No rating impact on Winsway from Chalco’s acquisition
Fitch Ratings says Winsway Coking Coal (Winsway, "BB"/Stable) will not see immediate rating impact from Aluminium Corporation of China"s (Chalco, "BBB+"/Stable) proposed acquisition of a 29.9% stake in the former as the benefits will only accrue over the long-term.
Fitch expects the acquisition, which will make Chalco Winsway"s largest shareholder, will enhance Winsway"s market position and competitiveness via Chalco"s stronger access to both funding and government support. Chalco"s stated commitment to expand into Mongolian coal mining could also increase Winsway"s utilisation of its logistics capacity.
The acquisition will also likely remove Chalco as a direct competitor to Winsway in Mongolian coal logistics provision. Competition from Chalco, which recently entered the Mongolian coal trading market, and from Inner Mongolia Thermal Coal for existing railway transportation capacity was part of the reason for Winsway"s 2011 performance being weaker than market expectations.
Industry fundamentals remain favourable over the long term. Only around 20% of China"s proven coal reserves are coking coal while high-quality hard coking coal is even scarcer in China, representing only 7% of total coal resources. Long-term steel production growth is another factor driving the demand for coking coal.
Fitch expects the acquisition, which will make Chalco Winsway"s largest shareholder, will enhance Winsway"s market position and competitiveness via Chalco"s stronger access to both funding and government support. Chalco"s stated commitment to expand into Mongolian coal mining could also increase Winsway"s utilisation of its logistics capacity.
The acquisition will also likely remove Chalco as a direct competitor to Winsway in Mongolian coal logistics provision. Competition from Chalco, which recently entered the Mongolian coal trading market, and from Inner Mongolia Thermal Coal for existing railway transportation capacity was part of the reason for Winsway"s 2011 performance being weaker than market expectations.
Industry fundamentals remain favourable over the long term. Only around 20% of China"s proven coal reserves are coking coal while high-quality hard coking coal is even scarcer in China, representing only 7% of total coal resources. Long-term steel production growth is another factor driving the demand for coking coal.
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