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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$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Sunday, 13 October 13
API 8 CFR SOUTH CHINA COAL - AVERAGE Q4 2013 DELIVERY FELL 0.30 PERCEPT ON WEEK
COALspot.com : API 8 CFR South China Coal swaps for average Q4 2013 delivery fell 0.30 percept week on week on Friday 11 October 2013. The CFR South ...
Saturday, 12 October 13
PANAMAX: OWNERS ARE AT US$ 17-18.5K PER DAY; CHARTERERS ARE AT US$ 15.5-16K - CAPT. REDDY
COALspot.com - The futures market was heavily down on the cape size vessels and the physical average charterer rates on cape size vessels dropped by ...
Friday, 11 October 13
DRY BULK FREIGHT RATE POSITIVE MOMENTUM TO BE SUPPORTED BY HIGHER DEMAND SAYS BIMCO - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
BIMCO released its latest short term research on the shipping markets, estimating that the elevated level of Capesize TC average rates i ...
Friday, 11 October 13
US COAL PRODUCTION FALLS 7.70% IN SEPTEMBER
COALspot.com – United States the world’s second largest coal producer produced approximately 17.70 million short tons (mmst) of coal in ...
Thursday, 10 October 13
NPC AUSTRALIA SHIPPED 2.99 MILLION TONS OF COAL W-O-W
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port up 12.04 per cent week on week to 2.99 million mt for ...
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- Australian Coal Association
- Bharathi Cement Corporation - India
- Trasteel International SA, Italy
- Kalimantan Lumbung Energi - Indonesia
- Economic Council, Georgia
- Independent Power Producers Association of India
- Gujarat Electricity Regulatory Commission - India
- Africa Commodities Group - South Africa
- Wood Mackenzie - Singapore
- Altura Mining Limited, Indonesia
- Global Business Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- VISA Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Malabar Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Posco Energy - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- Marubeni Corporation - India
- Pendopo Energi Batubara - Indonesia
- Lanco Infratech Ltd - India
- Kumho Petrochemical, South Korea
- Energy Development Corp, Philippines
- Eastern Coal Council - USA
- Binh Thuan Hamico - Vietnam
- Semirara Mining Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Madhucon Powers Ltd - India
- Salva Resources Pvt Ltd - India
- Tata Chemicals Ltd - India
- Sinarmas Energy and Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Attock Cement Pakistan Limited
- Tamil Nadu electricity Board
- PowerSource Philippines DevCo
- Ministry of Mines - Canada
- PetroVietnam Power Coal Import and Supply Company
- Banpu Public Company Limited - Thailand
- Straits Asia Resources Limited - Singapore
- Georgia Ports Authority, United States
- Samtan Co., Ltd - South Korea
- Kartika Selabumi Mining - Indonesia
- Eastern Energy - Thailand
- Jindal Steel & Power Ltd - India
- Indo Tambangraya Megah - Indonesia
- Xindia Steels Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Ministry of Finance - Indonesia
- OPG Power Generation Pvt Ltd - India
- Grasim Industreis Ltd - India
- San Jose City I Power Corp, Philippines
- Indika Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Indonesian Coal Mining Association
- Ceylon Electricity Board - Sri Lanka
- Mercuria Energy - Indonesia
- White Energy Company Limited
- Barasentosa Lestari - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cigading International Bulk Terminal - Indonesia
- London Commodity Brokers - England
- McConnell Dowell - Australia
- Kaltim Prima Coal - Indonesia
- Meralco Power Generation, Philippines
- Gujarat Sidhee Cement - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- The Treasury - Australian Government
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Krishnapatnam Port Company Ltd. - India
- IEA Clean Coal Centre - UK
- Merrill Lynch Commodities Europe
- India Bulls Power Limited - India
- Anglo American - United Kingdom
- Bukit Baiduri Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Mintek Dendrill Indonesia
- Renaissance Capital - South Africa
- Carbofer General Trading SA - India
- Dalmia Cement Bharat India
- Meenaskhi Energy Private Limited - India
- Energy Link Ltd, New Zealand
- Makarim & Taira - Indonesia
- Central Java Power - Indonesia
- South Luzon Thermal Energy Corporation
- IHS Mccloskey Coal Group - USA
- Indogreen Group - Indonesia
- Globalindo Alam Lestari - Indonesia
