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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$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Wednesday, 02 October 13
HOW LONG WILL THIS LATEST CAPESIZE RALLY LAST? - TASOS PAPADOPOULOS
By Tasos Papadopoulos, SnP Broker, Intermodal
The surge in iron ore trade has translated into a massive boost in daily earnings for capes; with t ...
Tuesday, 01 October 13
DRY BULK MARKET POISED FOR RETREAT ON CHINA HOLIDAY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The start of a national weeklong in China as of Tuesday is expected to put a lid in the latest rally of the dry bulk freight market, as has always b ...
Monday, 30 September 13
NEWCASTLE'S COAL EXPORT VOLUME CONTINUES TO SLIP
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port fell 8.38 per cent week on week to 2.67 million mt fo ...
Monday, 30 September 13
PANAMAX CHARTER RATES TOUCHING US$ 18K FOR A TRIP TO NOPAC - CAPT. REDDY
COALspot.com : The freight market continued to remain firm, BDI and the Panamax index up week ended 27 September 2013.
The cape index was fell to ...
Sunday, 29 September 13
API 8 CFR SOUTH CHINA COAL Q3 2014 DELIVERY SWAP GAINED $1.19 M-O-M
COALspot.com : SGX has launched API 8 CFR South China Coal Swap on 29 April 2013 and SGX replaced the previous swap.
API 8 CFR South China Coal s ...
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- Bahari Cakrawala Sebuku - Indonesia
- CNBM International Corporation - China
- Coastal Gujarat Power Limited - India
- PTC India Limited - India
- Indian Oil Corporation Limited
- Agrawal Coal Company - India
- Jindal Steel & Power Ltd - India
- Tamil Nadu electricity Board
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- San Jose City I Power Corp, Philippines
- New Zealand Coal & Carbon
- Sree Jayajothi Cements Limited - India
- Georgia Ports Authority, United States
- Minerals Council of Australia
- Oldendorff Carriers - Singapore
- Simpson Spence & Young - Indonesia
- PowerSource Philippines DevCo
- Vizag Seaport Private Limited - India
- Jaiprakash Power Ventures ltd
- Bangladesh Power Developement Board
- Coalindo Energy - Indonesia
- Meralco Power Generation, Philippines
- SMG Consultants - Indonesia
- Madhucon Powers Ltd - India
- Sarangani Energy Corporation, Philippines
- Heidelberg Cement - Germany
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Riau Bara Harum - Indonesia
- Iligan Light & Power Inc, Philippines
- Borneo Indobara - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bukit Makmur.PT - Indonesia
- Indo Tambangraya Megah - Indonesia
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
- Kideco Jaya Agung - Indonesia
- Grasim Industreis Ltd - India
- Australian Commodity Traders Exchange
- Semirara Mining Corp, Philippines
- ASAPP Information Group - India
- Bhushan Steel Limited - India
- Rashtriya Ispat Nigam Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Thiess Contractors Indonesia
- Economic Council, Georgia
- Wilmar Investment Holdings
- Jorong Barutama Greston.PT - Indonesia
- MS Steel International - UAE
- Xindia Steels Limited - India
- Australian Coal Association
- Gujarat Sidhee Cement - India
- Ministry of Finance - Indonesia
- Sindya Power Generating Company Private Ltd
- Kartika Selabumi Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Romanian Commodities Exchange
- TeaM Sual Corporation - Philippines
- Samtan Co., Ltd - South Korea
- Metalloyd Limited - United Kingdom
- Coal and Oil Company - UAE
- Wood Mackenzie - Singapore
- Kobexindo Tractors - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Altura Mining Limited, Indonesia
- Cement Manufacturers Association - India
- Ministry of Mines - Canada
- Banpu Public Company Limited - Thailand
- Medco Energi Mining Internasional
- Chamber of Mines of South Africa
- Electricity Generating Authority of Thailand
- Eastern Coal Council - USA
- Electricity Authority, New Zealand
- Indogreen Group - Indonesia
- India Bulls Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement - Thailand
- Attock Cement Pakistan Limited
- Savvy Resources Ltd - HongKong
- Sojitz Corporation - Japan
- The Treasury - Australian Government
- Krishnapatnam Port Company Ltd. - India
- Posco Energy - South Korea
