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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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Friday, 25 October 13
U.S. YEAR-TO-DATE COAL PRODUCTION REACHED TOTALLED 803.1 MMST
COALspot.com – United States the world’s second largest coal producer produced approximately 19.10 million short tons (mmst) of coal in ...
Thursday, 24 October 13
PANAMAX: RATES SLIP ACROSS BOTH HEMISPHERES
Handy
We were back from holidays but still not much enquiries in the market. Overall future direction is uncertain. Currently, ships passing Singap ...
Thursday, 24 October 13
SHIP PRICES ARE INCREASING ON THE BACK OF IMPROVED MARKET SENTIMENT - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has kept on retreating from its recent highs, ending yesterday at 1,786 points, down 61 points on the day, with Capesizes leadin ...
Wednesday, 23 October 13
DRY BULK MARKET HAS SHOWN SIGNS OF STABILITY - INTERMODAL
Chartering (Wet: Stable+ / Dry: Stable-)
The Dry Bulk market has shown signs of stability this past week, with the sole exception of Capes, rates f ...
Wednesday, 23 October 13
MARKET SENTIMENT IN THE DRY BULK SECTOR REMAINS POSITIVE - YANNIS OLZIERSKY
Market sentiment in the dry bulk sector remains positive despite the latest correction in freight rates for the Capesize sector, which are sliding f ...
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- Bukit Baiduri Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- IEA Clean Coal Centre - UK
- Star Paper Mills Limited - India
- Oldendorff Carriers - Singapore
- Salva Resources Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Aboitiz Power Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Baramulti Group, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Parliament of New Zealand
- Electricity Generating Authority of Thailand
- Sical Logistics Limited - India
- Bhatia International Limited - India
- Binh Thuan Hamico - Vietnam
- Independent Power Producers Association of India
- Standard Chartered Bank - UAE
- Semirara Mining and Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Attock Cement Pakistan Limited
- Rio Tinto Coal - Australia
- Chettinad Cement Corporation Ltd - India
- Australian Commodity Traders Exchange
- Barasentosa Lestari - Indonesia
- Toyota Tsusho Corporation, Japan
- IHS Mccloskey Coal Group - USA
- European Bulk Services B.V. - Netherlands
- MS Steel International - UAE
- Essar Steel Hazira Ltd - India
- South Luzon Thermal Energy Corporation
- Economic Council, Georgia
- International Coal Ventures Pvt Ltd - India
- Marubeni Corporation - India
- Central Java Power - Indonesia
- Ambuja Cements Ltd - India
- Posco Energy - South Korea
- Krishnapatnam Port Company Ltd. - India
- Heidelberg Cement - Germany
- Renaissance Capital - South Africa
- Bulk Trading Sa - Switzerland
- Chamber of Mines of South Africa
- Kobexindo Tractors - Indoneisa
- India Bulls Power Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bahari Cakrawala Sebuku - Indonesia
- Minerals Council of Australia
- Borneo Indobara - Indonesia
- Larsen & Toubro Limited - India
- Mercator Lines Limited - India
- Mjunction Services Limited - India
- Coalindo Energy - Indonesia
- CNBM International Corporation - China
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Australian Coal Association
- Rashtriya Ispat Nigam Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Bayan Resources Tbk. - Indonesia
- Vizag Seaport Private Limited - India
- The University of Queensland
- Sindya Power Generating Company Private Ltd
- Riau Bara Harum - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Vedanta Resources Plc - India
- Energy Link Ltd, New Zealand
- Agrawal Coal Company - India
- Lanco Infratech Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Global Green Power PLC Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- GVK Power & Infra Limited - India
- Jaiprakash Power Ventures ltd
- Parry Sugars Refinery, India
- Aditya Birla Group - India
- ASAPP Information Group - India
- Planning Commission, India
- Kohat Cement Company Ltd. - Pakistan
- Petrochimia International Co. Ltd.- Taiwan
- Metalloyd Limited - United Kingdom
- Tata Chemicals Ltd - India
- Karaikal Port Pvt Ltd - India
- Bhushan Steel Limited - India
- Indian Energy Exchange, India
- Mercuria Energy - Indonesia
- Electricity Authority, New Zealand
- Ministry of Finance - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- London Commodity Brokers - England
- Alfred C Toepfer International GmbH - Germany
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sojitz Corporation - Japan
- Orica Australia Pty. Ltd.
