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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$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Sunday, 18 August 13
SUB-BIT FOB INDONESIA COAL SWAP : ON POSITIVE DIRECTION ON DAY, WEEK AND MONTH
COALspot.com – Sub-Bit Indonesia coal swaps (FOB ) for average Q4 2013 delivery US$ 1.83 up month on month. The swap was moved positive ...
Sunday, 18 August 13
INDO - INDIA FREIGHT EXPECTED TO BE FIRM NEXT WEEK - VISTAAR
COALspot.com - The freight market was up this week with the BDI gaining more than 10 pct due to strong Cape Sector.
The BDI was closed at 1,102 p ...
Friday, 16 August 13
US COAL PRODUCTION SLIGHTLY UP ON WEEK
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.10 million short tons (mmst) of ...
Thursday, 15 August 13
CAPESIZE : TRENDS SOMETIMES SHIFT WITH NO PRIOR WARNING - FEARNRESEARCH
Handy
The influence of the summer holidays across Europe was felt in the Atlantic basin this week. Very little activity and a growing list of avail ...
Wednesday, 14 August 13
ANOTHER WEEK IN THE RED FOR DRY BULK CARRIERS - INTERMODAL
Chartering (Wet: Stable- / Dry: Stable- )
Another week in the red for Dry Bulk carriers with the market losing further steam as fewer an ...
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- New Zealand Coal & Carbon
- Interocean Group of Companies - India
- Toyota Tsusho Corporation, Japan
- CIMB Investment Bank - Malaysia
- McConnell Dowell - Australia
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- Star Paper Mills Limited - India
- Alfred C Toepfer International GmbH - Germany
- Indo Tambangraya Megah - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Medco Energi Mining Internasional
- The State Trading Corporation of India Ltd
- Banpu Public Company Limited - Thailand
- Kartika Selabumi Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- Agrawal Coal Company - India
- European Bulk Services B.V. - Netherlands
- Port Waratah Coal Services - Australia
- Latin American Coal - Colombia
- Karaikal Port Pvt Ltd - India
- Lanco Infratech Ltd - India
- Wood Mackenzie - Singapore
- Miang Besar Coal Terminal - Indonesia
- Bhushan Steel Limited - India
- Aditya Birla Group - India
- Chamber of Mines of South Africa
- PTC India Limited - India
- Kepco SPC Power Corporation, Philippines
- Videocon Industries ltd - India
- Barasentosa Lestari - Indonesia
- Central Java Power - Indonesia
- Energy Development Corp, Philippines
- IHS Mccloskey Coal Group - USA
- Directorate Of Revenue Intelligence - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kapuas Tunggal Persada - Indonesia
- SN Aboitiz Power Inc, Philippines
- Attock Cement Pakistan Limited
- Essar Steel Hazira Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Planning Commission, India
- Bulk Trading Sa - Switzerland
- Meralco Power Generation, Philippines
- Mjunction Services Limited - India
- Eastern Coal Council - USA
- Bharathi Cement Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Parliament of New Zealand
- GVK Power & Infra Limited - India
- Therma Luzon, Inc, Philippines
- Coalindo Energy - Indonesia
- Salva Resources Pvt Ltd - India
- London Commodity Brokers - England
- ICICI Bank Limited - India
- Kaltim Prima Coal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sindya Power Generating Company Private Ltd
- Global Business Power Corporation, Philippines
- SMG Consultants - Indonesia
- Sakthi Sugars Limited - India
- Pendopo Energi Batubara - Indonesia
- Xindia Steels Limited - India
- GAC Shipping (India) Pvt Ltd
- Tata Chemicals Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Goldman Sachs - Singapore
- Orica Australia Pty. Ltd.
