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Friday, 28 September 18
FITCH RATINGS: METALLURGICAL COAL MINERS MAY CURB COSTS AS PRICES SLIP
Strong cost inflation in the global metallurgical coal sector suggests that miners may focus on cost controls as prices decline from their current high levels over the next 18 months, say Fitch Ratings and CRU. However, mining companies rated by Fitch are well-positioned for any potential squeeze on margins, as their costs are relatively low by global standards and, in most cases, their diversified business operations limit exposure to the sector.
CRU estimates that global costs in the metallurgical coal sector increased by 18% in 2017 and continued to rise in 2018. Severe weather has played a role in Australia, causing supply-chain disruption that led to demurrage penalties and increased storage costs for unshipped coal. However, costs have also been pushed up globally by higher oil prices and attempts by mining companies to maximise production to take advantage of high prices.
Coking coal prices are currently sufficiently high that cost inflation has not undermined profitability. CRU estimates that the seaborne industry generated an average cash margin of 40% in 2016-2017, and profitability has remained very strong this year.
The metallurgical coal market is unlikely to become oversupplied in the near term, and Fitch does not expect prices to fall deep into the cost curve, as they did during 2014-2016. However, prices have already eased off from their peak of USD260/tonne in 4Q16, and are likely to decline further as supply constraints continue to ease. Fitch’s current assumptions are that hard coking coal prices will average USD185/tonne this year and USD140/tonne thereafter. These declines could put pressure on some less competitive mining companies to reduce costs to protect margins.
Among Fitch-rated companies, Teck Resources (BB+/Positive) has the largest exposure to the metallurgical coal sector, which accounted for 60% of its segment EBITDA in the 12 months to 30 June 2018. The company is among those that have increased use of contractors and rented more mining equipment to raise short-term output, which has pushed up marginal costs. Nevertheless, Teck is still in the lower half of the global cost curve (FOB port) and its costs remain lower in US dollar terms than in 2014. Teck has also taken advantage of strong margins and cash flow to reduce leverage. The main credit issue facing the company is the prospect of continued project spending and its funding resulting in weaker cash flows and higher financial leverage.
BHP Billiton (A/Stable) and Anglo American (BBB-/Stable) also have significant metallurgical coal assets, mostly located in Australia, where coal mines are generally relatively low cost by global standards. BHP and Anglo also have diversified operations, with metallurgical coal accounting for only around 16% of BHP Billiton’s revenue and 17% of Anglo’s in the financial year ending June 2017. There could be increased focus on improving efficiency in the Australian coal sector, as already signalled by some companies, but CRU and the Australian government expect production to continue to grow strongly over the next four years.
Meanwhile, mining service companies and earthmoving equipment manufacturers should continue to benefit from rising demand and a better pricing environment as miners continue with new projects and increase production. Emeco (B/Stable), which has the largest exposure to metallurgical coal among Fitch-rated companies, reported improved EBITDA margin as the commodity sector recovered. It also improved its leverage position. Further leverage improvements are likely in 2019-2021 due to equity-funded acquisitions and a tight rental equipment market in Australia.
Source: Fitch Ratings
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Wednesday, 17 October 18
SHIPPING MARKET INSIGHT - TIMOS PAPADIMITRIOU
In the last three months approximately 72 tankers changed hands involving ships larger than 33kdwt up to VLCC. 43 of those vessels had to do ...
Tuesday, 16 October 18
A PRACTICAL OVERVIEW OF THE IMO 2020 SULPHUR CAP - CLYDE&CO
KNOWLEDGE TO ELEVATE
With less than eighteen months before Regulation 14.1.3 of Annex VI of the MARPOL Convention comes into effect, there are ...
Saturday, 13 October 18
SUPRAMAX: SIGNIFICANT ACTIVITY IN THE INDIAN OCEAN WAS EVIDENT AND RATES JUMPED - BALTIC BRIEFING
Capesize
A sharp reversal of fortunes for the big ships as the week closed after a depressed beginning. To start with drops were sudden, with t ...
Wednesday, 10 October 18
SHIPPING MARKET INSIGHT - ILIAS M. LALAOUNIS
During the end of last month the BHSI was hovering around 630 points, while the last observed sale on a 10-yr old Japanese Handy was the M/V Van Im ...
Monday, 08 October 18
INDONESIAN THERMAL COAL PRICE REFERENCE FELL 3.74% IN OCTOBER 2018
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down the benchmark price of Indonesian thermal ...
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- Indika Energy - Indonesia
- Siam City Cement - Thailand
- Asmin Koalindo Tuhup - Indonesia
- Goldman Sachs - Singapore
- Videocon Industries ltd - India
- Global Business Power Corporation, Philippines
- White Energy Company Limited
- ASAPP Information Group - India
- Renaissance Capital - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Chamber of Mines of South Africa
- Borneo Indobara - Indonesia
- Madhucon Powers Ltd - India
- Simpson Spence & Young - Indonesia
- Kumho Petrochemical, South Korea
- Trasteel International SA, Italy
- Eastern Coal Council - USA
- SMC Global Power, Philippines
- Indonesian Coal Mining Association
- Chettinad Cement Corporation Ltd - India
- Standard Chartered Bank - UAE
- Miang Besar Coal Terminal - Indonesia
- The University of Queensland
- Planning Commission, India
- Semirara Mining and Power Corporation, Philippines
- Central Java Power - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Directorate Of Revenue Intelligence - India
- Ministry of Mines - Canada
- Heidelberg Cement - Germany
- Indian Energy Exchange, India
- Minerals Council of Australia
- GVK Power & Infra Limited - India
- Energy Link Ltd, New Zealand
- Carbofer General Trading SA - India
- Kaltim Prima Coal - Indonesia
- Makarim & Taira - Indonesia
- Wilmar Investment Holdings
- Maharashtra Electricity Regulatory Commission - India
- Leighton Contractors Pty Ltd - Australia
- Ministry of Transport, Egypt
- Larsen & Toubro Limited - India
- Indo Tambangraya Megah - Indonesia
- Coastal Gujarat Power Limited - India
- Mercator Lines Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining Corp, Philippines
- Sakthi Sugars Limited - India
- International Coal Ventures Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Mercuria Energy - Indonesia
- Electricity Generating Authority of Thailand
- Toyota Tsusho Corporation, Japan
- PetroVietnam Power Coal Import and Supply Company
- Savvy Resources Ltd - HongKong
- Timah Investasi Mineral - Indoneisa
- Bulk Trading Sa - Switzerland
- Commonwealth Bank - Australia
- Meenaskhi Energy Private Limited - India
- Gujarat Sidhee Cement - India
- Medco Energi Mining Internasional
- Tamil Nadu electricity Board
- Anglo American - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Australian Coal Association
- Thiess Contractors Indonesia
- Meralco Power Generation, Philippines
- Edison Trading Spa - Italy
- Indogreen Group - Indonesia
- India Bulls Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
- Orica Australia Pty. Ltd.
