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Australian Coal Industry Booming, But What Happens When Prices Fall? Jul 05
Standard & Poors, July 2005
Abstract
The global coal industry is experiencing boom conditions, with prices at historic highs driven in part by surging demand from China. Current coal industry optimism is evident in significant capital expenditure to expand both mines and processing and port facilities. High prices are underpinning strong earnings and cash flows, which are positive for credit quality. Key questions for credit quality over the cycle, however, are how companies will fare when the inevitable downturn in prices occurs, and the degree to which this downturn will be exacerbated by the current phase of capacity expansion. Rated Australian players are well placed to cope with even a steep decline in prices because of their diverse portfolios. Australia is a major player in the...
Companies mentioned in this report are: BHP Billiton Ltd.,Mitsubishi Corp.,Mitsui & Co. Ltd.,Rio Tinto Ltd.,ITOCHU Corp.,Xstrata Queensland Ltd.,Wesfarmers Ltd.,Peabody Energy Corp.,Anglo American PLC
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
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