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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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Thursday, 05 September 13
DRY BULK MARKET ON A HIGH ROLL, MAINLY THANKS TO CAPESIZE APPETITE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Capesize owners have been rejoycing on the back of renewed optimism for the further rise in the dry bulk market's freight rates, especially when on ...
Wednesday, 04 September 13
RBCT SHIPPED 16.18 PERCENT MORE COAL IN JULY
COALspot.com - Richards Bay Coal Terminal (RBCT) is the single largest coal export terminal South African as well as in the world has shipped 6,162, ...
Wednesday, 04 September 13
SUPRAS AND HANDIES : INDONESIAN COAL CARGOES ARE SUPPORTING HEALTHY ACTIVITY LEVELS - INTERMODAL
The Dry Bulk market has pooled back a bit this week after firming for two weeks in a row. The BDI is s holding above 1,100 points and despite the sm ...
Tuesday, 03 September 13
AUSTRALIA'S NEWCASTLE PORT SHIPPED 22.93 PER CENT MORE COAL W-O-W
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port up 22.93 per cent week on week to 3.39 million mt for ...
Sunday, 01 September 13
COAL SWAP SHOWS MIXED TREND
COALspot.com – Sub-Bit Indonesia coal swaps (FOB ) for average Q4 2013 delivery 1.25 percent up month on month. The swap was moved posit ...
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- Toyota Tsusho Corporation, Japan
- Borneo Indobara - Indonesia
- Standard Chartered Bank - UAE
- Antam Resourcindo - Indonesia
- Ambuja Cements Ltd - India
- SMC Global Power, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Salva Resources Pvt Ltd - India
- New Zealand Coal & Carbon
- Ind-Barath Power Infra Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Globalindo Alam Lestari - Indonesia
- Rio Tinto Coal - Australia
- Bhatia International Limited - India
- Kaltim Prima Coal - Indonesia
- Bharathi Cement Corporation - India
- Deloitte Consulting - India
- ASAPP Information Group - India
- MS Steel International - UAE
- Sical Logistics Limited - India
- Bhoruka Overseas - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- The University of Queensland
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- Madhucon Powers Ltd - India
- Africa Commodities Group - South Africa
- Mjunction Services Limited - India
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- Banpu Public Company Limited - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Eastern Coal Council - USA
- Siam City Cement PLC, Thailand
- Electricity Generating Authority of Thailand
- Karbindo Abesyapradhi - Indoneisa
- VISA Power Limited - India
- Heidelberg Cement - Germany
- Australian Coal Association
- Jorong Barutama Greston.PT - Indonesia
- Power Finance Corporation Ltd., India
- Billiton Holdings Pty Ltd - Australia
- Makarim & Taira - Indonesia
- Karaikal Port Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Minerals Council of Australia
- GAC Shipping (India) Pvt Ltd
- Georgia Ports Authority, United States
- Romanian Commodities Exchange
- Independent Power Producers Association of India
- Singapore Mercantile Exchange
- Kartika Selabumi Mining - Indonesia
- The Treasury - Australian Government
- Videocon Industries ltd - India
- Neyveli Lignite Corporation Ltd, - India
- San Jose City I Power Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- Sarangani Energy Corporation, Philippines
- Malabar Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- Larsen & Toubro Limited - India
- Pendopo Energi Batubara - Indonesia
- LBH Netherlands Bv - Netherlands
- Agrawal Coal Company - India
- Bukit Makmur.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Edison Trading Spa - Italy
- Vijayanagar Sugar Pvt Ltd - India
- Baramulti Group, Indonesia
- Bhushan Steel Limited - India
- Meenaskhi Energy Private Limited - India
- Rashtriya Ispat Nigam Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Binh Thuan Hamico - Vietnam
- Iligan Light & Power Inc, Philippines
- Medco Energi Mining Internasional
- Planning Commission, India
- Vedanta Resources Plc - India
- Eastern Energy - Thailand
- Trasteel International SA, Italy
- Orica Australia Pty. Ltd.
