‘Indian, Chinese steel cos keen to acquire coal assets abroad’
New Delhi: Indian and Chinese steel makers are keenly looking for acquiring coal assets globally as they strive to better manage and hedge their energy costs, says a PWC report. According to the report, de-leveraging and consolidation are driving metal deals in India, and the period ahead is likely to be a “crunch time” for smaller Indian steel makers if they are not well positioned in specialised lines or have not reformed their balance sheets.
“Chinese and Indian metal companies remain keen to acquire coal assets for their energy needs in order to be able to better manage and hedge their energy costs,” the report said, adding that Australia and Mongolia are favourite destinations for such transactions.
“Australia is a favourite hunting ground for coal mine acquisitions. Companies are also looking at coal blocks acquisitions in Mongolia which have a similar quality of Australian coal,” the report said.
As demand remains uncertain and shareholder margins come under pressure, there is a prolonged period of de-leveraging among Indian steel companies but in order to hedge their energy costs they are open to acquisition of coal assets abroad.
“The scope for de-leveraging and consolidation is considerable and we expect to see this trend play out in the next year,” the report said. Moreover, the demand supply mismatch will further increase the appetite of Indian producers for their own coal assets, it added.
Interestingly, the focus of metals deals has shifted substantially away from the Americas and Europe to Asia Pacific in the past year. Targets in the Asia Pacific region accounted for 68 per cent of the total metals deal value in 2012, more than three times the 19 per cent share in 2011.
The Asia Pacific region was the only territory to record a y-o-y increase in total deal value, with target value up more than four-fold, from $ 7.3 billion in 2011 to $ 31.1 billion in 2012.
“Chinese and Indian metal companies remain keen to acquire coal assets for their energy needs in order to be able to better manage and hedge their energy costs,” the report said, adding that Australia and Mongolia are favourite destinations for such transactions.
“Australia is a favourite hunting ground for coal mine acquisitions. Companies are also looking at coal blocks acquisitions in Mongolia which have a similar quality of Australian coal,” the report said.
As demand remains uncertain and shareholder margins come under pressure, there is a prolonged period of de-leveraging among Indian steel companies but in order to hedge their energy costs they are open to acquisition of coal assets abroad.
“The scope for de-leveraging and consolidation is considerable and we expect to see this trend play out in the next year,” the report said. Moreover, the demand supply mismatch will further increase the appetite of Indian producers for their own coal assets, it added.
Interestingly, the focus of metals deals has shifted substantially away from the Americas and Europe to Asia Pacific in the past year. Targets in the Asia Pacific region accounted for 68 per cent of the total metals deal value in 2012, more than three times the 19 per cent share in 2011.
The Asia Pacific region was the only territory to record a y-o-y increase in total deal value, with target value up more than four-fold, from $ 7.3 billion in 2011 to $ 31.1 billion in 2012.
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