- Global Business Power Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Meenaskhi Energy Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Mintek Dendrill Indonesia
- Sical Logistics Limited - India
- Karaikal Port Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Global Green Power PLC Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Edison Trading Spa - Italy
- PNOC Exploration Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Price Waterhouse Coopers - Russia
- Star Paper Mills Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Parliament of New Zealand
- Alfred C Toepfer International GmbH - Germany
- Petron Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Aditya Birla Group - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Eastern Energy - Thailand
- Holcim Trading Pte Ltd - Singapore
- Directorate Of Revenue Intelligence - India
- Standard Chartered Bank - UAE
- Central Electricity Authority - India
- Kepco SPC Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Interocean Group of Companies - India
- Leighton Contractors Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Carbofer General Trading SA - India
- Binh Thuan Hamico - Vietnam
- Ambuja Cements Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Power Finance Corporation Ltd., India
- Toyota Tsusho Corporation, Japan
- Maheswari Brothers Coal Limited - India
- Commonwealth Bank - Australia
- Videocon Industries ltd - India
- Deloitte Consulting - India
- Globalindo Alam Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- GVK Power & Infra Limited - India
- Mercator Lines Limited - India
- Semirara Mining and Power Corporation, Philippines
- Tata Chemicals Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- ICICI Bank Limited - India
- Intertek Mineral Services - Indonesia
- The University of Queensland
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Lanco Infratech Ltd - India
- SMC Global Power, Philippines
- GAC Shipping (India) Pvt Ltd
- Central Java Power - Indonesia
- Bharathi Cement Corporation - India
- Anglo American - United Kingdom
- Bayan Resources Tbk. - Indonesia
- Kaltim Prima Coal - Indonesia
- Renaissance Capital - South Africa
- Latin American Coal - Colombia
- Pendopo Energi Batubara - Indonesia
- Goldman Sachs - Singapore
- GMR Energy Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Planning Commission, India
- Chettinad Cement Corporation Ltd - India
- Baramulti Group, Indonesia
- Global Coal Blending Company Limited - Australia
- Energy Link Ltd, New Zealand
- Indonesian Coal Mining Association
- Barasentosa Lestari - Indonesia
- Thai Mozambique Logistica
- Marubeni Corporation - India
- Parry Sugars Refinery, India
- GN Power Mariveles Coal Plant, Philippines
- Port Waratah Coal Services - Australia
- Directorate General of MIneral and Coal - Indonesia
- IEA Clean Coal Centre - UK
- VISA Power Limited - India
- European Bulk Services B.V. - Netherlands
- White Energy Company Limited
- Manunggal Multi Energi - Indonesia
- Straits Asia Resources Limited - Singapore
- Therma Luzon, Inc, Philippines
- Mjunction Services Limited - India
- SN Aboitiz Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Energy Development Corp, Philippines
- Ministry of Transport, Egypt
- Rio Tinto Coal - Australia
- Cigading International Bulk Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Antam Resourcindo - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Singapore Mercantile Exchange
- Siam City Cement PLC, Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Indian Energy Exchange, India
- McConnell Dowell - Australia
- CIMB Investment Bank - Malaysia
- Trasteel International SA, Italy
- Dalmia Cement Bharat India
- LBH Netherlands Bv - Netherlands
- Africa Commodities Group - South Africa
- Uttam Galva Steels Limited - India
- Indika Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Independent Power Producers Association of India
- Bhatia International Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Petrochimia International Co. Ltd.- Taiwan
- Formosa Plastics Group - Taiwan
- Sakthi Sugars Limited - India
- Mercuria Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Larsen & Toubro Limited - India
- Orica Australia Pty. Ltd.
- London Commodity Brokers - England
- Merrill Lynch Commodities Europe
- Makarim & Taira - Indonesia
- Gujarat Mineral Development Corp Ltd - India
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