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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, 11 September 13
ASIA - PACIFIC THERMAL COAL MARKET TO REMAIN OVERSUPPLIED IN NEXT 12 MONTHS - FITCH RATINGS
COALspot.com: Fitch Ratings says the Asia-Pacific thermal coal market will remain oversupplied in the next 12 months because strong production has b ...
Tuesday, 10 September 13
COAL EXPORTS AT AUSTRALIA'S NEWCASTLE PORT SLIP 30.31% ON WEEK TO 2.36 MMT
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port down 30.31 per cent week on week to 2.36 million mt f ...
Tuesday, 10 September 13
WORLDWIDE COAL CONSUMPTION RISES SHARPLY - RA DR. ERICH SCHMITZ
By: RA Dr. Erich Schmitz, Verein der Kohlenimporteure (Germany Coal Importers Association)
World hard coal market in the first half of 2013: worl ...
Monday, 09 September 13
REBOUND IN NEWBUILDING ORDERS HASN'T HURT DRY BULK MARKET PROSPECTS, BUT SHIP OWNERS SHOULD STILL BE CAUTIOUS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Since the start of 2013 and up until the end of August, one thing has really caught the headlines in the dry bulk market, except of course, the frei ...
Sunday, 08 September 13
Q3 2014 THERMAL COAL SWAPS : STEADY DIRECTION
COALspot.com – Sub-Bit Indonesia coal swap (FOB ) for average Q4 2013 delivery up 1.88 percent month on month. The swap was moved ...
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- Semirara Mining Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Therma Luzon, Inc, Philippines
- Simpson Spence & Young - Indonesia
- The Treasury - Australian Government
- Aboitiz Power Corporation - Philippines
- Commonwealth Bank - Australia
- Central Java Power - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Star Paper Mills Limited - India
- Agrawal Coal Company - India
- Mjunction Services Limited - India
- Independent Power Producers Association of India
- Medco Energi Mining Internasional
- Ceylon Electricity Board - Sri Lanka
- ICICI Bank Limited - India
- Meralco Power Generation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Jaiprakash Power Ventures ltd
- Wilmar Investment Holdings
- Billiton Holdings Pty Ltd - Australia
- CIMB Investment Bank - Malaysia
- Trasteel International SA, Italy
- Indogreen Group - Indonesia
- Petron Corporation, Philippines
- Videocon Industries ltd - India
- Banpu Public Company Limited - Thailand
- Bukit Makmur.PT - Indonesia
- Intertek Mineral Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- Mintek Dendrill Indonesia
- Global Green Power PLC Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Baramulti Group, Indonesia
- Xindia Steels Limited - India
- PowerSource Philippines DevCo
- Essar Steel Hazira Ltd - India
- Indo Tambangraya Megah - Indonesia
- Borneo Indobara - Indonesia
- Australian Commodity Traders Exchange
- MS Steel International - UAE
- Bayan Resources Tbk. - Indonesia
- Directorate Of Revenue Intelligence - India
- Kumho Petrochemical, South Korea
- Ind-Barath Power Infra Limited - India
- Marubeni Corporation - India
- McConnell Dowell - Australia
- Ministry of Mines - Canada
- Rashtriya Ispat Nigam Limited - India
- Cement Manufacturers Association - India
- Formosa Plastics Group - Taiwan
- Thiess Contractors Indonesia
- Meenaskhi Energy Private Limited - India
- Tata Chemicals Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Grasim Industreis Ltd - India
- San Jose City I Power Corp, Philippines
- OPG Power Generation Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- India Bulls Power Limited - India
- SMC Global Power, Philippines
- Directorate General of MIneral and Coal - Indonesia
- The University of Queensland
- Kartika Selabumi Mining - Indonesia
- Madhucon Powers Ltd - India
- Chamber of Mines of South Africa
- Latin American Coal - Colombia
- Anglo American - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- Edison Trading Spa - Italy
- White Energy Company Limited
- Straits Asia Resources Limited - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Sindya Power Generating Company Private Ltd
- The State Trading Corporation of India Ltd
- Globalindo Alam Lestari - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Kaltim Prima Coal - Indonesia
- Ministry of Finance - Indonesia
- International Coal Ventures Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Manunggal Multi Energi - Indonesia
- London Commodity Brokers - England
