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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, 01 September 13
INDONESIA TO INDIA SPOT FREIGHT STAYS FIRM THIS WEEK - VISTAAR
COALspot.com: The freight market continued to be firm with even though the BDI and Cape index dropped by about 3 pct week on week.
The BDI was do ...
Friday, 30 August 13
US COAL PRODUCTION FELL 0.48 PERCENT WEEK ON WEEK - EIA
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.70 million short tons (mmst) of ...
Thursday, 29 August 13
HANDY: THE PACIFIC MARKET STARTED HEALTHY THIS WEEK - FEARNRESEARCH
Handy
The Pacific market started healthy this week. We have seen many bauxite, iron ore and few coal fixtures. Ships passing Singapore were able to ...
Thursday, 29 August 13
NO RATING IMPACT ON INDONESIAN ENERGY COMPANIES FROM RUPIAH DEPRECIATION - FITCH RATINGS
Fitch Ratings says the credit profiles of rated Indonesian energy and utilities companies, including thermal coal producers, will largely remain una ...
Wednesday, 28 August 13
THE BDI HAS MOVED TO LEVELS CONSIDERABLY STRONGER THAN THE BEGINNING OF THE YEAR - INTERMODAL
By George Bassakos
SnP Broker - Intermodal
We have already reached the end of August and whilst students are preparing themselves for another sc ...
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- Barasentosa Lestari - Indonesia
- Madhucon Powers Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Orica Australia Pty. Ltd.
- Krishnapatnam Port Company Ltd. - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Altura Mining Limited, Indonesia
- Energy Link Ltd, New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Georgia Ports Authority, United States
- Australian Coal Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- GMR Energy Limited - India
- Coastal Gujarat Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Kepco SPC Power Corporation, Philippines
- Indogreen Group - Indonesia
- Sarangani Energy Corporation, Philippines
- Singapore Mercantile Exchange
- Banpu Public Company Limited - Thailand
- Gujarat Mineral Development Corp Ltd - India
- Ministry of Transport, Egypt
- Minerals Council of Australia
- Marubeni Corporation - India
- PowerSource Philippines DevCo
- Kohat Cement Company Ltd. - Pakistan
- Wood Mackenzie - Singapore
- Agrawal Coal Company - India
- Vedanta Resources Plc - India
- SMC Global Power, Philippines
- Heidelberg Cement - Germany
- Price Waterhouse Coopers - Russia
- Petron Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Carbofer General Trading SA - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Rashtriya Ispat Nigam Limited - India
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- PTC India Limited - India
- Jindal Steel & Power Ltd - India
- Sinarmas Energy and Mining - Indonesia
- MS Steel International - UAE
- India Bulls Power Limited - India
- Anglo American - United Kingdom
- Directorate General of MIneral and Coal - Indonesia
- ICICI Bank Limited - India
- Holcim Trading Pte Ltd - Singapore
- Economic Council, Georgia
- Energy Development Corp, Philippines
- Uttam Galva Steels Limited - India
- Standard Chartered Bank - UAE
- Leighton Contractors Pty Ltd - Australia
- ASAPP Information Group - India
- Formosa Plastics Group - Taiwan
- Chamber of Mines of South Africa
- Global Business Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- The Treasury - Australian Government
- Chettinad Cement Corporation Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Independent Power Producers Association of India
- Cement Manufacturers Association - India
- Straits Asia Resources Limited - Singapore
- Miang Besar Coal Terminal - Indonesia
- Tamil Nadu electricity Board
- Riau Bara Harum - Indonesia
- Kaltim Prima Coal - Indonesia
- Mercuria Energy - Indonesia
- Electricity Authority, New Zealand
- Sical Logistics Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- IEA Clean Coal Centre - UK
- Gujarat Electricity Regulatory Commission - India
- Aditya Birla Group - India
- Alfred C Toepfer International GmbH - Germany
- Eastern Coal Council - USA
- Larsen & Toubro Limited - India
- Edison Trading Spa - Italy
- Kalimantan Lumbung Energi - Indonesia
- SMG Consultants - Indonesia
- Bhatia International Limited - India
- Antam Resourcindo - Indonesia
- Karaikal Port Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Mjunction Services Limited - India
- Pendopo Energi Batubara - Indonesia
- White Energy Company Limited
- Ministry of Mines - Canada
