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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, 18 September 13
DRY BULK MARKET CONTINUED TO ADVANCE - INTERMODAL
Chartering (Wet: Stable- / Dry: Firm+ )
The Dry Bulk market continued to advance at a very fast pace, with the BDI closing off the week north ...
Tuesday, 17 September 13
BUMA PRODUCED 3.57 PERCENT MORE COAL IN AUGUST
COALspot.com: BUMA has removed totaled 25.20 million bcm of overburden to produce 2.90 million tons coal in August 2013. BUMI produced 3.07 percent ...
Tuesday, 17 September 13
NEWCASTLE PORT SHIPPED ABOUT 27 PERCENT MORE COAL WEEK ON WEEK
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port up 27.26 per cent week on week to 3.01 million mt for ...
Tuesday, 17 September 13
TAIPOWER INVITES BIDS FOR SUPPLY OF SUB-BITUMINOUS COAL
COALspot.com - Taiwan Power Company intends to procure 1.050 million tons of sub-bituminous coal for Taipower thermal power plant through open tende ...
Tuesday, 17 September 13
ORPHEUS SECURES SIGNIFICANT INFRASTRUCTURE DEAL THROUGH ACQUISITION OF SOUTH KALIMANTAN PORT CAPACITY
COALspot.com : Orpheus Energy Limited (ASX: OEG) of Australia has today announced that, it has executed a binding agreement with the proprietor of S ...
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- Kobexindo Tractors - Indoneisa
- Petrochimia International Co. Ltd.- Taiwan
- Straits Asia Resources Limited - Singapore
- Timah Investasi Mineral - Indoneisa
- Thai Mozambique Logistica
- Jindal Steel & Power Ltd - India
- Merrill Lynch Commodities Europe
- Indika Energy - Indonesia
- SMC Global Power, Philippines
- Anglo American - United Kingdom
- Larsen & Toubro Limited - India
- IEA Clean Coal Centre - UK
- VISA Power Limited - India
- SMG Consultants - Indonesia
- Electricity Authority, New Zealand
- LBH Netherlands Bv - Netherlands
- Billiton Holdings Pty Ltd - Australia
- McConnell Dowell - Australia
- Singapore Mercantile Exchange
- Kalimantan Lumbung Energi - Indonesia
- Borneo Indobara - Indonesia
- Port Waratah Coal Services - Australia
- PowerSource Philippines DevCo
- Renaissance Capital - South Africa
- Indogreen Group - Indonesia
- Parry Sugars Refinery, India
- Siam City Cement PLC, Thailand
- European Bulk Services B.V. - Netherlands
- Oldendorff Carriers - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Sarangani Energy Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Central Java Power - Indonesia
- Sindya Power Generating Company Private Ltd
- GAC Shipping (India) Pvt Ltd
- Indo Tambangraya Megah - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Petron Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Edison Trading Spa - Italy
- Bukit Baiduri Energy - Indonesia
- Australian Commodity Traders Exchange
- Posco Energy - South Korea
- Dalmia Cement Bharat India
- Leighton Contractors Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- Sree Jayajothi Cements Limited - India
- Parliament of New Zealand
- Wilmar Investment Holdings
- Uttam Galva Steels Limited - India
- Marubeni Corporation - India
- Ministry of Transport, Egypt
- India Bulls Power Limited - India
- White Energy Company Limited
- Georgia Ports Authority, United States
- MS Steel International - UAE
- Carbofer General Trading SA - India
- Ind-Barath Power Infra Limited - India
- Bhatia International Limited - India
- Jaiprakash Power Ventures ltd
- The State Trading Corporation of India Ltd
- Mjunction Services Limited - India
- Central Electricity Authority - India
- GN Power Mariveles Coal Plant, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Chettinad Cement Corporation Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Ministry of Mines - Canada
- Bayan Resources Tbk. - Indonesia
- Karaikal Port Pvt Ltd - India
- Chamber of Mines of South Africa
- Intertek Mineral Services - Indonesia
- GVK Power & Infra Limited - India
- Rio Tinto Coal - Australia
- Sakthi Sugars Limited - India
- Electricity Generating Authority of Thailand
- Economic Council, Georgia
- Indian Energy Exchange, India
- IHS Mccloskey Coal Group - USA
- Kaltim Prima Coal - Indonesia
- Lanco Infratech Ltd - India
- Mercator Lines Limited - India
- Sojitz Corporation - Japan
- Salva Resources Pvt Ltd - India
- Eastern Energy - Thailand
- Latin American Coal - Colombia
- Kepco SPC Power Corporation, Philippines
- PTC India Limited - India
- Indian Oil Corporation Limited
- Iligan Light & Power Inc, Philippines
- Orica Mining Services - Indonesia
- New Zealand Coal & Carbon
- Attock Cement Pakistan Limited
- ICICI Bank Limited - India
- Power Finance Corporation Ltd., India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Energy Link Ltd, New Zealand
- Tamil Nadu electricity Board
- Orica Australia Pty. Ltd.
