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Wednesday, 03 November 21
HIGHER COKING COAL PRICES TO PARE PROFITABILITY OF STEELMAKERS IN SECOND HALF OF FY22 - CRISIL RATINGS
The operating margin of primary steelmakers will reduce by a third to 24-26% in the second half of this fiscal versus the first half as input cost soars owing to a more than 2x rise in coking coal prices since July.
However, for the full fiscal, the operating margin will average a robust 31-32%, a good ~400 basis points (bps) higher than in last fiscal, due to a strong first half that saw healthy steel prices and moderate input costs.
The consequent robust accruals will support increased capital expenditure, continued deleveraging and strengthening of balance sheets, a CRISIL study of the top five steelmakers, which account for 58% of domestic production, shows. Global coking coal prices have rallied strongly since July, rising from ~$175 per tonne in June to ~$400 per tonne in October, mainly due to disruptions in the Australian and Chinese mines, and logistical issues such as freight and container unavailability, amid healthy demand from global steel producers, especially ex-China.
The prices are expected to ease only gradually as supply takes time to ramp up. Given that domestic primary steel producers rely mainly on imported coking coal, their production costs will rise sharply.
In contrast, iron ore, the other key raw material that accounts for 15-20% of the cost of production, is entirely met from domestic sources (captive plus merchant supplies). Although global iron ore prices have fallen ~60% between July and October, domestic prices have fallen only ~ 30% as supply continues to be tight.
Says Naveen Vaidyanathan, Director, CRISIL Ratings, “The surge in coking coal prices, which account for about a third of the total cost of production, will materially elevate cost pressures for domestic primary steel makers. At the same time, the fall in domestic iron ore prices has been significantly lower than the increase in coking coal prices, thereby providing limited cushion. These factors will lead to an overall increase in cost of production by ~ 30% for domestic steelmakers in the second half of the fiscal.”
Global steel prices after rallying in the first half of this fiscal by ~1.8x the average price last fiscal are expected to remain healthy in the second half. While prices were supported by strong demand and costlier iron ore in the first half, the second half will see more supply cuts in China as part of green initiatives there, and higher coal costs. Prices are expected to average $850-900 per tonne this fiscal, more than 60% higher on-year.
Domestic steel prices, which are significantly driven by the landed cost of imports, have also continued to be strong despite some moderation in the second quarter of this fiscal due to weak domestic demand amid the second wave.
Further, healthy global realisations, strong domestic demand growth (14-16% on-year this fiscal), high export potential and increased cost of production are expected to prop domestic prices during second half of the fiscal.
Says Ankush Tyagi, Team Leader, CRISIL Ratings, “Although domestic steel prices are expected to remain strong, further upside from current levels could be limited because the discount of domestic steel prices to the landed cost of imports has already reduced to ~15% in October from ~ 25% at the beginning of the fiscal.
Also, players could witness challenges in taking steep price hikes in the domestic market due to the nascent economic recovery. This, along with increased cost of production, could reduce operating margins to 24-26% in the second half against an estimated 35-37% in the first half. That said, the average operating margin for the fiscal could still be 350-400 bps higher than ~27.5% last fiscal.”
Healthy annual accruals should support planned capex towards capacity expansion and also strengthen the balance sheet of the players. Net debt-to-Ebitda is expected to be less than 1 time this fiscal against 1.9 times last fiscal, whereas interest cover will increase to more than 8.5 times, almost double from last fiscal.
A sharper-than-expected correction in global steel prices, weaker global demand, significantly higher-than-expected input costs would be the key monitorables from here.
Source: IIFL
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Thursday, 04 November 21
FASTER DECARBONISATION: BACK TO BASICS FOR THE MINING INDUSTRY? - WOOD MACKENZIE
To the uninitiated, rugby is a technical and complicated game. As young schoolboys it was all a wee bit confusing and we invariably ended up on the ...
