At oil price below USD60, it will be hard for KNM to negotiate with oil majors as the later are not stupid and want inflated bid to be stripped out of the system. Margin will be squeeze as steel prices may not fall by the same quantum.

If oil price stays depressed, major oil projects will continue to be cancelled worldwide, shutting the door for KNM to replenish order book for sales recognition in 2010 second half and 2011.

If that happens, the next 3 years will be hell to KNM. By the time oil price shock comes and spikes in 2013, KNM could be in danger of defaulting on bank loan.

I see oil at 60USD as safe for KNM. At 50, contract replenishment will be an issue and margin will be compromised. Still, the bus will leave on time tomorrow at 9am. We will see where it is headed.