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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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Thursday, 26 September 13
INTERCARGO PUBLISHES BENCHMARKING BULK CARRIERS 2012-13 REPORT
The International Association of Dry Cargo Shipowners (Intercargo) has today launched Benchmarking Bulk Carriers 2012-13, the latest edition of our ...
Thursday, 26 September 13
DRY BULK MARKET KEEPS ON RALLYING ON THE BACK OF HIGH CAPESIZE DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has kept its momentum over the course of the past week, on the back of increased demand for Capesizes and an improvement of mark ...
Wednesday, 25 September 13
RBCT'S COAL EXPORT DECLINES IN AUGUST
COALspot.com - Richards Bay Coal Terminal (RBCT) is the single largest coal export terminal in South African as well as in the world has shipped 16. ...
Wednesday, 25 September 13
CAPES TOUCHING RATES NO ONE BELIEVED COULD BE ACHIEVED IN 2013 - INTERMODAL
Chartering (Wet: Stable- / Dry: Firm+ )
The Dry Bulk market is the gift that keeps on giving these days. With rates for Capes touching numbers ...
Wednesday, 25 September 13
IS IT TIME AGAIN TO SUPERSIZE AGAIN? - GEORGE LAZARIDIS
After an early arrival of the seasonal rally in the Capesize market, things look to be on the upbeat for these dry bulk giants. With the Index reach ...
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- Bulk Trading Sa - Switzerland
- Trasteel International SA, Italy
- Baramulti Group, Indonesia
- ASAPP Information Group - India
- Samtan Co., Ltd - South Korea
- Interocean Group of Companies - India
- Bayan Resources Tbk. - Indonesia
- Sindya Power Generating Company Private Ltd
- Straits Asia Resources Limited - Singapore
- Videocon Industries ltd - India
- The Treasury - Australian Government
- PowerSource Philippines DevCo
- IEA Clean Coal Centre - UK
- Mjunction Services Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Indogreen Group - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Rio Tinto Coal - Australia
- Miang Besar Coal Terminal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- India Bulls Power Limited - India
- Coastal Gujarat Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- Maheswari Brothers Coal Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Electricity Generating Authority of Thailand
- The State Trading Corporation of India Ltd
- Vedanta Resources Plc - India
- Timah Investasi Mineral - Indoneisa
- Bharathi Cement Corporation - India
- Aditya Birla Group - India
- Latin American Coal - Colombia
- Thai Mozambique Logistica
- Kobexindo Tractors - Indoneisa
- Karaikal Port Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Economic Council, Georgia
- Energy Development Corp, Philippines
- Malabar Cements Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Planning Commission, India
- Ministry of Finance - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Uttam Galva Steels Limited - India
- Binh Thuan Hamico - Vietnam
- Minerals Council of Australia
- Mercuria Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Independent Power Producers Association of India
- PTC India Limited - India
- Iligan Light & Power Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Kumho Petrochemical, South Korea
- CNBM International Corporation - China
- Ministry of Mines - Canada
- SMG Consultants - Indonesia
- Port Waratah Coal Services - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- Barasentosa Lestari - Indonesia
- Ind-Barath Power Infra Limited - India
- Larsen & Toubro Limited - India
- Ceylon Electricity Board - Sri Lanka
- Thiess Contractors Indonesia
- Oldendorff Carriers - Singapore
- GMR Energy Limited - India
- Antam Resourcindo - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Bhushan Steel Limited - India
- Deloitte Consulting - India
- Metalloyd Limited - United Kingdom
- Altura Mining Limited, Indonesia
- ICICI Bank Limited - India
- Merrill Lynch Commodities Europe
- Parliament of New Zealand
- Orica Mining Services - Indonesia
- Coalindo Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Bukit Baiduri Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Standard Chartered Bank - UAE
- Dalmia Cement Bharat India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Tata Chemicals Ltd - India
- Romanian Commodities Exchange