- Indika Energy - Indonesia
- Romanian Commodities Exchange
- Alfred C Toepfer International GmbH - Germany
- Toyota Tsusho Corporation, Japan
- Energy Development Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Port Waratah Coal Services - Australia
- Sojitz Corporation - Japan
- Vedanta Resources Plc - India
- Siam City Cement PLC, Thailand
- Asmin Koalindo Tuhup - Indonesia
- Salva Resources Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Kalimantan Lumbung Energi - Indonesia
- VISA Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- CNBM International Corporation - China
- Minerals Council of Australia
- Power Finance Corporation Ltd., India
- Gujarat Sidhee Cement - India
- Malabar Cements Ltd - India
- Riau Bara Harum - Indonesia
- SMG Consultants - Indonesia
- Makarim & Taira - Indonesia
- Georgia Ports Authority, United States
- Kepco SPC Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Posco Energy - South Korea
- Kapuas Tunggal Persada - Indonesia
- GAC Shipping (India) Pvt Ltd
- TeaM Sual Corporation - Philippines
- Pendopo Energi Batubara - Indonesia
- Oldendorff Carriers - Singapore
- Interocean Group of Companies - India
- Bhoruka Overseas - Indonesia
- Planning Commission, India
- South Luzon Thermal Energy Corporation
- Maharashtra Electricity Regulatory Commission - India
- Altura Mining Limited, Indonesia
- Goldman Sachs - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Electricity Authority, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Bangladesh Power Developement Board
- Coal and Oil Company - UAE
- Miang Besar Coal Terminal - Indonesia
- Rio Tinto Coal - Australia
- Bhatia International Limited - India
- Coastal Gujarat Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Mercator Lines Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Carbofer General Trading SA - India
- Standard Chartered Bank - UAE
- Uttam Galva Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Sree Jayajothi Cements Limited - India
- Coalindo Energy - Indonesia
- Indian Energy Exchange, India
- Energy Link Ltd, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Deloitte Consulting - India
- PTC India Limited - India
- Eastern Coal Council - USA
- Kobexindo Tractors - Indoneisa
- Ambuja Cements Ltd - India
- Economic Council, Georgia
- GMR Energy Limited - India
- Barasentosa Lestari - Indonesia
- Australian Coal Association
- Iligan Light & Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Siam City Cement - Thailand
- Wood Mackenzie - Singapore
- Tamil Nadu electricity Board
- Semirara Mining and Power Corporation, Philippines
- Aditya Birla Group - India
- Samtan Co., Ltd - South Korea
- Kideco Jaya Agung - Indonesia
- Savvy Resources Ltd - HongKong
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Parliament of New Zealand
- GVK Power & Infra Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Offshore Bulk Terminal Pte Ltd, Singapore
- Heidelberg Cement - Germany
- Ministry of Transport, Egypt
- Global Business Power Corporation, Philippines
- Sakthi Sugars Limited - India
- Orica Australia Pty. Ltd.
- Singapore Mercantile Exchange
- Binh Thuan Hamico - Vietnam
- Bharathi Cement Corporation - India
- Parry Sugars Refinery, India
- Sical Logistics Limited - India
- New Zealand Coal & Carbon
- Pipit Mutiara Jaya. PT, Indonesia
- Indonesian Coal Mining Association
- Vizag Seaport Private Limited - India
- Dalmia Cement Bharat India
- Africa Commodities Group - South Africa
- Central Electricity Authority - India
- Electricity Generating Authority of Thailand
- Eastern Energy - Thailand
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- PNOC Exploration Corporation - Philippines
- Lanco Infratech Ltd - India
- Bulk Trading Sa - Switzerland
- Chettinad Cement Corporation Ltd - India
- European Bulk Services B.V. - Netherlands
- Bhushan Steel Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Orica Mining Services - Indonesia
- SN Aboitiz Power Inc, Philippines
- ASAPP Information Group - India
- Antam Resourcindo - Indonesia
- Larsen & Toubro Limited - India
- Renaissance Capital - South Africa
- IHS Mccloskey Coal Group - USA
- Karbindo Abesyapradhi - Indoneisa
- Global Coal Blending Company Limited - Australia
- Thai Mozambique Logistica
- Mercuria Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- Indian Oil Corporation Limited
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