- Bhoruka Overseas - Indonesia
- Interocean Group of Companies - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Globalindo Alam Lestari - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Africa Commodities Group - South Africa
- GMR Energy Limited - India
- Bhushan Steel Limited - India
- Kumho Petrochemical, South Korea
- Independent Power Producers Association of India
- Banpu Public Company Limited - Thailand
- PetroVietnam Power Coal Import and Supply Company
- Sinarmas Energy and Mining - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Cement Manufacturers Association - India
- Miang Besar Coal Terminal - Indonesia
- Siam City Cement - Thailand
- Australian Coal Association
- Coal and Oil Company - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Makmur.PT - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Energy Development Corp, Philippines
- OPG Power Generation Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Karbindo Abesyapradhi - Indoneisa
- Essar Steel Hazira Ltd - India
- Directorate Of Revenue Intelligence - India
- Malabar Cements Ltd - India
- Minerals Council of Australia
- Tata Chemicals Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Maheswari Brothers Coal Limited - India
- Heidelberg Cement - Germany
- Eastern Coal Council - USA
- Asia Pacific Energy Resources Ventures Inc, Philippines
- CNBM International Corporation - China
- Grasim Industreis Ltd - India
- Ministry of Finance - Indonesia
- Deloitte Consulting - India
- Bharathi Cement Corporation - India
- Asmin Koalindo Tuhup - Indonesia
- Pendopo Energi Batubara - Indonesia
- Planning Commission, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Maharashtra Electricity Regulatory Commission - India
- Kapuas Tunggal Persada - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Vedanta Resources Plc - India
- Romanian Commodities Exchange
- Wood Mackenzie - Singapore
- Medco Energi Mining Internasional
- South Luzon Thermal Energy Corporation
- The University of Queensland
- Rashtriya Ispat Nigam Limited - India
- Global Business Power Corporation, Philippines
- Coalindo Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Price Waterhouse Coopers - Russia
- Binh Thuan Hamico - Vietnam
- SN Aboitiz Power Inc, Philippines
- Bangladesh Power Developement Board
- Goldman Sachs - Singapore
- Alfred C Toepfer International GmbH - Germany
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Thiess Contractors Indonesia
- Barasentosa Lestari - Indonesia
- Vizag Seaport Private Limited - India
- Global Green Power PLC Corporation, Philippines
- Baramulti Group, Indonesia
- Gujarat Sidhee Cement - India
- Semirara Mining Corp, Philippines
- San Jose City I Power Corp, Philippines
- London Commodity Brokers - England
- The Treasury - Australian Government
- Savvy Resources Ltd - HongKong
- Standard Chartered Bank - UAE
- CIMB Investment Bank - Malaysia
- Videocon Industries ltd - India
- Mercuria Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Metalloyd Limited - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Madhucon Powers Ltd - India
- Formosa Plastics Group - Taiwan
- Antam Resourcindo - Indonesia
- Aditya Birla Group - India
- Manunggal Multi Energi - Indonesia
- International Coal Ventures Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Star Paper Mills Limited - India
- Commonwealth Bank - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Agrawal Coal Company - India
- Makarim & Taira - Indonesia
- TeaM Sual Corporation - Philippines
- Meralco Power Generation, Philippines
- Xindia Steels Limited - India
- Mintek Dendrill Indonesia
- Toyota Tsusho Corporation, Japan
- Samtan Co., Ltd - South Korea
- Trasteel International SA, Italy
- Global Coal Blending Company Limited - Australia
- Sical Logistics Limited - India
- Riau Bara Harum - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kideco Jaya Agung - Indonesia
- Kartika Selabumi Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- Simpson Spence & Young - Indonesia
- ASAPP Information Group - India
- Ambuja Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Meenaskhi Energy Private Limited - India
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