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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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Sunday, 08 September 13
BALTIC INDEX UP ON HIGHER CAPESIZE, PANAMAX RATES
COALspot.com : The freight market continued saw one of the biggest rally last week with Cape Size taking the lead followed by Panamax.
The BDI wa ...
Friday, 06 September 13
DRY BULK MARKET REACHES NEW YEAR-HIGHS ON THE BACK OF INCREASED CAPESIZE DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has been on the rise once again, but this time around any new increase of freight rates translates into new year-highs, thus bri ...
Friday, 06 September 13
US PRODUCED APPROXIMATELY 90.80 MMST OF COAL IN AUGUST
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.90 million short tons (mmst) of ...
Thursday, 05 September 13
INDONESIAN COAL EXPORTS UP BY 6.72 PERCENT IN JULY
COALspot.com: Indonesia, the world's largest multi grade coal exporter shipped 35.268* million tons of coal in July 2013. Indonesian coal exp ...
Thursday, 05 September 13
HANDY: NICKEL ORE WAS PUSHING THE FAR EAST MARKET - FEARNLEYS
Handy
Nickel Ore was pushing the Feast market, several ships were fixed from low teens to $14k. Indo/India was still supported by bauxite, while th ...
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- Essar Steel Hazira Ltd - India
- Altura Mining Limited, Indonesia
- Tamil Nadu electricity Board
- Central Electricity Authority - India
- Sree Jayajothi Cements Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- New Zealand Coal & Carbon
- Meenaskhi Energy Private Limited - India
- Sakthi Sugars Limited - India
- Africa Commodities Group - South Africa
- Makarim & Taira - Indonesia
- Globalindo Alam Lestari - Indonesia
- Chamber of Mines of South Africa
- TeaM Sual Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Standard Chartered Bank - UAE
- Neyveli Lignite Corporation Ltd, - India
- Iligan Light & Power Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Ministry of Finance - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate Of Revenue Intelligence - India
- Kapuas Tunggal Persada - Indonesia
- London Commodity Brokers - England
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Petron Corporation, Philippines
- Indogreen Group - Indonesia
- Port Waratah Coal Services - Australia
- Formosa Plastics Group - Taiwan
- Binh Thuan Hamico - Vietnam
- CNBM International Corporation - China
- Salva Resources Pvt Ltd - India
- Mjunction Services Limited - India
- Tata Chemicals Ltd - India
- Coastal Gujarat Power Limited - India
- Orica Mining Services - Indonesia
- Marubeni Corporation - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Aboitiz Power Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Global Business Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- Mercator Lines Limited - India
- Indo Tambangraya Megah - Indonesia
- Indika Energy - Indonesia
- Banpu Public Company Limited - Thailand
- South Luzon Thermal Energy Corporation
- Meralco Power Generation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Star Paper Mills Limited - India
- Xindia Steels Limited - India
- Jindal Steel & Power Ltd - India
- Mercuria Energy - Indonesia
- The Treasury - Australian Government
- Orica Australia Pty. Ltd.
- Bhoruka Overseas - Indonesia
- Toyota Tsusho Corporation, Japan
- Sindya Power Generating Company Private Ltd
- Kartika Selabumi Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- PTC India Limited - India
- Eastern Energy - Thailand
- Uttam Galva Steels Limited - India
- Bukit Makmur.PT - Indonesia
- Central Java Power - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Baramulti Group, Indonesia
- Edison Trading Spa - Italy
- Interocean Group of Companies - India
- Electricity Authority, New Zealand
- SN Aboitiz Power Inc, Philippines
- Commonwealth Bank - Australia
- Timah Investasi Mineral - Indoneisa
- Simpson Spence & Young - Indonesia
- Therma Luzon, Inc, Philippines
- The State Trading Corporation of India Ltd
- Anglo American - United Kingdom
- Cement Manufacturers Association - India
- Savvy Resources Ltd - HongKong
- Oldendorff Carriers - Singapore
- Ministry of Mines - Canada
- Gujarat Mineral Development Corp Ltd - India
- The University of Queensland
- ASAPP Information Group - India
- Siam City Cement - Thailand
- India Bulls Power Limited - India
- CIMB Investment Bank - Malaysia
- Wood Mackenzie - Singapore
- Gujarat Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- Ambuja Cements Ltd - India
- IEA Clean Coal Centre - UK
- Parry Sugars Refinery, India
- Barasentosa Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- Parliament of New Zealand
- Australian Commodity Traders Exchange
- Indian Energy Exchange, India
- Georgia Ports Authority, United States
- Bukit Baiduri Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Siam City Cement PLC, Thailand
- MS Steel International - UAE
- Cigading International Bulk Terminal - Indonesia
- Deloitte Consulting - India
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Kalimantan Lumbung Energi - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Independent Power Producers Association of India
- Kepco SPC Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- LBH Netherlands Bv - Netherlands
- Intertek Mineral Services - Indonesia
- IHS Mccloskey Coal Group - USA
- Riau Bara Harum - Indonesia
- Bharathi Cement Corporation - India
- Energy Development Corp, Philippines
- Semirara Mining Corp, Philippines
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- White Energy Company Limited
- San Jose City I Power Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Indian Oil Corporation Limited
- Metalloyd Limited - United Kingdom
- Singapore Mercantile Exchange
- Semirara Mining and Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Ind-Barath Power Infra Limited - India
- Coalindo Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Romanian Commodities Exchange
- Planning Commission, India
- Latin American Coal - Colombia
- Merrill Lynch Commodities Europe
- Grasim Industreis Ltd - India
- Thai Mozambique Logistica
- Madhucon Powers Ltd - India
- Wilmar Investment Holdings
- Sarangani Energy Corporation, Philippines
- Indonesian Coal Mining Association
- Antam Resourcindo - Indonesia
- Sojitz Corporation - Japan
- Mintek Dendrill Indonesia
- Bulk Trading Sa - Switzerland
- Coal and Oil Company - UAE
- Borneo Indobara - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Kumho Petrochemical, South Korea
- Malabar Cements Ltd - India
- McConnell Dowell - Australia
- Billiton Holdings Pty Ltd - Australia
- Chettinad Cement Corporation Ltd - India
- Larsen & Toubro Limited - India
- Renaissance Capital - South Africa
- Posco Energy - South Korea
- Videocon Industries ltd - India
- Price Waterhouse Coopers - Russia
- Eastern Coal Council - USA
- Sical Logistics Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- Aditya Birla Group - India
- Alfred C Toepfer International GmbH - Germany
- Leighton Contractors Pty Ltd - Australia
- Bayan Resources Tbk. - Indonesia
- SMG Consultants - Indonesia
- Electricity Generating Authority of Thailand
- SMC Global Power, Philippines
- Australian Coal Association
- Dalmia Cement Bharat India
- Rio Tinto Coal - Australia
- Vizag Seaport Private Limited - India
- Energy Link Ltd, New Zealand
- Bhatia International Limited - India
- Global Coal Blending Company Limited - Australia
- Petrochimia International Co. Ltd.- Taiwan
- GVK Power & Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Trasteel International SA, Italy
- Rashtriya Ispat Nigam Limited - India
- ICICI Bank Limited - India
- Samtan Co., Ltd - South Korea
- Bangladesh Power Developement Board
- Bhushan Steel Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Krishnapatnam Port Company Ltd. - India
- OPG Power Generation Pvt Ltd - India
- Carbofer General Trading SA - India
- Agrawal Coal Company - India
- Medco Energi Mining Internasional
- Heidelberg Cement - Germany
- PetroVietnam Power Coal Import and Supply Company
- Thiess Contractors Indonesia
- Minerals Council of Australia
- Economic Council, Georgia
- Bukit Asam (Persero) Tbk - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Kaltim Prima Coal - Indonesia
- Jaiprakash Power Ventures ltd
- Goldman Sachs - Singapore
- Kobexindo Tractors - Indoneisa
- GAC Shipping (India) Pvt Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Lanco Infratech Ltd - India
- International Coal Ventures Pvt Ltd - India
- VISA Power Limited - India
- Power Finance Corporation Ltd., India
- Sinarmas Energy and Mining - Indonesia
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