- Altura Mining Limited, Indonesia
- Bhushan Steel Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sojitz Corporation - Japan
- Marubeni Corporation - India
- PTC India Limited - India
- The Treasury - Australian Government
- Vedanta Resources Plc - India
- Siam City Cement PLC, Thailand
- Grasim Industreis Ltd - India
- Deloitte Consulting - India
- Rio Tinto Coal - Australia
- Bhoruka Overseas - Indonesia
- European Bulk Services B.V. - Netherlands
- Aboitiz Power Corporation - Philippines
- Bayan Resources Tbk. - Indonesia
- Jindal Steel & Power Ltd - India
- Ind-Barath Power Infra Limited - India
- Star Paper Mills Limited - India
- Bukit Baiduri Energy - Indonesia
- Bharathi Cement Corporation - India
- Karbindo Abesyapradhi - Indoneisa
- Cigading International Bulk Terminal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Malabar Cements Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- ICICI Bank Limited - India
- Coalindo Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Sarangani Energy Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Dalmia Cement Bharat India
- Pipit Mutiara Jaya. PT, Indonesia
- Globalindo Alam Lestari - Indonesia
- Indian Oil Corporation Limited
- Sree Jayajothi Cements Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Orica Mining Services - Indonesia
- Wood Mackenzie - Singapore
- IEA Clean Coal Centre - UK
- Georgia Ports Authority, United States
- Directorate General of MIneral and Coal - Indonesia
- Bangladesh Power Developement Board
- Aditya Birla Group - India
- Ambuja Cements Ltd - India
- Eastern Energy - Thailand
- Bhatia International Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- New Zealand Coal & Carbon
- Therma Luzon, Inc, Philippines
- TeaM Sual Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Sindya Power Generating Company Private Ltd
- Attock Cement Pakistan Limited
- Energy Development Corp, Philippines
- Merrill Lynch Commodities Europe
- Global Green Power PLC Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Finance - Indonesia
- GMR Energy Limited - India
- Parry Sugars Refinery, India
- Power Finance Corporation Ltd., India
- Formosa Plastics Group - Taiwan
- Kepco SPC Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- Salva Resources Pvt Ltd - India
- Independent Power Producers Association of India
- Petron Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- OPG Power Generation Pvt Ltd - India
- Mjunction Services Limited - India
- CNBM International Corporation - China
- Oldendorff Carriers - Singapore
- Riau Bara Harum - Indonesia
- Posco Energy - South Korea
- Tata Chemicals Ltd - India
- Binh Thuan Hamico - Vietnam
- Mintek Dendrill Indonesia
- Global Coal Blending Company Limited - Australia
- London Commodity Brokers - England
- San Jose City I Power Corp, Philippines
- South Luzon Thermal Energy Corporation
- Metalloyd Limited - United Kingdom
- Baramulti Group, Indonesia
- Karaikal Port Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Bukit Makmur.PT - Indonesia
- Straits Asia Resources Limited - Singapore
- Lanco Infratech Ltd - India
- Thai Mozambique Logistica
- Cement Manufacturers Association - India
- Ceylon Electricity Board - Sri Lanka
- Samtan Co., Ltd - South Korea
- Australian Commodity Traders Exchange
- Singapore Mercantile Exchange
- Port Waratah Coal Services - Australia
- The State Trading Corporation of India Ltd
- Romanian Commodities Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parliament of New Zealand
- Antam Resourcindo - Indonesia
- Sical Logistics Limited - India
- PowerSource Philippines DevCo
- CIMB Investment Bank - Malaysia
- Kideco Jaya Agung - Indonesia
- SN Aboitiz Power Inc, Philippines
- Agrawal Coal Company - India
- Barasentosa Lestari - Indonesia
- Kartika Selabumi Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Latin American Coal - Colombia
- Jaiprakash Power Ventures ltd
- McConnell Dowell - Australia
- PNOC Exploration Corporation - Philippines
- Africa Commodities Group - South Africa
- Alfred C Toepfer International GmbH - Germany
- Manunggal Multi Energi - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kobexindo Tractors - Indoneisa
- Electricity Authority, New Zealand
- IHS Mccloskey Coal Group - USA
- MS Steel International - UAE
- SMG Consultants - Indonesia
- Intertek Mineral Services - Indonesia
- Banpu Public Company Limited - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Interocean Group of Companies - India
- GAC Shipping (India) Pvt Ltd
- VISA Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Coal and Oil Company - UAE
- Uttam Galva Steels Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Economic Council, Georgia
- Xindia Steels Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
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