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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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Saturday, 10 August 13
MOODY'S: OUTLOOK FOR US COAL INDUSTRY CHANGES TO STABLE FROM NEGATIVE
Moody's Investors Service has changed its outlook for the US coal industry to stable from negative, the rating agency says in a new report, "U ...
Saturday, 10 August 13
DEMOLITION ACTIVITY TO BE CRUCIAL AGAIN IN PROVIDING SUPPORT TO THE DRY BULK MARKET - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
We appear to have forgotten demolition activity this year, with the Baltic Dry Index gaining traction in the latter part of the second half and emer ...
Friday, 09 August 13
US PRODUCED 4.00 PERCENT LESS COAL ON WEEK
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.00 million short tons (mmst) of ...
Thursday, 08 August 13
HANDY : NO POSITIVE SENTIMENT FOR THE FAR EAST MARKET - FEARNRESEARCH
Handy
No positive sentiment for the Far East market. There are a number of ships coming open in SE Asia this week and owners rating mid/high USD 8k ...
Thursday, 08 August 13
MALAYSIA HOSTS THIRD ANNUAL ASIAN SUB-BITUMINOUS COAL USERS' GROUP CONFERENCE
Press Release : The third Annual Asian Sub-Bituminous Coal Users’ Group (ASBCUG) conference convenes Sept. 30-Oct. 3 at the Eastern & Orie ...
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- Jorong Barutama Greston.PT - Indonesia
- Parry Sugars Refinery, India
- The University of Queensland
- Coalindo Energy - Indonesia
- ASAPP Information Group - India
- Economic Council, Georgia
- Petrochimia International Co. Ltd.- Taiwan
- Gujarat Sidhee Cement - India
- Oldendorff Carriers - Singapore
- Parliament of New Zealand
- Energy Link Ltd, New Zealand
- Mercator Lines Limited - India
- Sical Logistics Limited - India
- LBH Netherlands Bv - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Sojitz Corporation - Japan
- Australian Commodity Traders Exchange
- Orica Mining Services - Indonesia
- McConnell Dowell - Australia
- Tamil Nadu electricity Board
- Bahari Cakrawala Sebuku - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Madhucon Powers Ltd - India
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- Cigading International Bulk Terminal - Indonesia
- Romanian Commodities Exchange
- Formosa Plastics Group - Taiwan
- Latin American Coal - Colombia
- Neyveli Lignite Corporation Ltd, - India
- Global Business Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Power Finance Corporation Ltd., India
- Agrawal Coal Company - India
- Sarangani Energy Corporation, Philippines
- Deloitte Consulting - India
- PetroVietnam Power Coal Import and Supply Company
- Global Green Power PLC Corporation, Philippines
- South Luzon Thermal Energy Corporation
- SN Aboitiz Power Inc, Philippines
- Videocon Industries ltd - India
- Bhatia International Limited - India
- AsiaOL BioFuels Corp., Philippines
- The Treasury - Australian Government
- Banpu Public Company Limited - Thailand
- Makarim & Taira - Indonesia
- Eastern Energy - Thailand
- Aditya Birla Group - India
- Essar Steel Hazira Ltd - India
- Maheswari Brothers Coal Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Meralco Power Generation, Philippines
- Planning Commission, India
- TNB Fuel Sdn Bhd - Malaysia
- Wood Mackenzie - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Central Electricity Authority - India
- Star Paper Mills Limited - India
- GVK Power & Infra Limited - India
- Xindia Steels Limited - India
- Anglo American - United Kingdom
- Commonwealth Bank - Australia
- Miang Besar Coal Terminal - Indonesia
- Coastal Gujarat Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Global Coal Blending Company Limited - Australia
- Cement Manufacturers Association - India
- San Jose City I Power Corp, Philippines
- Bangladesh Power Developement Board
- Malabar Cements Ltd - India
- Siam City Cement - Thailand
- International Coal Ventures Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Simpson Spence & Young - Indonesia
- Kideco Jaya Agung - Indonesia
- Mercuria Energy - Indonesia
- Uttam Galva Steels Limited - India
- Kaltim Prima Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- PNOC Exploration Corporation - Philippines
- Therma Luzon, Inc, Philippines
- Central Java Power - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Georgia Ports Authority, United States
- The State Trading Corporation of India Ltd
- Indian Oil Corporation Limited
- Trasteel International SA, Italy
- SMG Consultants - