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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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Monday, 16 September 13
WHAT RECOVERY MEANS FOR THE CAPESIZE MARKET - COMMODORE RESEARCH
COALspot.com: The simple fact that capesize rates have been able to increase above the $9,000/mark and become much more responsive to changes in car ...
Monday, 16 September 13
CFR SOUTH CHINA COAL SWAP: STABLE TO STEADY
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 ...
Monday, 16 September 13
INDONESIAN SUB-BIT COAL SWAP STRUGGLING TO FINDS THE RIGHT PATH
COALspot.com – Sub-Bit Indonesia coal swap (FOB ) for average Q4 2013 delivery down 0.75 percept month on month on Friday 13 Septe ...
Sunday, 15 September 13
CAPE FREIGHT RATES RISE ON HIGH DEMAND AND TIGHT AVAILABILITY - CAPT. REDDY
COALspot.com : The BDI, Cape and Panamax indices are continued to rise and saw a steep surge with average index in these segments up around 25 pct w ...
Friday, 13 September 13
US COAL OUTPUT SLIPS 3.34% ON-WEEK
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.20 million short tons (mmst) of ...
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- ASAPP Information Group - India
- Africa Commodities Group - South Africa
- Meralco Power Generation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Intertek Mineral Services - Indonesia
- Heidelberg Cement - Germany
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Straits Asia Resources Limited - Singapore
- Lanco Infratech Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- CIMB Investment Bank - Malaysia
- Baramulti Group, Indonesia
- SMG Consultants - Indonesia
- Indo Tambangraya Megah - Indonesia
- GMR Energy Limited - India
- Orica Mining Services - Indonesia
- Central Java Power - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- IHS Mccloskey Coal Group - USA
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Mintek Dendrill Indonesia
- Malabar Cements Ltd - India
- Kumho Petrochemical, South Korea
- PNOC Exploration Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- TeaM Sual Corporation - Philippines
- Thiess Contractors Indonesia
- Metalloyd Limited - United Kingdom
- Kartika Selabumi Mining - Indonesia
- Electricity Authority, New Zealand
- Star Paper Mills Limited - India
- Eastern Coal Council - USA
- Indian Oil Corporation Limited
- Savvy Resources Ltd - HongKong
- Sinarmas Energy and Mining - Indonesia
- Anglo American - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Vedanta Resources Plc - India
- Toyota Tsusho Corporation, Japan
- Wilmar Investment Holdings
- Indonesian Coal Mining Association
- India Bulls Power Limited - India
- Orica Australia Pty. Ltd.
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Altura Mining Limited, Indonesia
- Aditya Birla Group - India
- Sindya Power Generating Company Private Ltd
- Sarangani Energy Corporation, Philippines
- Goldman Sachs - Singapore
- Alfred C Toepfer International GmbH - Germany
- Iligan Light & Power Inc, Philippines
- Antam Resourcindo - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Meenaskhi Energy Private Limited - India
- Kapuas Tunggal Persada - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Larsen & Toubro Limited - India
- Bharathi Cement Corporation - India
- The State Trading Corporation of India Ltd
- Global Business Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Romanian Commodities Exchange
- Tamil Nadu electricity Board
- Bhatia International Limited - India
- Gujarat Electricity Regulatory Commission - India
- Agrawal Coal Company - India
- Bayan Resources Tbk. - Indonesia
- Billiton Holdings Pty Ltd - Australia
- IEA Clean Coal Centre - UK
- Rashtriya Ispat Nigam Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Rio Tinto Coal - Australia
- Planning Commission, India
- Posco Energy - South Korea
- Medco Energi Mining Internasional
- Interocean Group of Companies - India
- LBH Netherlands Bv - Netherlands
- Merrill Lynch Commodities Europe
- Cement Manufacturers Association - India
- South Luzon Thermal Energy Corporation
- Bukit Baiduri Energy - Indonesia
- Siam City Cement - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Parliament of New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Power Finance Corporation Ltd., India
- London Commodity Brokers - England