- TeaM Sual Corporation - Philippines
- Australian Commodity Traders Exchange
- Sree Jayajothi Cements Limited - India
- McConnell Dowell - Australia
- Oldendorff Carriers - Singapore
- Siam City Cement PLC, Thailand
- Kumho Petrochemical, South Korea
- Bhushan Steel Limited - India
- Makarim & Taira - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- The State Trading Corporation of India Ltd
- Semirara Mining Corp, Philippines
- European Bulk Services B.V. - Netherlands
- GVK Power & Infra Limited - India
- Lanco Infratech Ltd - India
- OPG Power Generation Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Simpson Spence & Young - Indonesia
- LBH Netherlands Bv - Netherlands
- Kapuas Tunggal Persada - Indonesia
- Sojitz Corporation - Japan
- Grasim Industreis Ltd - India
- Meenaskhi Energy Private Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Commonwealth Bank - Australia
- Eastern Energy - Thailand
- Parliament of New Zealand
- Globalindo Alam Lestari - Indonesia
- Kideco Jaya Agung - Indonesia
- Intertek Mineral Services - Indonesia
- Sindya Power Generating Company Private Ltd
- Metalloyd Limited - United Kingdom
- Global Green Power PLC Corporation, Philippines
- Indian Oil Corporation Limited
- Salva Resources Pvt Ltd - India
- Medco Energi Mining Internasional
- Baramulti Group, Indonesia
- Ind-Barath Power Infra Limited - India
- Interocean Group of Companies - India
- Kobexindo Tractors - Indoneisa
- Latin American Coal - Colombia
- Power Finance Corporation Ltd., India
- Cigading International Bulk Terminal - Indonesia
- Mercator Lines Limited - India
- Central Java Power - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Orica Mining Services - Indonesia
- CNBM International Corporation - China
- Indian Energy Exchange, India
- Manunggal Multi Energi - Indonesia
- Toyota Tsusho Corporation, Japan
- Karbindo Abesyapradhi - Indoneisa
- Coalindo Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- PNOC Exploration Corporation - Philippines
- VISA Power Limited - India
- Wilmar Investment Holdings
- International Coal Ventures Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Posco Energy - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Binh Thuan Hamico - Vietnam
- Bulk Trading Sa - Switzerland
- Savvy Resources Ltd - HongKong
- New Zealand Coal & Carbon
- Essar Steel Hazira Ltd - India
- Rio Tinto Coal - Australia
- Trasteel International SA, Italy
- Siam City Cement - Thailand
- Sakthi Sugars Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Parry Sugars Refinery, India
- Samtan Co., Ltd - South Korea
- Xindia Steels Limited - India
- Bukit Baiduri Energy - Indonesia
- Coal and Oil Company - UAE
- Maheswari Brothers Coal Limited - India
- Aboitiz Power Corporation - Philippines
- Goldman Sachs - Singapore
- Thai Mozambique Logistica
- Bayan Resources Tbk. - Indonesia
- Ministry of Finance - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Videocon Industries ltd - India
- Vizag Seaport Private Limited - India
- Ceylon Electricity Board - Sri Lanka
- Port Waratah Coal Services - Australia
- South Luzon Thermal Energy Corporation
- Jaiprakash Power Ventures ltd
- Star Paper Mills Limited - India
- Indika Energy - Indonesia
- Electricity Generating Authority of Thailand
- Africa Commodities Group - South Africa
- London Commodity Brokers - England
- IHS Mccloskey Coal Group - USA
- Central Electricity Authority - India
- Deloitte Consulting - India
- Merrill Lynch Commodities Europe
- Global Coal Blending Company Limited - Australia
- Dalmia Cement Bharat India
- San Jose City I Power Corp, Philippines
- Attock Cement Pakistan Limited
- Vijayanagar Sugar Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- The University of Queensland
- Borneo Indobara - Indonesia
- Mintek Dendrill Indonesia
- Neyveli Lignite Corporation Ltd, - India
- PetroVietnam Power Coal Import and Supply Company
- Bhoruka Overseas - Indonesia
- Malabar Cements Ltd - India
- Tata Chemicals Ltd - India
- GAC Shipping (India) Pvt Ltd
- CIMB Investment Bank - Malaysia
- Renaissance Capital - South Africa
- Romanian Commodities Exchange
- Indo Tambangraya Megah - Indonesia
- Indonesian Coal Mining Association
- Meralco Power Generation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Gujarat Sidhee Cement - India
- Ambuja Cements Ltd - India
- Bangladesh Power Developement Board
- Thiess Contractors Indonesia
- Bharathi Cement Corporation - India
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