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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, 18 October 13
WOOD MACKENZIE FORECASTS CHINA WILL OUTWEIGH THE REST OF THE WORLD FOR BASE METALS DEMAND BY 2017
China set to account for 52% of 117mt base metals market by 2017
China is on track to exceed rest of the World demand by 2017, becoming the singl ...
Friday, 18 October 13
DRY BULK MARKET ON "PAUSE" MODE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has been on "pause" mode over the past week, after China's return from the week long holidays. The industry's benchm ...
Friday, 18 October 13
US PRODUCED 6.7% MORE COAL W-W
COALspot.com – United States the world’s second largest coal producer produced approximately 18.9 million short tons (mmst) of coal in a ...
Thursday, 17 October 13
CAPESIZE: RATES ARE AGAIN MOVING UPWARDS - FEARNRESEARCH
Handy
Activities were obviously slowed down in the Pacific basin. There were only few coal movements which fixed around USD 15-16k for ships in Sin ...
Thursday, 17 October 13
SGX TO LAUNCH "SGX THERMAL COAL FUTURES" NEXT MONDAY
COALspot.com: SGX is to launch two thermal coal futures contracts, SGX API 8 CFR China Coal Index Futures and SGX IHS McCloskey Indonesian Sub-bit F ...
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- Salva Resources Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Jaiprakash Power Ventures ltd
- Commonwealth Bank - Australia
- Kohat Cement Company Ltd. - Pakistan
- Energy Development Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Anglo American - United Kingdom
- Bharathi Cement Corporation - India
- Economic Council, Georgia
- Pipit Mutiara Jaya. PT, Indonesia
- Australian Commodity Traders Exchange
- Cement Manufacturers Association - India
- Indian Energy Exchange, India
- Vijayanagar Sugar Pvt Ltd - India
- Georgia Ports Authority, United States
- CNBM International Corporation - China
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Finance - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- VISA Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Eastern Coal Council - USA
- Ministry of Mines - Canada
- Heidelberg Cement - Germany
- Maheswari Brothers Coal Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Sarangani Energy Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Jindal Steel & Power Ltd - India
- Rio Tinto Coal - Australia
- Singapore Mercantile Exchange
- Malabar Cements Ltd - India
- Kartika Selabumi Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- Wood Mackenzie - Singapore
- Siam City Cement PLC, Thailand
- Planning Commission, India
- Bulk Trading Sa - Switzerland
- Semirara Mining Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Latin American Coal - Colombia
- Larsen & Toubro Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Edison Trading Spa - Italy
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bangladesh Power Developement Board
- PowerSource Philippines DevCo
- Coalindo Energy - Indonesia
- Borneo Indobara - Indonesia
- ASAPP Information Group - India
- Barasentosa Lestari - Indonesia
- Indogreen Group - Indonesia
- SN Aboitiz Power Inc, Philippines
- White Energy Company Limited
- Xindia Steels Limited - India
- GVK Power & Infra Limited - India
- Oldendorff Carriers - Singapore
- McConnell Dowell - Australia
- Port Waratah Coal Services - Australia
- Bhoruka Overseas - Indonesia
- Marubeni Corporation - India
- Ceylon Electricity Board - Sri Lanka
- Merrill Lynch Commodities Europe
- Meralco Power Generation, Philippines
- Bhatia International Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Central Electricity Authority - India
- South Luzon Thermal Energy Corporation
- Bukit Asam (Persero) Tbk - Indonesia
- Antam Resourcindo - Indonesia
- Global Green Power PLC Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Independent Power Producers Association of India
- Grasim Industreis Ltd - India
- Trasteel International SA, Italy
- Deloitte Consulting - India
- Miang Besar Coal Terminal - Indonesia
- Attock Cement Pakistan Limited
- Ministry of Transport, Egypt
- Kobexindo Tractors - Indoneisa
- Eastern Energy - Thailand
- Sojitz Corporation - Japan
- Makarim & Taira - Indonesia
- Indonesian Coal Mining Association
- Global Coal Blending Company Limited - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Directorate Of Revenue Intelligence - India
- Lanco Infratech Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Leighton Contractors Pty Ltd - Australia
- Vizag Seaport Private Limited - India
- Meenaskhi Energy Private Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- SMG Consultants - Indonesia
- Ind-Barath Power Infra Limited - India
- Kaltim Prima Coal - Indonesia
- Standard Chartered Bank - UAE
- Coal and Oil Company - UAE
- Kideco Jaya Agung - Indonesia
- Altura Mining Limited, Indonesia
- Bhushan Steel Limited - India
- The Treasury - Australian Government
- Chamber of Mines of South Africa
- Siam City Cement - Thailand
- Banpu Public Company Limited - Thailand
- Samtan Co., Ltd - South Korea
- Vedanta Resources Plc - India
- Jorong Barutama Greston.PT - Indonesia
- Electricity Generating Authority of Thailand
- Coastal Gujarat Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Goldman Sachs - Singapore
- Billiton Holdings Pty Ltd - Australia
- Carbofer General Trading SA - India
- Karbindo Abesyapradhi - Indoneisa
- Aditya Birla Group - India
- Orica Australia Pty. Ltd.
