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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$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Friday, 13 September 13
DIRECTOR GENERAL OF MINERAL AND COAL OF INDONESIA REVISED UP COAL PRICE REFERENCE TO US$ 76.89
COALspot. com - The Indonesian government has revised up its owned coal bench mark price by US$ 0.19/ MT to US$ 76.89 for September 2013 deliveries ...
Thursday, 12 September 13
PANAMAX : PACIFIC ROUNDS ARE NOW REPORTED BETWEEN USD 13K AND 15K PER DAY - FEARNRESEARCH
Handy
Nickel ore is a key support SE Asia/Feast rate at the moment; vessel in N.China were fixed around USD 11-12k, ships in mid China can expect a ...
Thursday, 12 September 13
CAPESIZE MARKET WILL BECOME EVEN TIGHTER - JEFFREY LANDSBERG
COALspot.com : While it is no secret that current capesize availability has become tight and has caused capesize rates to surge, availability is set ...
Thursday, 12 September 13
OVER THE WORST? WE MIGHT FIND OUT THIS WEEK - BIMCO
The shipping market has a spring in its step, even as summer draws to a close. There is it seems, confidence that finally, we are emerging into the ...
Thursday, 12 September 13
DRY BULK MARKET RALLY COMES AT A GOOD TIME FOR MOST SHIP OWNERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The latest surge of the dry bulk market has helped offset other lingering factors, which otherwise, could have plunged freight rates to new lows. Fo ...
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- Anglo American - United Kingdom
- Posco Energy - South Korea
- Africa Commodities Group - South Africa
- Pendopo Energi Batubara - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Oldendorff Carriers - Singapore
- Bulk Trading Sa - Switzerland
- Kobexindo Tractors - Indoneisa
- OPG Power Generation Pvt Ltd - India
- Deloitte Consulting - India
- Indo Tambangraya Megah - Indonesia
- Maheswari Brothers Coal Limited - India
- Georgia Ports Authority, United States
- TNB Fuel Sdn Bhd - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Mjunction Services Limited - India
- Bukit Baiduri Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Timah Investasi Mineral - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Orica Australia Pty. Ltd.
- Price Waterhouse Coopers - Russia
- Bukit Asam (Persero) Tbk - Indonesia
- Thiess Contractors Indonesia
- Ministry of Finance - Indonesia
- MS Steel International - UAE
- Straits Asia Resources Limited - Singapore
- Star Paper Mills Limited - India
- Agrawal Coal Company - India
- The Treasury - Australian Government
- Latin American Coal - Colombia
- Altura Mining Limited, Indonesia
- Meralco Power Generation, Philippines
- Antam Resourcindo - Indonesia
- Sindya Power Generating Company Private Ltd
- India Bulls Power Limited - India
- The State Trading Corporation of India Ltd
- South Luzon Thermal Energy Corporation
- Karaikal Port Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Sakthi Sugars Limited - India
- Iligan Light & Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- SMG Consultants - Indonesia
- Independent Power Producers Association of India
- Samtan Co., Ltd - South Korea
- Kartika Selabumi Mining - Indonesia
- Sical Logistics Limited - India
- Directorate Of Revenue Intelligence - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Sidhee Cement - India
- Metalloyd Limited - United Kingdom
- ASAPP Information Group - India
- Ministry of Transport, Egypt
- Central Electricity Authority - India
- Gujarat Electricity Regulatory Commission - India
- Banpu Public Company Limited - Thailand
- Wilmar Investment Holdings
- Meenaskhi Energy Private Limited - India
- IHS Mccloskey Coal Group - USA
- Chamber of Mines of South Africa
- Videocon Industries ltd - India
- Uttam Galva Steels Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Planning Commission, India
- Barasentosa Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- Vijayanagar Sugar Pvt Ltd - India
- Rio Tinto Coal - Australia
- Electricity Generating Authority of Thailand
- Heidelberg Cement - Germany
- Makarim & Taira - Indonesia
- International Coal Ventures Pvt Ltd - India
- Orica Mining Services - Indonesia
- Dalmia Cement Bharat India
- Therma Luzon, Inc, Philippines
- Intertek Mineral Services - Indonesia
- The University of Queensland
- Marubeni Corporation - India
- Indonesian Coal Mining Association
- Coalindo Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Petron Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Energy Development Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Mercator Lines Limited - India