- PTC India Limited - India
- Parry Sugars Refinery, India
- Indian Energy Exchange, India
- The State Trading Corporation of India Ltd
- Timah Investasi Mineral - Indoneisa
- Neyveli Lignite Corporation Ltd, - India
- Vijayanagar Sugar Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Star Paper Mills Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Antam Resourcindo - Indonesia
- Baramulti Group, Indonesia
- GAC Shipping (India) Pvt Ltd
- Ministry of Transport, Egypt
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Larsen & Toubro Limited - India
- Alfred C Toepfer International GmbH - Germany
- Coalindo Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Australian Commodity Traders Exchange
- Bhushan Steel Limited - India
- Ind-Barath Power Infra Limited - India
- Kapuas Tunggal Persada - Indonesia
- Oldendorff Carriers - Singapore
- Bangladesh Power Developement Board
- CNBM International Corporation - China
- The University of Queensland
- Jaiprakash Power Ventures ltd
- Thiess Contractors Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Global Green Power PLC Corporation, Philippines
- Siam City Cement PLC, Thailand
- Deloitte Consulting - India
- Orica Mining Services - Indonesia
- Savvy Resources Ltd - HongKong
- Manunggal Multi Energi - Indonesia
- Riau Bara Harum - Indonesia
- Simpson Spence & Young - Indonesia
- Toyota Tsusho Corporation, Japan
- Kohat Cement Company Ltd. - Pakistan
- Agrawal Coal Company - India
- International Coal Ventures Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Power Finance Corporation Ltd., India
- Electricity Generating Authority of Thailand
- Heidelberg Cement - Germany
- Romanian Commodities Exchange
- Intertek Mineral Services - Indonesia
- Edison Trading Spa - Italy
- Thai Mozambique Logistica
- Price Waterhouse Coopers - Russia
- Kobexindo Tractors - Indoneisa
- Commonwealth Bank - Australia
- Uttam Galva Steels Limited - India
- Standard Chartered Bank - UAE
- Karaikal Port Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Siam City Cement - Thailand
- Sakthi Sugars Limited - India
- Billiton Holdings Pty Ltd - Australia
- Chamber of Mines of South Africa
- Mercator Lines Limited - India
- Bulk Trading Sa - Switzerland
- Central Electricity Authority - India
- Rashtriya Ispat Nigam Limited - India
- Borneo Indobara - Indonesia
- ICICI Bank Limited - India
- Iligan Light & Power Inc, Philippines
- Minerals Council of Australia
- Sical Logistics Limited - India
- European Bulk Services B.V. - Netherlands
- Petron Corporation, Philippines
- GMR Energy Limited - India
- Cement Manufacturers Association - India
- Formosa Plastics Group - Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Medco Energi Mining Internasional
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rio Tinto Coal - Australia
- SMG Consultants - Indonesia
- Latin American Coal - Colombia
- Sarangani Energy Corporation, Philippines
- Mjunction Services Limited - India
- Holcim Trading Pte Ltd - Singapore
- Orica Australia Pty. Ltd.
- Directorate Of Revenue Intelligence - India
- CIMB Investment Bank - Malaysia
- Videocon Industries ltd - India
- Bayan Resources Tbk. - Indonesia
- Bhatia International Limited - India
- Coal and Oil Company - UAE
- GVK Power & Infra Limited - India
- Singapore Mercantile Exchange
- Global Coal Blending Company Limited - Australia
- MS Steel International - UAE
- Bukit Makmur.PT - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Indian Oil Corporation Limited
- Interocean Group of Companies - India
- Aditya Birla Group - India
- SMC Global Power, Philippines
- AsiaOL BioFuels Corp., Philippines
- Essar Steel Hazira Ltd - India
- Goldman Sachs - Singapore
- Ambuja Cements Ltd - India
- Sindya Power Generating Company Private Ltd
- Parliament of New Zealand
- Chettinad Cement Corporation Ltd - India
- ASAPP Information Group - India
- Electricity Authority, New Zealand
- Miang Besar Coal Terminal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Vedanta Resources Plc - India
- Port Waratah Coal Services - Australia
- Planning Commission, India
- Sree Jayajothi Cements Limited - India
- Kideco Jaya Agung - Indonesia
- Vizag Seaport Private Limited - India
- Wilmar Investment Holdings
- Bhoruka Overseas - Indonesia
- New Zealand Coal & Carbon
- Sojitz Corporation - Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- LBH Netherlands Bv - Netherlands
- Maheswari Brothers Coal Limited - India
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