Soft coal prices create excess supply
Thailand's top coal miner Banpu has suspended up to US$600 million of its four-year investment plan and lowered its production target by 10% due to softening coal prices.
The SET-listed company has also revised down this year's growth forecast from 15% to flat growth. Production revenue will fall to 44 million tonnes from the original 47 million-tonne target, said chief executive Chanin Vongkusolkit.
Under the current forecast, Indonesian coal prices are expected to average $92 a tonne compared with $95 a tonne last year. Tonnes of coal for the year were originally expected to range somewhere from $100-120.
Including coal swap gains of $3 a tonne, Banpu's average price is estimated at $95, said Mr Chanin.
"Altogether, we're likely to delay until the end of 2015 some $500-600 million of our planned $1.75-billion capital expenditures," Mr Chanin said yesterday.
Of the total amount, investments allocated for Auatralian operations will be lowered by to $400 million. Capital expenditure planned for Indonesia will be cut by $100 million from $345 million, while the budget for Mongolia is down by $250 million from $400 million.
The Mongolian project, for example, is delayed because there is no urgency to mine coal during unfavourable price conditions. Under the previous plan, Banpu would have produced up to 1 million tonnes in Mongolia this year.
The company also plans cost-cutting measures aimed at lowering operation costs in Indonesia by $4 a tonne this year and plans to increase savings in future years.
"We have to lower costs and suspend unnecessary projects to maintain our sound financial status and cope with short-term coal price fluctuations," said Mr Chanin.
Banpu will maintain enough cash to safeguard itself and pursue growth opportunities. As of March, its cash on hand totalled 30 billion baht.
"Our net profit will certainly shrink this year from 20 billion baht last year, while the revenue will be flat or merely increase by 3% at best," he said.
Mr Chanin said low shale gas prices and coal exports from the US have caused coal prices to plummet.
Currently, there is a 10% surplus or 80 million tonnes of seaborne coal trading, which will take nearly a month to balance out.
The price of shale gas is below production costs and should rise to $4-5 million in two years, he said.
Coal is currently trading at $88-89 per tonne compared with $125 last year and a contracted price of $93 for next year.
In the worst-case scenario, the price will drop to about $80 for the rest of the year.
By postponing some projects, Banpu's 2015 production target will possibly be reduced to 55 million tonnes from 60 million tonnes. The company produced 42 million tonnes last year.
BANPU shares closed unchanged yesterday on the SET at 440 baht in trade worth 551 million baht.
The SET-listed company has also revised down this year's growth forecast from 15% to flat growth. Production revenue will fall to 44 million tonnes from the original 47 million-tonne target, said chief executive Chanin Vongkusolkit.
Under the current forecast, Indonesian coal prices are expected to average $92 a tonne compared with $95 a tonne last year. Tonnes of coal for the year were originally expected to range somewhere from $100-120.
Including coal swap gains of $3 a tonne, Banpu's average price is estimated at $95, said Mr Chanin.
"Altogether, we're likely to delay until the end of 2015 some $500-600 million of our planned $1.75-billion capital expenditures," Mr Chanin said yesterday.
Of the total amount, investments allocated for Auatralian operations will be lowered by to $400 million. Capital expenditure planned for Indonesia will be cut by $100 million from $345 million, while the budget for Mongolia is down by $250 million from $400 million.
The Mongolian project, for example, is delayed because there is no urgency to mine coal during unfavourable price conditions. Under the previous plan, Banpu would have produced up to 1 million tonnes in Mongolia this year.
The company also plans cost-cutting measures aimed at lowering operation costs in Indonesia by $4 a tonne this year and plans to increase savings in future years.
"We have to lower costs and suspend unnecessary projects to maintain our sound financial status and cope with short-term coal price fluctuations," said Mr Chanin.
Banpu will maintain enough cash to safeguard itself and pursue growth opportunities. As of March, its cash on hand totalled 30 billion baht.
"Our net profit will certainly shrink this year from 20 billion baht last year, while the revenue will be flat or merely increase by 3% at best," he said.
Mr Chanin said low shale gas prices and coal exports from the US have caused coal prices to plummet.
Currently, there is a 10% surplus or 80 million tonnes of seaborne coal trading, which will take nearly a month to balance out.
The price of shale gas is below production costs and should rise to $4-5 million in two years, he said.
Coal is currently trading at $88-89 per tonne compared with $125 last year and a contracted price of $93 for next year.
In the worst-case scenario, the price will drop to about $80 for the rest of the year.
By postponing some projects, Banpu's 2015 production target will possibly be reduced to 55 million tonnes from 60 million tonnes. The company produced 42 million tonnes last year.
BANPU shares closed unchanged yesterday on the SET at 440 baht in trade worth 551 million baht.
Comments
Post a Comment