- LBH Netherlands Bv - Netherlands
- Bangladesh Power Developement Board
- McConnell Dowell - Australia
- Global Green Power PLC Corporation, Philippines
- Bhushan Steel Limited - India
- Ind-Barath Power Infra Limited - India
- London Commodity Brokers - England
- Toyota Tsusho Corporation, Japan
- Holcim Trading Pte Ltd - Singapore
- Binh Thuan Hamico - Vietnam
- Mintek Dendrill Indonesia
- Renaissance Capital - South Africa
- Indika Energy - Indonesia
- Malabar Cements Ltd - India
- New Zealand Coal & Carbon
- Siam City Cement - Thailand
- Indian Oil Corporation Limited
- Petrochimia International Co. Ltd.- Taiwan
- PetroVietnam Power Coal Import and Supply Company
- Borneo Indobara - Indonesia
- Attock Cement Pakistan Limited
- Asmin Koalindo Tuhup - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- SN Aboitiz Power Inc, Philippines
- Australian Coal Association
- Chettinad Cement Corporation Ltd - India
- Madhucon Powers Ltd - India
- Central Java Power - Indonesia
- Tata Chemicals Ltd - India
- PowerSource Philippines DevCo
- Maharashtra Electricity Regulatory Commission - India
- ICICI Bank Limited - India
- Economic Council, Georgia
- AsiaOL BioFuels Corp., Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GN Power Mariveles Coal Plant, Philippines
- Bhatia International Limited - India
- European Bulk Services B.V. - Netherlands
- PTC India Limited - India
- Bharathi Cement Corporation - India
- Cement Manufacturers Association - India
- Aboitiz Power Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Larsen & Toubro Limited - India
- SMC Global Power, Philippines
- Trasteel International SA, Italy
- Directorate General of MIneral and Coal - Indonesia
- Mercuria Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Parliament of New Zealand
- PNOC Exploration Corporation - Philippines
- Grasim Industreis Ltd - India
- Ministry of Mines - Canada
- Electricity Authority, New Zealand
- Essar Steel Hazira Ltd - India
- Eastern Coal Council - USA
- CIMB Investment Bank - Malaysia
- Tamil Nadu electricity Board
- Ambuja Cements Ltd - India
- Vizag Seaport Private Limited - India
- Singapore Mercantile Exchange
- Thai Mozambique Logistica
- Minerals Council of Australia
- Miang Besar Coal Terminal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- IEA Clean Coal Centre - UK
- Kaltim Prima Coal - Indonesia
- GVK Power & Infra Limited - India
- Sojitz Corporation - Japan
- Romanian Commodities Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Indogreen Group - Indonesia
- GMR Energy Limited - India
- Krishnapatnam Port Company Ltd. - India
- Medco Energi Mining Internasional
- Neyveli Lignite Corporation Ltd, - India
- Energy Link Ltd, New Zealand
- Baramulti Group, Indonesia
- Savvy Resources Ltd - HongKong
- Goldman Sachs - Singapore
- Wood Mackenzie - Singapore
- Simpson Spence & Young - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Semirara Mining Corp, Philippines
- Manunggal Multi Energi - Indonesia
- Edison Trading Spa - Italy
- Gujarat Mineral Development Corp Ltd - India
- Vedanta Resources Plc - India
- San Jose City I Power Corp, Philippines
- Coal and Oil Company - UAE
- Xindia Steels Limited - India
- Lanco Infratech Ltd - India
- Standard Chartered Bank - UAE
- Bukit Makmur.PT - Indonesia
- Power Finance Corporation Ltd., India
- Kapuas Tunggal Persada - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sree Jayajothi Cements Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Kideco Jaya Agung - Indonesia
- Semirara Mining and Power Corporation, Philippines
- CNBM International Corporation - China
- Jindal Steel & Power Ltd - India
- White Energy Company Limited
- Australian Commodity Traders Exchange
- Carbofer General Trading SA - India
- Ceylon Electricity Board - Sri Lanka
- Kepco SPC Power Corporation, Philippines
- Interocean Group of Companies - India
- Merrill Lynch Commodities Europe
- VISA Power Limited - India
- Commonwealth Bank - Australia
- TeaM Sual Corporation - Philippines
- Riau Bara Harum - Indonesia
- Eastern Energy - Thailand
- Parry Sugars Refinery, India
- Aditya Birla Group - India
- Indian Energy Exchange, India
- Bahari Cakrawala Sebuku - Indonesia
- Global Business Power Corporation, Philippines
- Port Waratah Coal Services - Australia
- Sinarmas Energy and Mining - Indonesia
- Kumho Petrochemical, South Korea
- Bhoruka Overseas - Indonesia
- Coastal Gujarat Power Limited - India
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