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Tuesday, 16 July 13
TAKE - OR - PAY CONTRACTS CONTINUE TO INCENTIVISE AUSTRALIAN COAL PRODUCERS DESPITE POTENTIAL NEGATIVE CASH MARGINS - WOOD MACKENZIE
 Australia's coal production has continued to grow, despite lower coal prices in 2013. Global investors and suppliers are therefore questioning whether more production will be shut down. Wood Mackenzie estimates that in 2013, only 4 million tonnes (mt) of coal production in Australia is at risk of closure even though 32mt of coal will be produced at negative margins, including sustaining capital. The decision to continue production instead of shutting it down can mainly be attributed to transport and port contracts in Australia, otherwise known as 'take-or-pay' contracts.
Take-or-pay contracts are fixed cost contracts that result in most producers paying for capacity regardless of tonnes shipped. Stronger growth in exports relative to new capacity build will reduce the average cost per tonne that miners pay for not fully utilising contracted capacity.
Mr. Viktor Tanevski, Coal Cost Analyst at Wood Mackenzie, says, "There have only been two mine closures so far in 2013 compared to seven in 2012. Despite the low coal price environment and current margin squeeze, take-or-pay contracts are incentivising coal producers to increase rather than reduce production, even if additional production is generating negative cash margins. This is because the fixed cost of infrastructure capacity makes the cost of shutting down even more expensive than the cost of maintaining production."
"We estimate that only 4mt, or just over 1% of Australia's coal exports in 2013, is at risk of closure based on Hard Coking Coal (HCC) price of US$171/t and thermal coal price of US$92/t. This is not a significant volume of output; however the amount at risk increases significantly under a lower price scenario.
Wood Mackenzie analyses that if average prices fall to US$122/t for HCC and US$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Tuesday, 29 October 13
NEWCASTLE PORT SHIPPED 12.29 PER CENT MORE COAL W-W
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port up 12.29 per cent week on week to 3.61 million mt for ...
Monday, 28 October 13
API 8 CFR SOUTH CHINA COAL FOR Q3'14 DELIVERY LOST ON D-D,W-W & M-M
COALspot.com : API 8 CFR South China Coal swaps for average Q4 2013 delivery fell 0.22 percept M-M on Friday 25 October 2013. The CFR South China Co ...
Monday, 28 October 13
COAL SWAP FOR Q3' 2014 DELIVERY LOST ON D-D, W-W AND M-M
COALspot.com – Sub-Bit Indonesia coal swap (FOB ) for average Q4 2013 delivery gained 0.46 percept month on month on Friday 25 October 2 ...
Saturday, 26 October 13
PANAMAX CHARTER RATES FROM INDONESIA TO INDIA STAY FIRM - SOLYM
COALspot.com: The freight market showed tendency of softness with Cape and Panamax futures and physical soft.
The BDI was down by 12 pct week end ...
Saturday, 26 October 13
DRY BULK MARKET KEEPS ON RETREATING, BUT NEW BUILDING ORDERS KEEP ON PILING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market kept on retreating this week, with the industry's benchmark, the Baltic Dry Index (BDI) falling to 1,708 points, down 78 on the ...
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- Electricity Authority, New Zealand
- Global Coal Blending Company Limited - Australia
- Oldendorff Carriers - Singapore
- Standard Chartered Bank - UAE
- Globalindo Alam Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Coal and Oil Company - UAE
- Intertek Mineral Services - Indonesia
- Anglo American - United Kingdom
- Goldman Sachs - Singapore
- Wood Mackenzie - Singapore
- GMR Energy Limited - India
- Trasteel International SA, Italy
- Indogreen Group - Indonesia
- PTC India Limited - India
- Makarim & Taira - Indonesia
- London Commodity Brokers - England
- PetroVietnam Power Coal Import and Supply Company
- Meralco Power Generation, Philippines
- Straits Asia Resources Limited - Singapore
- Toyota Tsusho Corporation, Japan
- Kohat Cement Company Ltd. - Pakistan
- Barasentosa Lestari - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- SMG Consultants - Indonesia
- CNBM International Corporation - China
- McConnell Dowell - Australia
- Economic Council, Georgia
- Price Waterhouse Coopers - Russia
- Bukit Asam (Persero) Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- Directorate General of MIneral and Coal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Krishnapatnam Port Company Ltd. - India
- ASAPP Information Group - India
- Parry Sugars Refinery, India
- Heidelberg Cement - Germany
- International Coal Ventures Pvt Ltd - India
- Larsen & Toubro Limited - India
- European Bulk Services B.V. - Netherlands
- Bulk Trading Sa - Switzerland
- Rashtriya Ispat Nigam Limited - India
- Aboitiz Power Corporation - Philippines
- Mjunction Services Limited - India
- Banpu Public Company Limited - Thailand
- VISA Power Limited - India
- Thiess Contractors Indonesia
- Dalmia Cement Bharat India
- Central Electricity Authority - India
- Vijayanagar Sugar Pvt Ltd - India
- Energy Development Corp, Philippines
- Sindya Power Generating Company Private Ltd
- Jaiprakash Power Ventures ltd
- Leighton Contractors Pty Ltd - Australia
- IEA Clean Coal Centre - UK
- Petrochimia International Co. Ltd.- Taiwan