- CNBM International Corporation - China
- Energy Development Corp, Philippines
- Simpson Spence & Young - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Banpu Public Company Limited - Thailand
- Videocon Industries ltd - India
- Georgia Ports Authority, United States
- Krishnapatnam Port Company Ltd. - India
- Economic Council, Georgia
- Independent Power Producers Association of India
- Edison Trading Spa - Italy
- Uttam Galva Steels Limited - India
- Bangladesh Power Developement Board
- Directorate Of Revenue Intelligence - India
- Chamber of Mines of South Africa
- Ind-Barath Power Infra Limited - India
- Miang Besar Coal Terminal - Indonesia
- The Treasury - Australian Government
- Indogreen Group - Indonesia
- Deloitte Consulting - India
- Trasteel International SA, Italy
- Indian Energy Exchange, India
- Barasentosa Lestari - Indonesia
- Latin American Coal - Colombia
- PTC India Limited - India
- Formosa Plastics Group - Taiwan
- Kobexindo Tractors - Indoneisa
- Ministry of Mines - Canada
- Dalmia Cement Bharat India
- Oldendorff Carriers - Singapore
- Vizag Seaport Private Limited - India
- GVK Power & Infra Limited - India
- Commonwealth Bank - Australia
- Jorong Barutama Greston.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Bahari Cakrawala Sebuku - Indonesia
- Eastern Energy - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Kaltim Prima Coal - Indonesia
- Port Waratah Coal Services - Australia
- Standard Chartered Bank - UAE
- Mercator Lines Limited - India
- PowerSource Philippines DevCo
- Binh Thuan Hamico - Vietnam
- Carbofer General Trading SA - India
- Petron Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jindal Steel & Power Ltd - India
- Riau Bara Harum - Indonesia
- McConnell Dowell - Australia
- Karaikal Port Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- International Coal Ventures Pvt Ltd - India
- Ministry of Finance - Indonesia
- Price Waterhouse Coopers - Russia
- Semirara Mining and Power Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Sakthi Sugars Limited - India
- Ambuja Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Semirara Mining Corp, Philippines
- Coal and Oil Company - UAE
- New Zealand Coal & Carbon
- AsiaOL BioFuels Corp., Philippines
- Mjunction Services Limited - India
- Makarim & Taira - Indonesia
- San Jose City I Power Corp, Philippines
- Coalindo Energy - Indonesia
- Wood Mackenzie - Singapore
- Minerals Council of Australia
- Thai Mozambique Logistica
- Sical Logistics Limited - India
- Madhucon Powers Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Essar Steel Hazira Ltd - India
- White Energy Company Limited
- Borneo Indobara - Indonesia
- Bhoruka Overseas - Indonesia
- Aboitiz Power Corporation - Philippines
- MS Steel International - UAE
- Manunggal Multi Energi - Indonesia
- GAC Shipping (India) Pvt Ltd
- Tata Chemicals Ltd - India
- Global Green Power PLC Corporation, Philippines
- Marubeni Corporation - India
- VISA Power Limited - India
- Energy Link Ltd, New Zealand
- Timah Investasi Mineral - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- The University of Queensland
- Ministry of Transport, Egypt
- Bhushan Steel Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Australian Coal Association
- Australian Commodity Traders Exchange
- Mercuria Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Kideco Jaya Agung - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- European Bulk Services B.V. - Netherlands
- Petrochimia International Co. Ltd.- Taiwan
- Attock Cement Pakistan Limited
- Salva Resources Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Singapore Mercantile Exchange
- Kepco SPC Power Corporation, Philippines
- Central Electricity Authority - India
- Jaiprakash Power Ventures ltd
- Samtan Co., Ltd - South Korea
- Kalimantan Lumbung Energi - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sree Jayajothi Cements Limited - India
- Xindia Steels Limited - India
- Chettinad Cement Corporation Ltd - India
- SMC Global Power, Philippines
- Renaissance Capital - South Africa
- Sojitz Corporation - Japan
- ICICI Bank Limited - India
- Grasim Industreis Ltd - India
- SN Aboitiz Power Inc, Philippines
- Bulk Trading Sa - Switzerland
- Parry Sugars Refinery, India
- Siam City Cement PLC, Thailand
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