Wednesday, 03 November 21
CHINA TO LAUNCH NEW DATA MONITORING SYSTEM, TARGETING COAL MARKET SPECULATION, HOARDING - GLOBAL TIMES
China’s top economic planner announced on Sunday a new data system for supervising the implementation of medium- and long-term contracts of c ...
Wednesday, 03 November 21
CHINA’S STATE PLANNER SAYS COAL SUPPLY IMPROVING, PRICES STABILISING - REUTERS
China’s coal supply situation has seen significant improvement with joint efforts from coal producers, logistics and downstream users, while ...
Wednesday, 03 November 21
MARKET INSIGHT - INTERMODAL
November is here and soon the all time seasonal favorite “all I want or Christmas is you” by Mariah Carey will be played in radio stati ...
Monday, 01 November 21
COAL PRICES HAVE FURTHER ROOM TO DROP: TOP ECONOMIC PLANNER - GLOBAL TIMES
China’s top economic planner said coal prices have further room to drop on Friday, as the most traded coal futures dropped to below 1,000 yua ...
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- Bulk Trading Sa - Switzerland
- PowerSource Philippines DevCo
- Indogreen Group - Indonesia
- Lanco Infratech Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Mercuria Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Alfred C Toepfer International GmbH - Germany
- London Commodity Brokers - England
- Trasteel International SA, Italy
- Bharathi Cement Corporation - India
- Attock Cement Pakistan Limited
- PNOC Exploration Corporation - Philippines
- Riau Bara Harum - Indonesia
- Xindia Steels Limited - India
- Mjunction Services Limited - India
- GAC Shipping (India) Pvt Ltd
- Central Java Power - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Sojitz Corporation - Japan
- The Treasury - Australian Government
- Planning Commission, India
- Kideco Jaya Agung - Indonesia
- Aboitiz Power Corporation - Philippines
- Global Business Power Corporation, Philippines
- Interocean Group of Companies - India
- Pipit Mutiara Jaya. PT, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Tata Chemicals Ltd - India
- IEA Clean Coal Centre - UK
- Intertek Mineral Services - Indonesia
- Larsen & Toubro Limited - India
- Sinarmas Energy and Mining - Indonesia
- Ministry of Transport, Egypt
- Holcim Trading Pte Ltd - Singapore
- Semirara Mining and Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- IHS Mccloskey Coal Group - USA
- Merrill Lynch Commodities Europe
- Banpu Public Company Limited - Thailand
- Savvy Resources Ltd - HongKong
- Bahari Cakrawala Sebuku - Indonesia
- Bangladesh Power Developement Board
- Electricity Generating Authority of Thailand
- Sakthi Sugars Limited - India
- Standard Chartered Bank - UAE
- Coastal Gujarat Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Grasim Industreis Ltd - India
- Bukit Baiduri Energy - Indonesia
- Africa Commodities Group - South Africa
- Dalmia Cement Bharat India
- Edison Trading Spa - Italy
- Thai Mozambique Logistica
- Bhushan Steel Limited - India
- OPG Power Generation Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Barasentosa Lestari - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Mines - Canada
- Latin American Coal - Colombia
- Iligan Light & Power Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Energy Link Ltd, New Zealand
- TeaM Sual Corporation - Philippines
- Gujarat Sidhee Cement - India
- Kartika Selabumi Mining - Indonesia
- New Zealand Coal & Carbon
- Siam City Cement PLC, Thailand
- White Energy Company Limited
- Georgia Ports Authority, United States
- McConnell Dowell - Australia
- Kepco SPC Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Malabar Cements Ltd - India
- Samtan Co., Ltd - South Korea
- Simpson Spence & Young - Indonesia
- Energy Development Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Goldman Sachs - Singapore
- Mintek Dendrill Indonesia
- Port Waratah Coal Services - Australia
- Ministry of Finance - Indonesia
- Ind-Barath Power Infra Limited - India
- Marubeni Corporation - India
- Sree Jayajothi Cements Limited - India
- Wood Mackenzie - Singapore
- Karaikal Port Pvt Ltd - India
- Posco Energy - South Korea
- India Bulls Power Limited - India
- SMG Consultants - Indonesia
- Bhatia International Limited - India
- Pendopo Energi Batubara - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Tamil Nadu electricity Board