- Renaissance Capital - South Africa
- PowerSource Philippines DevCo
- Orica Mining Services - Indonesia
- Thai Mozambique Logistica
- Global Coal Blending Company Limited - Australia
- Barasentosa Lestari - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Asmin Koalindo Tuhup - Indonesia
- India Bulls Power Limited - India
- Marubeni Corporation - India
- Bahari Cakrawala Sebuku - Indonesia
- Indo Tambangraya Megah - Indonesia
- Economic Council, Georgia
- Carbofer General Trading SA - India
- Indika Energy - Indonesia
- Sakthi Sugars Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Kideco Jaya Agung - Indonesia
- SN Aboitiz Power Inc, Philippines
- South Luzon Thermal Energy Corporation
- Coalindo Energy - Indonesia
- McConnell Dowell - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- International Coal Ventures Pvt Ltd - India
- Central Java Power - Indonesia
- Wood Mackenzie - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Meralco Power Generation, Philippines
- ICICI Bank Limited - India
- Leighton Contractors Pty Ltd - Australia
- Maheswari Brothers Coal Limited - India
- Thiess Contractors Indonesia
- Semirara Mining and Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Latin American Coal - Colombia
- Tata Chemicals Ltd - India
- Savvy Resources Ltd - HongKong
- Straits Asia Resources Limited - Singapore
- Wilmar Investment Holdings
- Ministry of Transport, Egypt
- Oldendorff Carriers - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mercator Lines Limited - India
- IHS Mccloskey Coal Group - USA
- Indian Energy Exchange, India
- Port Waratah Coal Services - Australia
- Ceylon Electricity Board - Sri Lanka
- Bayan Resources Tbk. - Indonesia
- Xindia Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- SMG Consultants - Indonesia
- Tamil Nadu electricity Board
- European Bulk Services B.V. - Netherlands
- Riau Bara Harum - Indonesia
- Posco Energy - South Korea
- Kobexindo Tractors - Indoneisa
- Bangladesh Power Developement Board
- White Energy Company Limited
- Kumho Petrochemical, South Korea
- Sree Jayajothi Cements Limited - India
- Metalloyd Limited - United Kingdom
- Jindal Steel & Power Ltd - India
- Gujarat Sidhee Cement - India
- Lanco Infratech Ltd - India
- CNBM International Corporation - China
- PetroVietnam Power Coal Import and Supply Company
- Chamber of Mines of South Africa
- GVK Power & Infra Limited - India
- Mintek Dendrill Indonesia
- CIMB Investment Bank - Malaysia
- Coal and Oil Company - UAE
- Star Paper Mills Limited - India
- Formosa Plastics Group - Taiwan
- Parliament of New Zealand
- Aboitiz Power Corporation - Philippines
- Goldman Sachs - Singapore
- AsiaOL BioFuels Corp., Philippines
- Coastal Gujarat Power Limited - India
- Chettinad Cement Corporation Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Sojitz Corporation - Japan
- Indogreen Group - Indonesia
- Simpson Spence & Young - Indonesia
- Energy Link Ltd, New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Miang Besar Coal Terminal - Indonesia
- Energy Development Corp, Philippines
- Petron Corporation, Philippines
- Central Electricity Authority - India
- Dalmia Cement Bharat India
- Samtan Co., Ltd - South Korea
- Uttam Galva Steels Limited - India
- OPG Power Generation Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- The State Trading Corporation of India Ltd
- Anglo American - United Kingdom
- Attock Cement Pakistan Limited
- Krishnapatnam Port Company Ltd. - India
- Jaiprakash Power Ventures ltd
- Altura Mining Limited, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Sindya Power Generating Company Private Ltd
- Semirara Mining Corp, Philippines
- Parry Sugars Refinery, India
- GMR Energy Limited - India
- Siam City Cement - Thailand
- London Commodity Brokers - England
- Grasim Industreis Ltd - India
- Therma Luzon, Inc, Philippines
- Merrill Lynch Commodities Europe
- Pipit Mutiara Jaya. PT, Indonesia
- Commonwealth Bank - Australia
- Ministry of Mines - Canada
- Global Green Power PLC Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Mercuria Energy - Indonesia
- Interocean Group of Companies - India
- Essar Steel Hazira Ltd - India
- Price Waterhouse Coopers - Russia
- Indian Oil Corporation Limited
- Cement Manufacturers Association - India
- PTC India Limited - India
- Electricity Authority, New Zealand
- Australian Commodity Traders Exchange
- Manunggal Multi Energi - Indonesia
- Global Business Power Corporation, Philippines
- Ministry of Finance - Indonesia
- Cigading International Bulk Terminal - Indonesia
- PNOC Exploration Corporation - Philippines
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