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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, 29 September 13
SUB-BIT INDONESIA COAL SWAP FELL ON MONTH AND WEEK
COALspot.com – Sub-Bit Indonesia coal swap (FOB ) for average Q4 2013 delivery fell 3.93 percept month on month on Friday 27 September 2 ...
Friday, 27 September 13
TAIWAN'S FORMOSA TO IMPORT 140K MT OF BITUMINOUS COAL FOR Q4
COALspot.com : Taiwan's Formosa Plastics Group is inviting bids for 140,000 mt of bituminous coal for delivery in the Q4 for its China plant.
Ac ...
Friday, 27 September 13
CAPESIZES REGAINING PART OF THEIR FORMER GLORY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The latest dry bulk market rally has been nothing short of spectacular, with freight rates more than doubling over the past few weeks. This growth h ...
Friday, 27 September 13
US PRODUCED 19.30 MMST OF COAL IN SEVEN DAYS
COALspot.com – United States the world’s second largest coal producer produced approximately 19.30 million short tons (mmst) of coal in ...
Thursday, 26 September 13
PANAMAX MARKET CONTINUE WITH STRONG RATES IN BOTH BASINS - FEARNRESEARCH
Handy
Feast rates are still firm, some fresh stems entered the market. Vessels trading around $15k passing Singapore for coal to India, and a bit l ...
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- Independent Power Producers Association of India
- Coalindo Energy - Indonesia
- Mercuria Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Banpu Public Company Limited - Thailand
- Mintek Dendrill Indonesia
- Billiton Holdings Pty Ltd - Australia
- Xindia Steels Limited - India
- PNOC Exploration Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Central Electricity Authority - India
- Chettinad Cement Corporation Ltd - India
- Aditya Birla Group - India
- Semirara Mining and Power Corporation, Philippines
- Renaissance Capital - South Africa
- Borneo Indobara - Indonesia
- LBH Netherlands Bv - Netherlands
- Marubeni Corporation - India
- Petron Corporation, Philippines
- Attock Cement Pakistan Limited
- Kalimantan Lumbung Energi - Indonesia
- Port Waratah Coal Services - Australia
- Gujarat Sidhee Cement - India
- Electricity Authority, New Zealand
- Barasentosa Lestari - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dalmia Cement Bharat India
- Goldman Sachs - Singapore
- Ministry of Finance - Indonesia
- Kepco SPC Power Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- AsiaOL BioFuels Corp., Philippines
- Commonwealth Bank - Australia
- Eastern Energy - Thailand
- Star Paper Mills Limited - India
- Posco Energy - South Korea
- Sakthi Sugars Limited - India
- Agrawal Coal Company - India
- Sindya Power Generating Company Private Ltd
- The University of Queensland
- Miang Besar Coal Terminal - Indonesia
- Eastern Coal Council - USA
- Mjunction Services Limited - India
- Tata Chemicals Ltd - India
- Aboitiz Power Corporation - Philippines
- Indika Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- European Bulk Services B.V. - Netherlands
- Standard Chartered Bank - UAE
- Singapore Mercantile Exchange
- Merrill Lynch Commodities Europe
- Manunggal Multi Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Ministry of Mines - Canada
- Essar Steel Hazira Ltd - India
- Lanco Infratech Ltd - India
- ICICI Bank Limited - India
- IEA Clean Coal Centre - UK
- Bharathi Cement Corporation - India
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- MS Steel International - UAE
- Intertek Mineral Services - Indonesia
- Australian Coal Association
- Edison Trading Spa - Italy
- Central Java Power - Indonesia
- Indo Tambangraya Megah - Indonesia
- Romanian Commodities Exchange
- Formosa Plastics Group - Taiwan
- Indian Oil Corporation Limited
- Binh Thuan Hamico - Vietnam
- Thai Mozambique Logistica
- Kapuas Tunggal Persada - Indonesia
- Orica Australia Pty. Ltd.
