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Tuesday, 16 June 20
HIGHER IRON ORE PRICES OFFSET CORONAVIRUS-DRIVEN PRODUCTION RISK - FITCH RATINGS
 Lower iron ore production in Brazil, resulting from rising coronavirus infections, should only marginally affect the cash flow of Vale and other global mining companies due to higher prices, says Fitch Ratings. More than 10% of Vale’s production was affected last week when a local court suspended operations at its Itabira Complex due to employees testing positive for the virus.
Iron ore prices declined earlier this year due to demand concerns but later rebounded and are being supported by supply constraints caused by Vale’s 2019 dam accident and weather-related production disruptions. Prices increased to above USD100/dry metric ton (dmt) due to the news regarding the suspension.
Vale maintained its 2020 production guidance at 310 metric tons (mt) to 330mt with production expected to resume once all employees are tested and the company ensures no infected workers are working at the facilities. CRU Group believes it will be increasingly difficult for Vale to meet volume guidance considering the suspension, weak production in the Northern System and the effect heavy rainfall had on output at the start of 2020. The potential for additional infections increases employee absenteeism and production risk, as the number of people available to work in mines and processing plants falls, and other municipalities could take similar actions to stem the spread of the virus.
Material Environmental, Social and Governance (ESG) shortcomings, particularly in the areas of executing strategy and maintaining the well-being of employees, constrain Vale’s ‘BBB-’ credit ratings with a Stable Outlook. However, Vale is a low-cost producer with a leading market position, abundant reserves, and high-grade iron that commands a market premium, which reduces credit implications.
Fitch projects Vale will generate more than USD14 billion of EBITDA in 2020, assuming iron ore prices average USD75/dmt. FCF should be about USD5.0 billion, assuming capex is about USD4.7 billion and dividends are USD3.0 billion. Vale’s 2020 net debt/EBITDA is projected to be around 0.5x. These forecasts compare with USD17 billion of EBITDA, USD7 billion of FCF and net debt/EBITDA of 0.3x for the LTM ended March 31. Forecasts could prove conservative, given the rise in iron ore prices.
Similar dynamics apply to Anglo American’s operations at Minas-Rio. Fitch used for its rating case the bottom of existing production guidance of 22 million tonnes – 24 million tonnes and a price assumption of USD75/tonne in 2020 for the 62% Fe benchmark cost and freight (CFR) China price. The company has scheduled a one month production stoppage for inspection of its slurry pipeline for second-half 2020. If there were any pandemic-related disruptions in the coming months it might be possible to use the slot to re-schedule the maintenance work. Overall, based on production figures to date, upside from actual prices realized and material Brazilian real depreciation, there is unlikely to be any cash flow downside for the earnings outlook from a temporary disruption, if it occurs at Minas-Rio, to the existing rating case.
CRU’s forecast for benchmark 62% Fe fines CFR China is USD80/dmt as of May 2020. Iron ore demand in China remains robust as rising steel prices and margins for hot rolled coil producers above 10% encourage steel production. CRU expects strong steel production ahead of the wet season in southern China, which typically slows demand from the construction sector. Steel mills in China continue to operate with exceptionally low inventories and recent data shows mill inventories are declining further while port stocks remain steady at 108mt.
Source: Fitch Ratings
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Friday, 06 September 24
REBOUND IN OIL DEMAND COULD LIFT MARKET IN LATTER HALF OF 2024 - BIMCO
Supply/demand
Based on a strong second half demand, the supply/balance is forecast to strengthen in 2024 but weaken slightly in 2025 as n ...
Friday, 06 September 24
GLOBAL SEABORNE LNG TRADE HAS CONTINUED TO INCREASE LAST YEAR - BANCHERO COSTA
Global seaborne LNG trade has continued to increase last year, helped also by the events in Ukraine which forced Europe to diversify away from Russ ...
Wednesday, 28 August 24
SEABORNE COAL IMPORTS INTO INDIA INCREASED BY +9.9% Y-O-Y TO 146.6 MLN T - BANCHERO COSTA
Global coal trade has really picked up pace over the past year, and is now fully back to pre-Covid levels said Banchero Costa Research in its lates ...
Tuesday, 06 August 24
EXERCISE CAUTION WITH AMMONIA SWITCH - BALTIC EXCHANGE
A new study from the Massachusetts Institute of Technology (MIT) has thrown a spanner into the plan to transition ships from diesel fuel to ammonia ...
Friday, 02 August 24
ENERGY MARKET DEVELOPMENTS: COAL AND NATURAL GAS PRICES REACH RECORD HIGHS - WORLD BANK
The recent surge in natural gas and coal prices has been so swift that the main benchmarks were roughly three times higher in 2022Q2 compared to a ...
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- Binh Thuan Hamico - Vietnam
- Jaiprakash Power Ventures ltd
- Sinarmas Energy and Mining - Indonesia
- Economic Council, Georgia
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- Wood Mackenzie - Singapore
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- Pipit Mutiara Jaya. PT, Indonesia
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- Anglo American - United Kingdom
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- India Bulls Power Limited - India
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- Kartika Selabumi Mining - Indonesia
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- Global Green Power PLC Corporation, Philippines
- CIMB Investment Bank - Malaysia
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- Siam City Cement - Thailand
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- Global Business Power Corporation, Philippines
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- Altura Mining Limited, Indonesia
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- Jindal Steel & Power Ltd - India
- Australian Coal Association
- Marubeni Corporation - India
- VISA Power Limited - India
- Energy Development Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
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- Medco Energi Mining Internasional
- Tata Chemicals Ltd - India
- Wilmar Investment Holdings
- Latin American Coal - Colombia
- Thiess Contractors Indonesia
- Sree Jayajothi Cements Limited - India
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- Eastern Coal Council - USA
- Semirara Mining and Power Corporation, Philippines
- Madhucon Powers Ltd - India
- PNOC Exploration Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Posco Energy - South Korea
- Port Waratah Coal Services - Australia
- Maheswari Brothers Coal Limited - India
- SMC Global Power, Philippines
- ASAPP Information Group - India
- Eastern Energy - Thailand
- Sakthi Sugars Limited - India
- IEA Clean Coal Centre - UK
- Kepco SPC Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- MS Steel International - UAE
- Ambuja Cements Ltd - India
- Standard Chartered Bank - UAE
- Barasentosa Lestari - Indonesia
- Vedanta Resources Plc - India
- Karaikal Port Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Cement Manufacturers Association - India
- Therma Luzon, Inc, Philippines
- PowerSource Philippines DevCo
- Metalloyd Limited - United Kingdom
- Central Java Power - Indonesia
- Lanco Infratech Ltd - India
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- AsiaOL BioFuels Corp., Philippines
- London Commodity Brokers - England
- New Zealand Coal & Carbon
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- Bulk Trading Sa - Switzerland
- Ind-Barath Power Infra Limited - India
- Electricity Generating Authority of Thailand
- Borneo Indobara - Indonesia
- The University of Queensland
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate Of Revenue Intelligence - India
- Sojitz Corporation - Japan
- Kumho Petrochemical, South Korea
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- Tamil Nadu electricity Board
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- Asia Pacific Energy Resources Ventures Inc, Philippines
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- Heidelberg Cement - Germany
- IHS Mccloskey Coal Group - USA
- OPG Power Generation Pvt Ltd - India
- Grasim Industreis Ltd - India
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