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