- Bukit Makmur.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- ICICI Bank Limited - India
- Metalloyd Limited - United Kingdom
- Indian Oil Corporation Limited
- Carbofer General Trading SA - India
- Parry Sugars Refinery, India
- The State Trading Corporation of India Ltd
- Chettinad Cement Corporation Ltd - India
- Sarangani Energy Corporation, Philippines
- GVK Power & Infra Limited - India
- ASAPP Information Group - India
- VISA Power Limited - India
- Orica Mining Services - Indonesia
- International Coal Ventures Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Indonesian Coal Mining Association
- Essar Steel Hazira Ltd - India
- Indo Tambangraya Megah - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Antam Resourcindo - Indonesia
- Singapore Mercantile Exchange
- Timah Investasi Mineral - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- Global Coal Blending Company Limited - Australia
- Minerals Council of Australia
- Commonwealth Bank - Australia
- LBH Netherlands Bv - Netherlands
- Price Waterhouse Coopers - Russia
- Thiess Contractors Indonesia
- The University of Queensland
- GMR Energy Limited - India
- Miang Besar Coal Terminal - Indonesia
- Borneo Indobara - Indonesia
- Economic Council, Georgia
- Romanian Commodities Exchange
- Sindya Power Generating Company Private Ltd
- Anglo American - United Kingdom
- Ambuja Cements Ltd - India
- Agrawal Coal Company - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Australian Coal Association
- Kumho Petrochemical, South Korea
- Coalindo Energy - Indonesia
- Madhucon Powers Ltd - India
- Star Paper Mills Limited - India
- Rashtriya Ispat Nigam Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Altura Mining Limited, Indonesia
- Vedanta Resources Plc - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SN Aboitiz Power Inc, Philippines
- Therma Luzon, Inc, Philippines
- San Jose City I Power Corp, Philippines
- Wilmar Investment Holdings
- Deloitte Consulting - India
- Globalindo Alam Lestari - Indonesia
- Heidelberg Cement - Germany
- Makarim & Taira - Indonesia
- Sical Logistics Limited - India
- Toyota Tsusho Corporation, Japan
- Billiton Holdings Pty Ltd - Australia
- European Bulk Services B.V. - Netherlands
- Chamber of Mines of South Africa
- Jaiprakash Power Ventures ltd
- Aditya Birla Group - India
- Siam City Cement - Thailand
- Meralco Power Generation, Philippines
- Eastern Energy - Thailand
- Kalimantan Lumbung Energi - Indonesia
- Bayan Resources Tbk. - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vizag Seaport Private Limited - India
- Petron Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- CIMB Investment Bank - Malaysia
- Orica Australia Pty. Ltd.
- Jindal Steel & Power Ltd - India
- Rio Tinto Coal - Australia
- Power Finance Corporation Ltd., India
- Straits Asia Resources Limited - Singapore
- Central Electricity Authority - India
- Renaissance Capital - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Global Green Power PLC Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Parliament of New Zealand
- Uttam Galva Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Cement Manufacturers Association - India
- Australian Commodity Traders Exchange
- Electricity Authority, New Zealand
- Salva Resources Pvt Ltd - India
- Indika Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Petrochimia International Co. Ltd.- Taiwan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Formosa Plastics Group - Taiwan
- Bhoruka Overseas - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- PTC India Limited - India
- Maharashtra Electricity Regulatory Commission - India
- MS Steel International - UAE
- Indian Energy Exchange, India
- Videocon Industries ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Eastern Coal Council - USA
- Binh Thuan Hamico - Vietnam
- Baramulti Group, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Coal and Oil Company - UAE
- CNBM International Corporation - China
- Gujarat Mineral Development Corp Ltd - India
- SMC Global Power, Philippines
- Independent Power Producers Association of India
- Medco Energi Mining Internasional
- Mercator Lines Limited - India
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