- Carbofer General Trading SA - India
- Ind-Barath Power Infra Limited - India
- Electricity Generating Authority of Thailand
- International Coal Ventures Pvt Ltd - India
- PTC India Limited - India
- Wilmar Investment Holdings
- OPG Power Generation Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement PLC, Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMG Consultants - Indonesia
- Madhucon Powers Ltd - India
- Therma Luzon, Inc, Philippines
- Planning Commission, India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- McConnell Dowell - Australia
- Bhushan Steel Limited - India
- Anglo American - United Kingdom
- Samtan Co., Ltd - South Korea
- Bukit Baiduri Energy - Indonesia
- Trasteel International SA, Italy
- CNBM International Corporation - China
- Sarangani Energy Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Meralco Power Generation, Philippines
- Grasim Industreis Ltd - India
- GAC Shipping (India) Pvt Ltd
- Jaiprakash Power Ventures ltd
- Africa Commodities Group - South Africa
- Global Business Power Corporation, Philippines
- Sical Logistics Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Sree Jayajothi Cements Limited - India
- Ceylon Electricity Board - Sri Lanka
- ASAPP Information Group - India
- Bulk Trading Sa - Switzerland
- Offshore Bulk Terminal Pte Ltd, Singapore
- PetroVietnam Power Coal Import and Supply Company
- Kideco Jaya Agung - Indonesia
- Minerals Council of Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- Deloitte Consulting - India
- Timah Investasi Mineral - Indoneisa
- Price Waterhouse Coopers - Russia
- Chamber of Mines of South Africa
- Ambuja Cements Ltd - India
- Antam Resourcindo - Indonesia
- Power Finance Corporation Ltd., India
- Krishnapatnam Port Company Ltd. - India
- Parliament of New Zealand
- Ministry of Transport, Egypt
- Latin American Coal - Colombia
- Jindal Steel & Power Ltd - India
- Global Coal Blending Company Limited - Australia
- Heidelberg Cement - Germany
- Maharashtra Electricity Regulatory Commission - India
- Altura Mining Limited, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Iligan Light & Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Malabar Cements Ltd - India
- Mercator Lines Limited - India
- Cement Manufacturers Association - India
- Thiess Contractors Indonesia
- Maheswari Brothers Coal Limited - India
- Rashtriya Ispat Nigam Limited - India
- Baramulti Group, Indonesia
- Bayan Resources Tbk. - Indonesia
- SN Aboitiz Power Inc, Philippines
- VISA Power Limited - India
- Kumho Petrochemical, South Korea
- Pendopo Energi Batubara - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- India Bulls Power Limited - India
- Economic Council, Georgia
- The Treasury - Australian Government
- Sojitz Corporation - Japan
- Rio Tinto Coal - Australia
- Bahari Cakrawala Sebuku - Indonesia
- GVK Power & Infra Limited - India
- Indogreen Group - Indonesia
- GMR Energy Limited - India
- Medco Energi Mining Internasional
- Coal and Oil Company - UAE
- Georgia Ports Authority, United States
- Parry Sugars Refinery, India
- Kobexindo Tractors - Indoneisa
- SMC Global Power, Philippines
- CIMB Investment Bank - Malaysia
- IHS Mccloskey Coal Group - USA
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Directorate Of Revenue Intelligence - India
- Simpson Spence & Young - Indonesia
- Larsen & Toubro Limited - India
- Interocean Group of Companies - India
- Petrochimia International Co. Ltd.- Taiwan
- GN Power Mariveles Coal Plant, Philippines
- Tamil Nadu electricity Board
- Riau Bara Harum - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Uttam Galva Steels Limited - India
- Indonesian Coal Mining Association
- Wood Mackenzie - Singapore
- Australian Commodity Traders Exchange
- Vizag Seaport Private Limited - India
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Videocon Industries ltd - India
- Meenaskhi Energy Private Limited - India
- Vedanta Resources Plc - India
- Orica Mining Services - Indonesia
- South Luzon Thermal Energy Corporation
- Oldendorff Carriers - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- New Zealand Coal & Carbon
- Bukit Makmur.PT - Indonesia
- Bhatia International Limited - India
- Jorong Barutama Greston.PT - Indonesia
- The State Trading Corporation of India Ltd
- Directorate General of MIneral and Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Salva Resources Pvt Ltd - India
- Makarim & Taira - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Siam City Cement - Thailand
- Metalloyd Limited - United Kingdom
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PowerSource Philippines DevCo
- Alfred C Toepfer International GmbH - Germany
- White Energy Company Limited
- Karaikal Port Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Bangladesh Power Developement Board
- Asmin Koalindo Tuhup - Indonesia
- Energy Development Corp, Philippines
- London Commodity Brokers - England
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