- Siam City Cement - Thailand
- GAC Shipping (India) Pvt Ltd
- Directorate General of MIneral and Coal - Indonesia
- Edison Trading Spa - Italy
- Cigading International Bulk Terminal - Indonesia
- Sojitz Corporation - Japan
- Indonesian Coal Mining Association
- Africa Commodities Group - South Africa
- Bhoruka Overseas - Indonesia
- TeaM Sual Corporation - Philippines
- Ministry of Transport, Egypt
- Singapore Mercantile Exchange
- Marubeni Corporation - India
- Lanco Infratech Ltd - India
- European Bulk Services B.V. - Netherlands
- Grasim Industreis Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Manunggal Multi Energi - Indonesia
- Electricity Authority, New Zealand
- Essar Steel Hazira Ltd - India
- Energy Link Ltd, New Zealand
- Central Java Power - Indonesia
- Xindia Steels Limited - India
- Wood Mackenzie - Singapore
- Gujarat Sidhee Cement - India
- Krishnapatnam Port Company Ltd. - India
- Heidelberg Cement - Germany
- MS Steel International - UAE
- GVK Power & Infra Limited - India
- Semirara Mining and Power Corporation, Philippines
- Chamber of Mines of South Africa
- Kartika Selabumi Mining - Indonesia
- Indika Energy - Indonesia
- Goldman Sachs - Singapore
- Medco Energi Mining Internasional
- Therma Luzon, Inc, Philippines
- New Zealand Coal & Carbon
- SMC Global Power, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Mercator Lines Limited - India
- SN Aboitiz Power Inc, Philippines
- Borneo Indobara - Indonesia
- Wilmar Investment Holdings
- South Luzon Thermal Energy Corporation
- Sree Jayajothi Cements Limited - India
- Anglo American - United Kingdom
- Meralco Power Generation, Philippines
- Gujarat Electricity Regulatory Commission - India
- PetroVietnam Power Coal Import and Supply Company
- Star Paper Mills Limited - India
- Simpson Spence & Young - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Pendopo Energi Batubara - Indonesia
- Jindal Steel & Power Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- AsiaOL BioFuels Corp., Philippines
- Kepco SPC Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Commonwealth Bank - Australia
- Georgia Ports Authority, United States
- Indian Energy Exchange, India
- Indo Tambangraya Megah - Indonesia
- Indian Oil Corporation Limited
- Global Green Power PLC Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Ambuja Cements Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Central Electricity Authority - India
- Kideco Jaya Agung - Indonesia
- The University of Queensland
- Rashtriya Ispat Nigam Limited - India
- Riau Bara Harum - Indonesia
- Eastern Coal Council - USA
- White Energy Company Limited
- Sakthi Sugars Limited - India
- Bangladesh Power Developement Board
- TNB Fuel Sdn Bhd - Malaysia
- VISA Power Limited - India
- IHS Mccloskey Coal Group - USA
- Gujarat Mineral Development Corp Ltd - India
- Toyota Tsusho Corporation, Japan
- Australian Coal Association
- Vizag Seaport Private Limited - India
- Parry Sugars Refinery, India
- Agrawal Coal Company - India
- Banpu Public Company Limited - Thailand
- Formosa Plastics Group - Taiwan
- Mintek Dendrill Indonesia
- Madhucon Powers Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Business Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Power Finance Corporation Ltd., India
- Directorate Of Revenue Intelligence - India
- London Commodity Brokers - England
- Cement Manufacturers Association - India
- Renaissance Capital - South Africa
- Makarim & Taira - Indonesia
- Intertek Mineral Services - Indonesia
- Carbofer General Trading SA - India
- GN Power Mariveles Coal Plant, Philippines
- Petron Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Attock Cement Pakistan Limited
- Tamil Nadu electricity Board
- Eastern Energy - Thailand
- Kaltim Prima Coal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Australian Commodity Traders Exchange
- McConnell Dowell - Australia
- Siam City Cement PLC, Thailand
- Meenaskhi Energy Private Limited - India
- Salva Resources Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Coal and Oil Company - UAE
- Bhatia International Limited - India
- Sical Logistics Limited - India
- OPG Power Generation Pvt Ltd - India
- Orica Australia Pty. Ltd.
- PNOC Exploration Corporation - Philippines
- Posco Energy - South Korea
- Chettinad Cement Corporation Ltd - India
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