- Parliament of New Zealand
- Bukit Makmur.PT - Indonesia
- Central Java Power - Indonesia
- Posco Energy - South Korea
- Globalindo Alam Lestari - Indonesia
- Pendopo Energi Batubara - Indonesia
- Australian Coal Association
- Petron Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Mintek Dendrill Indonesia
- Binh Thuan Hamico - Vietnam
- Alfred C Toepfer International GmbH - Germany
- Sical Logistics Limited - India
- International Coal Ventures Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Agrawal Coal Company - India
- Mercuria Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- SMC Global Power, Philippines
- Mercator Lines Limited - India
- Sindya Power Generating Company Private Ltd
- GMR Energy Limited - India
- Thai Mozambique Logistica
- London Commodity Brokers - England
- Gujarat Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Sakthi Sugars Limited - India
- Romanian Commodities Exchange
- Wilmar Investment Holdings
- Mjunction Services Limited - India
- European Bulk Services B.V. - Netherlands
- Manunggal Multi Energi - Indonesia
- Ambuja Cements Ltd - India
- Price Waterhouse Coopers - Russia
- Straits Asia Resources Limited - Singapore
- TeaM Sual Corporation - Philippines
- Indika Energy - Indonesia
- Power Finance Corporation Ltd., India
- Karaikal Port Pvt Ltd - India
- Minerals Council of Australia
- Thiess Contractors Indonesia
- Kapuas Tunggal Persada - Indonesia
- IEA Clean Coal Centre - UK
- Metalloyd Limited - United Kingdom
- Bayan Resources Tbk. - Indonesia
- Essar Steel Hazira Ltd - India
- Bukit Baiduri Energy - Indonesia
- Baramulti Group, Indonesia
- Kumho Petrochemical, South Korea
- MS Steel International - UAE
- Electricity Authority, New Zealand
- PNOC Exploration Corporation - Philippines
- Energy Link Ltd, New Zealand
- Africa Commodities Group - South Africa
- Formosa Plastics Group - Taiwan
- Orica Mining Services - Indonesia
- San Jose City I Power Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- Simpson Spence & Young - Indonesia
- Uttam Galva Steels Limited - India
- Parry Sugars Refinery, India
- Chettinad Cement Corporation Ltd - India
- Medco Energi Mining Internasional
- TNB Fuel Sdn Bhd - Malaysia
- Tata Chemicals Ltd - India
- Krishnapatnam Port Company Ltd. - India
- AsiaOL BioFuels Corp., Philippines
- New Zealand Coal & Carbon
- Tamil Nadu electricity Board
- ICICI Bank Limited - India
- Dalmia Cement Bharat India
- Cigading International Bulk Terminal - Indonesia
- Renaissance Capital - South Africa
- Aboitiz Power Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Therma Luzon, Inc, Philippines
- Indian Oil Corporation Limited
- Global Business Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- PTC India Limited - India
- Interocean Group of Companies - India
- Gujarat Mineral Development Corp Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Star Paper Mills Limited - India
- Neyveli Lignite Corporation Ltd, - India
- LBH Netherlands Bv - Netherlands
- The University of Queensland
- Madhucon Powers Ltd - India
- Savvy Resources Ltd - HongKong
- Gujarat Sidhee Cement - India
- Riau Bara Harum - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- IHS Mccloskey Coal Group - USA
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