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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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- CIMB Investment Bank - Malaysia
- Tamil Nadu electricity Board
- Gujarat Electricity Regulatory Commission - India
- Eastern Coal Council - USA
- Meenaskhi Energy Private Limited - India
- Aboitiz Power Corporation - Philippines
- Merrill Lynch Commodities Europe
- Larsen & Toubro Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Indian Oil Corporation Limited
- New Zealand Coal & Carbon
- Baramulti Group, Indonesia
- Altura Mining Limited, Indonesia
- Parliament of New Zealand
- Bhushan Steel Limited - India
- White Energy Company Limited
- Thai Mozambique Logistica
- McConnell Dowell - Australia
- Meralco Power Generation, Philippines
- Savvy Resources Ltd - HongKong
- Sinarmas Energy and Mining - Indonesia
- Central Electricity Authority - India
- South Luzon Thermal Energy Corporation
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Standard Chartered Bank - UAE
- IEA Clean Coal Centre - UK
- Coalindo Energy - Indonesia
- Mercator Lines Limited - India
- SN Aboitiz Power Inc, Philippines
- Wood Mackenzie - Singapore
- Electricity Generating Authority of Thailand
- Rio Tinto Coal - Australia
- Manunggal Multi Energi - Indonesia
- Electricity Authority, New Zealand
- GMR Energy Limited - India
- SMC Global Power, Philippines
- Karaikal Port Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Indika Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Renaissance Capital - South Africa
- VISA Power Limited - India
- PowerSource Philippines DevCo
- Ministry of Finance - Indonesia
- Tata Chemicals Ltd - India
- Sojitz Corporation - Japan
- Vedanta Resources Plc - India
- Independent Power Producers Association of India
- IHS Mccloskey Coal Group - USA
- Indo Tambangraya Megah - Indonesia
- Sical Logistics Limited - India
- Salva Resources Pvt Ltd - India
- Commonwealth Bank - Australia
- Grasim Industreis Ltd - India
- Medco Energi Mining Internasional
- Madhucon Powers Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Therma Luzon, Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Barasentosa Lestari - Indonesia
- Oldendorff Carriers - Singapore
- Carbofer General Trading SA - India
- Petron Corporation, Philippines
- Cement Manufacturers Association - India
- Ambuja Cements Ltd - India
- Bulk Trading Sa - Switzerland
- Kideco Jaya Agung - Indonesia
- Directorate Of Revenue Intelligence - India
- Thiess Contractors Indonesia
- Bangladesh Power Developement Board
- Kumho Petrochemical, South Korea
- Semirara Mining Corp, Philippines
- SMG Consultants - Indonesia
- Agrawal Coal Company - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- GN Power Mariveles Coal Plant, Philippines
- TeaM Sual Corporation - Philippines
- Singapore Mercantile Exchange
- Coal and Oil Company - UAE
- Attock Cement Pakistan Limited
- Videocon Industries ltd - India
- Eastern Energy - Thailand
- Samtan Co., Ltd - South Korea
- Mintek Dendrill Indonesia
- Australian Coal Association
- Central Java Power - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bukit Baiduri Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Jaiprakash Power Ventures ltd
- Interocean Group of Companies - India
- The University of Queensland
- Bhatia International Limited - India
- Energy Development Corp, Philippines
- Indian Energy Exchange, India
- Mjunction Services Limited - India
- Africa Commodities Group - South Africa
- Maheswari Brothers Coal Limited - India
- Australian Commodity Traders Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Anglo American - United Kingdom
- Wilmar Investment Holdings
- Parry Sugars Refinery, India
- India Bulls Power Limited - India
- Metalloyd Limited - United Kingdom
- Posco Energy - South Korea
- Jorong Barutama Greston.PT - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Orica Mining Services - Indonesia
- The Treasury - Australian Government
- Krishnapatnam Port Company Ltd. - India
- Miang Besar Coal Terminal - Indonesia
- Riau Bara Harum - Indonesia
- GVK Power & Infra Limited - India
- Trasteel International SA, Italy
- Borneo Indobara - Indonesia
- European Bulk Services B.V. - Netherlands
- Kalimantan Lumbung Energi - Indonesia
- Banpu Public Company Limited - Thailand
- Kobexindo Tractors - Indoneisa
- CNBM International Corporation - China
- Energy Link Ltd, New Zealand
- Heidelberg Cement - Germany
- Port Waratah Coal Services - Australia
- Romanian Commodities Exchange
- ASAPP Information Group - India
- Sree Jayajothi Cements Limited - India
- Kaltim Prima Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- Power Finance Corporation Ltd., India
- Ind-Barath Power Infra Limited - India
- Ceylon Electricity Board - Sri Lanka
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- ICICI Bank Limited - India
- Karbindo Abesyapradhi - Indoneisa
- London Commodity Brokers - England
- Globalindo Alam Lestari - Indonesia
- Georgia Ports Authority, United States
- Neyveli Lignite Corporation Ltd, - India
- Minerals Council of Australia
- Bhoruka Overseas - Indonesia
- Bayan Resources Tbk. - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Alfred C Toepfer International GmbH - Germany
- Rashtriya Ispat Nigam Limited - India
- Global Green Power PLC Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Price Waterhouse Coopers - Russia
- Deloitte Consulting - India
- Chettinad Cement Corporation Ltd - India
- Pendopo Energi Batubara - Indonesia
- PTC India Limited - India
- Chamber of Mines of South Africa
- Petrochimia International Co. Ltd.- Taiwan
- Formosa Plastics Group - Taiwan
- Jindal Steel & Power Ltd - India
- Toyota Tsusho Corporation, Japan
- Marubeni Corporation - India
- Sarangani Energy Corporation, Philippines
- Ministry of Transport, Egypt
- Malabar Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Goldman Sachs - Singapore
- Binh Thuan Hamico - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- PNOC Exploration Corporation - Philippines
- Planning Commission, India
- Lanco Infratech Ltd - India
- GAC Shipping (India) Pvt Ltd
- Siam City Cement - Thailand
- Asmin Koalindo Tuhup - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Indonesian Coal Mining Association
- Antam Resourcindo - Indonesia
- Siam City Cement PLC, Thailand
- Kepco SPC Power Corporation, Philippines
- Latin American Coal - Colombia
- Simpson Spence & Young - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Makarim & Taira - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bharathi Cement Corporation - India
- Dalmia Cement Bharat India
- Economic Council, Georgia
- Holcim Trading Pte Ltd - Singapore
- Edison Trading Spa - Italy
- Semirara Mining and Power Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Vizag Seaport Private Limited - India
- The State Trading Corporation of India Ltd
- LBH Netherlands Bv - Netherlands
- Xindia Steels Limited - India
- Gujarat Sidhee Cement - India
- MS Steel International - UAE
- Mercuria Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Star Paper Mills Limited - India
- Uttam Galva Steels Limited - India
- Billiton Holdings Pty Ltd - Australia
- Indogreen Group - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Mines - Canada
- Vijayanagar Sugar Pvt Ltd - India
- Sakthi Sugars Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Global Business Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- OPG Power Generation Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Aditya Birla Group - India
- Orica Australia Pty. Ltd.
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