Outlook Not So Grim For Asian Miners: Standard & Poor’s
Standard & Poor’s, a credit rating agency, said low production costs would help Asia Pacific’s coal miners amid weakening financial performances on declining coal prices.
In a report on Wednesday, S&P said it expected cash flows and financial performance of six Asia-Pacific coal producers, including two in Indonesia, to soften in the next 12 months compared to “bumper years” in 2010 and 2011.
However, Xavier Jean and Vishal Kulkarni, analysts at S&P, said generally low costs in production activities would help these companies mitigate their cash flow management.
“Low production costs and mines that are located close to the end markets are common characteristics of the six coal producers that we rate in the region,” Jean said. “Cost management in the context of softer coal prices will be key to the credit quality of Asia-Pacific coal miners over the next 12 months, in our view.”
S&P rated Bumi Resources, the largest coal producer in Indonesia, with a BB rating and negative outlook, and its affiliate Berau Coal Energy, which has a BB- rating and positive outlook. BB is two levels below investment grade.
The four other mining companies mentioned in the report were Yanzhou Coal Mining, Vietnam National Coal and Mineral Industries, Hidili Industry International Development and Mongolian Mining.
A coal mining executive remains positive on the outlook of coal price this year.
Dileep Srivastava, a director at Bumi Resources, said in an e-mail on Monday that demand for coal usually picked up as winter approached in the fourth quarter and that the price for coal could rise to $100 per metric ton from the current average price of around $85 now.
“We expect this year to be no different,” he said.