- Gujarat Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- Mercator Lines Limited - India
- Independent Power Producers Association of India
- ASAPP Information Group - India
- Bukit Baiduri Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Ind-Barath Power Infra Limited - India
- Bhoruka Overseas - Indonesia
- Indonesian Coal Mining Association
- Kalimantan Lumbung Energi - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Baramulti Group, Indonesia
- Grasim Industreis Ltd - India
- Vedanta Resources Plc - India
- Singapore Mercantile Exchange
- Jorong Barutama Greston.PT - Indonesia
- Australian Coal Association
- Sinarmas Energy and Mining - Indonesia
- Indogreen Group - Indonesia
- Siam City Cement - Thailand
- Mintek Dendrill Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Altura Mining Limited, Indonesia
- Parry Sugars Refinery, India
- India Bulls Power Limited - India
- Sical Logistics Limited - India
- CNBM International Corporation - China
- The Treasury - Australian Government
- AsiaOL BioFuels Corp., Philippines
- Rashtriya Ispat Nigam Limited - India
- VISA Power Limited - India
- Africa Commodities Group - South Africa
- LBH Netherlands Bv - Netherlands
- PetroVietnam Power Coal Import and Supply Company
- Indian Energy Exchange, India
- Georgia Ports Authority, United States
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bangladesh Power Developement Board
- Bayan Resources Tbk. - Indonesia
- TeaM Sual Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- MS Steel International - UAE
- Semirara Mining Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Borneo Indobara - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- Posco Energy - South Korea
- Chettinad Cement Corporation Ltd - India
- White Energy Company Limited
- Romanian Commodities Exchange
- Indika Energy - Indonesia
- Wilmar Investment Holdings
- Savvy Resources Ltd - HongKong
- Thai Mozambique Logistica
- Jindal Steel & Power Ltd - India
- Global Green Power PLC Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Siam City Cement PLC, Thailand
- Trasteel International SA, Italy
- Maheswari Brothers Coal Limited - India
- Deloitte Consulting - India
- Antam Resourcindo - Indonesia
- SMC Global Power, Philippines
- Bhatia International Limited - India
- Semirara Mining and Power Corporation, Philippines
- Mercuria Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Petron Corporation, Philippines
- Marubeni Corporation - India
- Uttam Galva Steels Limited - India
- Rio Tinto Coal - Australia
- Electricity Authority, New Zealand
- The University of Queensland
- Edison Trading Spa - Italy
- Meenaskhi Energy Private Limited - India
- Orica Mining Services - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kideco Jaya Agung - Indonesia
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- Malabar Cements Ltd - India
- Price Waterhouse Coopers - Russia
- Heidelberg Cement - Germany
- Commonwealth Bank - Australia
- Globalindo Alam Lestari - Indonesia
- Thiess Contractors Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Krishnapatnam Port Company Ltd. - India
- Tamil Nadu electricity Board
- International Coal Ventures Pvt Ltd - India
- Australian Commodity Traders Exchange
- Ministry of Finance - Indonesia
- Kobexindo Tractors - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Energy Link Ltd, New Zealand
- Renaissance Capital - South Africa
- Central Electricity Authority - India
- South Luzon Thermal Energy Corporation
- Asmin Koalindo Tuhup - Indonesia
- Formosa Plastics Group - Taiwan
- Cement Manufacturers Association - India
- Sojitz Corporation - Japan
- Riau Bara Harum - Indonesia
- Economic Council, Georgia
- Madhucon Powers Ltd - India
- Global Coal Blending Company Limited - Australia
- Coastal Gujarat Power Limited - India
- Gujarat Sidhee Cement - India
- Minerals Council of Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kumho Petrochemical, South Korea
- Eastern Energy - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Standard Chartered Bank - UAE
- Carbofer General Trading SA - India
- Ambuja Cements Ltd - India
- Metalloyd Limited - United Kingdom
- Makarim & Taira - Indonesia
- Bukit Makmur.PT - Indonesia
- Anglo American - United Kingdom
- PNOC Exploration Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Vizag Seaport Private Limited - India
- Oldendorff Carriers - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Mines - Canada
- Maharashtra Electricity Regulatory Commission - India
- Binh Thuan Hamico - Vietnam
- Iligan Light & Power Inc, Philippines
- San Jose City I Power Corp, Philippines
- Simpson Spence & Young - Indonesia
- Samtan Co., Ltd - South Korea
- PowerSource Philippines DevCo
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Oil Corporation Limited
- Larsen & Toubro Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Coal and Oil Company - UAE
- Ministry of Transport, Egypt
- IEA Clean Coal Centre - UK
- Aboitiz Power Corporation - Philippines
- Merrill Lynch Commodities Europe
- Dalmia Cement Bharat India
- Power Finance Corporation Ltd., India
- Gujarat Mineral Development Corp Ltd - India
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