- Coal and Oil Company - UAE
- Kumho Petrochemical, South Korea
- The State Trading Corporation of India Ltd
- Kapuas Tunggal Persada - Indonesia
- Lanco Infratech Ltd - India
- IHS Mccloskey Coal Group - USA
- Global Coal Blending Company Limited - Australia
- Mercator Lines Limited - India
- Iligan Light & Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Romanian Commodities Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- South Luzon Thermal Energy Corporation
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- Jaiprakash Power Ventures ltd
- The University of Queensland
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- Metalloyd Limited - United Kingdom
- Aditya Birla Group - India
- IEA Clean Coal Centre - UK
- Xindia Steels Limited - India
- Vedanta Resources Plc - India
- Kideco Jaya Agung - Indonesia
- Wilmar Investment Holdings
- Mercuria Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Billiton Holdings Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Price Waterhouse Coopers - Russia
- CIMB Investment Bank - Malaysia
- Sojitz Corporation - Japan
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- New Zealand Coal & Carbon
- Kartika Selabumi Mining - Indonesia
- GMR Energy Limited - India
- Meenaskhi Energy Private Limited - India
- Thiess Contractors Indonesia
- Medco Energi Mining Internasional
- Alfred C Toepfer International GmbH - Germany
- ASAPP Information Group - India
- Essar Steel Hazira Ltd - India
- India Bulls Power Limited - India
- Electricity Authority, New Zealand
- Bukit Baiduri Energy - Indonesia
- Renaissance Capital - South Africa
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- Samtan Co., Ltd - South Korea
- Parliament of New Zealand
- Rio Tinto Coal - Australia
- Manunggal Multi Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- Indogreen Group - Indonesia
- White Energy Company Limited
- Bank of Tokyo Mitsubishi UFJ Ltd
- Energy Development Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Edison Trading Spa - Italy
- Goldman Sachs - Singapore
- Orica Mining Services - Indonesia
- Gujarat Sidhee Cement - India
- Heidelberg Cement - Germany
- Chamber of Mines of South Africa
- Deloitte Consulting - India
- ICICI Bank Limited - India
- Cement Manufacturers Association - India
- Bharathi Cement Corporation - India
- Coalindo Energy - Indonesia
- Tamil Nadu electricity Board
- The Treasury - Australian Government
- Bukit Asam (Persero) Tbk - Indonesia
- GAC Shipping (India) Pvt Ltd
- PTC India Limited - India
- European Bulk Services B.V. - Netherlands
- Malabar Cements Ltd - India
- Economic Council, Georgia
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- Maharashtra Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- Baramulti Group, Indonesia
- Independent Power Producers Association of India
- Directorate Of Revenue Intelligence - India
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Banpu Public Company Limited - Thailand
- Global Green Power PLC Corporation, Philippines
- Ministry of Finance - Indonesia
- Central Java Power - Indonesia
- LBH Netherlands Bv - Netherlands
- Anglo American - United Kingdom
- Savvy Resources Ltd - HongKong
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Energy Link Ltd, New Zealand
- Indo Tambangraya Megah - Indonesia
- Sakthi Sugars Limited - India
- Bukit Makmur.PT - Indonesia
- Eastern Coal Council - USA
- Makarim & Taira - Indonesia
- Sical Logistics Limited - India
- Commonwealth Bank - Australia
- Coastal Gujarat Power Limited - India
- Electricity Generating Authority of Thailand
- Agrawal Coal Company - India
- Australian Coal Association
- Cigading International Bulk Terminal - Indonesia
- Planning Commission, India
- Posco Energy - South Korea
- CNBM International Corporation - China
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- London Commodity Brokers - England
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