Shipping companies world over are looking to diversify to hedge against the cyclicality of their core business. But Mercator Lines has taken a deeper path into coal mining. The country’s second-largest private sector shipping company has entered the business through its second subsidiary in Singapore. It has secured mining licences for two coal blocks in Indonesia and one in Mozambique.
Mercator has secured 50% rights in two coal blocks in Indonesia, which have reserves of 15 million tonnes of decent to good quality coal. The company would start production of coal in July this year and expects the two mines to contribute one million tonne of coal in the first year. However, the coal block in Mozambique where Mercator Lines has 85% rights is still under development. The coal reserves there have been estimated to be around three billion tonnes and the company anticipates a wait of another two to three years before they can start production.
The operating cost of producing one tonne of coal is $25. This also includes production tax and 9% royalty that the company needs to pay the Indonesian government. Thermal coal, on the other hand is currently sold at $45-50 per tonne. While, doing a forward calculation, one million tonne of coal for Mercator would translate into $50 million of revenue and a $25 million profit. Having 50% rights in the Indonesian mines, Mercator is set to draw a profit of $11-12 per tonne of coal that they produce or about $12 million profit.
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In spite of a credit crunch and slowdown in the US, both Indian and global IT services companies have seen strong business growth in 2007. Worldwide IT services revenue totalled $748 billion in 2007, 10.5 per cent higher than $677 billion reported in 2006, according to research from Gartner Inc. In the same period, the top six Indian IT companies TCS, Infosys, Wipro, Satyam, HCL and Cognizant increased their collective market share in the global IT service arena to 2.4 per cent against 1.9 per cent in the previous fiscal.
Even though Indian IT companies have collectively improved their revenues in 2007, they are still laggards when compared with US-based vendors, who dominated the IT services pie with 55.4 per cent market share. Indian IT companies account only for 4.1 per cent of the global IT services revenue tracked. On the global front, IBM and Accenture delivered strong growth rates of 12.2 per cent and 19.7 per cent, respectively.
However, domestic IT services business in the country also seems to have come of age. The Indian domestic IT services market has been outpacing the overall Asia Pacific growth, as it grew by 18 per cent in 2007. While cost remains a key consideration for users in the outsourcing services market in India, operational efficiency and business agility are driving most of the IT services engagements.
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Freight rate for iron ore is set to come down further with the Railways deciding to remove the 30% port congestion surcharge levied on the mineral meant for domestic use. The move is set to benefit steel companies such as Essar Steel, Ispat Industries and Vikram Ispat which do not have captive mines. These companies depend mainly on rail transport for moving raw material to their steel plants. A fortnight ago, the Railways had shifted iron ore from class 180 to 170. The reclassification had resulted in freight cut of ore by 4-5%. However, the port congestion surcharge on iron ore meant for exports would continue to remain at 100%.
The proposed changes follow a series of high-level government meetings over finalising a steel package to contain inflation. Iron ore constitutes an important cost element in the entire process of steel making. With iron ore prices rising 100% in a year and expected to rise further, the Railways’ initiative is expected to reduce cost pressure on the steel sector.
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