- Eastern Coal Council - USA
- Siam City Cement - Thailand
- Madhucon Powers Ltd - India
- CIMB Investment Bank - Malaysia
- Antam Resourcindo - Indonesia
- Georgia Ports Authority, United States
- Edison Trading Spa - Italy
- GAC Shipping (India) Pvt Ltd
- Leighton Contractors Pty Ltd - Australia
- Miang Besar Coal Terminal - Indonesia
- Africa Commodities Group - South Africa
- Bhoruka Overseas - Indonesia
- White Energy Company Limited
- Xindia Steels Limited - India
- Thai Mozambique Logistica
- Coastal Gujarat Power Limited - India
- Sakthi Sugars Limited - India
- Cement Manufacturers Association - India
- Petron Corporation, Philippines
- Global Business Power Corporation, Philippines
- Interocean Group of Companies - India
- SN Aboitiz Power Inc, Philippines
- The State Trading Corporation of India Ltd
- Goldman Sachs - Singapore
- Tamil Nadu electricity Board
- Kideco Jaya Agung - Indonesia
- Commonwealth Bank - Australia
- Pendopo Energi Batubara - Indonesia
- Mintek Dendrill Indonesia
- Merrill Lynch Commodities Europe
- Maharashtra Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- Singapore Mercantile Exchange
- Medco Energi Mining Internasional
- PTC India Limited - India
- Jindal Steel & Power Ltd - India
- Wilmar Investment Holdings
- Indogreen Group - Indonesia
- Savvy Resources Ltd - HongKong
- Maheswari Brothers Coal Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Deloitte Consulting - India
- Malabar Cements Ltd - India
- Kumho Petrochemical, South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- GMR Energy Limited - India
- Formosa Plastics Group - Taiwan
- Anglo American - United Kingdom
- Kepco SPC Power Corporation, Philippines
- Ministry of Transport, Egypt
- Neyveli Lignite Corporation Ltd, - India
- Thiess Contractors Indonesia
- Therma Luzon, Inc, Philippines
- Samtan Co., Ltd - South Korea
- Makarim & Taira - Indonesia
- Power Finance Corporation Ltd., India
- VISA Power Limited - India
- Ind-Barath Power Infra Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SMC Global Power, Philippines
- Indonesian Coal Mining Association
- Indian Oil Corporation Limited
- Latin American Coal - Colombia
- Directorate Of Revenue Intelligence - India
- Videocon Industries ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Coal and Oil Company - UAE
- Banpu Public Company Limited - Thailand
- PetroVietnam Power Coal Import and Supply Company
- SMG Consultants - Indonesia
- Port Waratah Coal Services - Australia
- Simpson Spence & Young - Indonesia
- Wood Mackenzie - Singapore
- Indo Tambangraya Megah - Indonesia
- ICICI Bank Limited - India
- Central Electricity Authority - India
- Timah Investasi Mineral - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- Energy Development Corp, Philippines
- Romanian Commodities Exchange
- Straits Asia Resources Limited - Singapore
- Iligan Light & Power Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Intertek Mineral Services - Indonesia
- McConnell Dowell - Australia
- GN Power Mariveles Coal Plant, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- New Zealand Coal & Carbon
- Directorate General of MIneral and Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Grasim Industreis Ltd - India
- Carbofer General Trading SA - India
- PowerSource Philippines DevCo
- Altura Mining Limited, Indonesia
- Bharathi Cement Corporation - India
- OPG Power Generation Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indika Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Dalmia Cement Bharat India
- Global Coal Blending Company Limited - Australia
- Siam City Cement PLC, Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Asam (Persero) Tbk - Indonesia
- Meenaskhi Energy Private Limited - India
- Cigading International Bulk Terminal - Indonesia
- Semirara Mining Corp, Philippines
- The Treasury - Australian Government
- Gujarat Sidhee Cement - India
- Sinarmas Energy and Mining - Indonesia
- Orica Mining Services - Indonesia
- Meralco Power Generation, Philippines
- Uttam Galva Steels Limited - India
- Trasteel International SA, Italy
- Eastern Energy - Thailand
- Bangladesh Power Developement Board
- Globalindo Alam Lestari - Indonesia
- Ministry of Mines - Canada
- Holcim Trading Pte Ltd - Singapore
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