- Binh Thuan Hamico - Vietnam
- Bharathi Cement Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Tata Chemicals Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Australian Coal Association
- Chamber of Mines of South Africa
- Sarangani Energy Corporation, Philippines
- Bhatia International Limited - India
- SMC Global Power, Philippines
- Kaltim Prima Coal - Indonesia
- Interocean Group of Companies - India
- Merrill Lynch Commodities Europe
- IHS Mccloskey Coal Group - USA
- Eastern Energy - Thailand
- Georgia Ports Authority, United States
- Essar Steel Hazira Ltd - India
- India Bulls Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Singapore Mercantile Exchange
- TeaM Sual Corporation - Philippines
- Antam Resourcindo - Indonesia
- The Treasury - Australian Government
- Africa Commodities Group - South Africa
- LBH Netherlands Bv - Netherlands
- Alfred C Toepfer International GmbH - Germany
- Sree Jayajothi Cements Limited - India
- Ministry of Transport, Egypt
- Videocon Industries ltd - India
- ICICI Bank Limited - India
- Wilmar Investment Holdings
- The University of Queensland
- Kumho Petrochemical, South Korea
- Ceylon Electricity Board - Sri Lanka
- Mintek Dendrill Indonesia
- Star Paper Mills Limited - India
- Xindia Steels Limited - India
- Rio Tinto Coal - Australia
- Ind-Barath Power Infra Limited - India
- Cement Manufacturers Association - India
- Timah Investasi Mineral - Indoneisa
- Maheswari Brothers Coal Limited - India
- Salva Resources Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Petron Corporation, Philippines
- Renaissance Capital - South Africa
- Energy Link Ltd, New Zealand
- Billiton Holdings Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- PNOC Exploration Corporation - Philippines
- Pendopo Energi Batubara - Indonesia
- Grasim Industreis Ltd - India
- PowerSource Philippines DevCo
- New Zealand Coal & Carbon
- Port Waratah Coal Services - Australia
- Miang Besar Coal Terminal - Indonesia
- Minerals Council of Australia
- Posco Energy - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Riau Bara Harum - Indonesia
- Coastal Gujarat Power Limited - India
- Thai Mozambique Logistica
- GAC Shipping (India) Pvt Ltd
- Simpson Spence & Young - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Baramulti Group, Indonesia
- Indian Oil Corporation Limited
- Central Java Power - Indonesia
- Kobexindo Tractors - Indoneisa
- Indika Energy - Indonesia
- White Energy Company Limited
- Parliament of New Zealand
- Independent Power Producers Association of India
- Orica Australia Pty. Ltd.
- Indonesian Coal Mining Association
- Bukit Makmur.PT - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mercuria Energy - Indonesia
- Mercator Lines Limited - India
- Kartika Selabumi Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Marubeni Corporation - India
- Therma Luzon, Inc, Philippines
- Edison Trading Spa - Italy
- TNB Fuel Sdn Bhd - Malaysia
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement - Thailand
- Samtan Co., Ltd - South Korea
- Uttam Galva Steels Limited - India
- Electricity Generating Authority of Thailand
- Attock Cement Pakistan Limited
- Bhoruka Overseas - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Orica Mining Services - Indonesia
- Power Finance Corporation Ltd., India
- Vizag Seaport Private Limited - India
- Semirara Mining Corp, Philippines
- Gujarat Sidhee Cement - India
- Sinarmas Energy and Mining - Indonesia
- Bhushan Steel Limited - India
- GVK Power & Infra Limited - India
- Agrawal Coal Company - India
- San Jose City I Power Corp, Philippines
- South Luzon Thermal Energy Corporation
- Ministry of Finance - Indonesia
- Romanian Commodities Exchange
- MS Steel International - UAE
- Metalloyd Limited - United Kingdom
- Australian Commodity Traders Exchange
- Planning Commission, India
- Lanco Infratech Ltd - India
- Indian Energy Exchange, India
- Sakthi Sugars Limited - India
- The State Trading Corporation of India Ltd
- Kapuas Tunggal Persada - Indonesia
- Deloitte Consulting - India
- Siam City Cement PLC, Thailand
- Tamil Nadu electricity Board
- Gujarat Electricity Regulatory Commission - India
- Kideco Jaya Agung - Indonesia
- CIMB Investment Bank - Malaysia
- Directorate Of Revenue Intelligence - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sojitz Corporation - Japan
- Kalimantan Lumbung Energi - Indonesia
- Medco Energi Mining Internasional
- Coalindo Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Carbofer General Trading SA - India
- Formosa Plastics Group - Taiwan
- Karbindo Abesyapradhi - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Vedanta Resources Plc - India
- Global Green Power PLC Corporation, Philippines
- Commonwealth Bank - Australia
- Semirara Mining and Power Corporation, Philippines
- Bangladesh Power Developement Board
- Bahari Cakrawala Sebuku - Indonesia
- OPG Power Generation Pvt Ltd - India
- Sical Logistics Limited - India
- Borneo Indobara - Indonesia
- Meenaskhi Energy Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Eastern Coal Council - USA
- Latin American Coal - Colombia
- Aditya Birla Group - India
- Bayan Resources Tbk. - Indonesia
- Madhucon Powers Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Malabar Cements Ltd - India
- Ministry of Mines - Canada
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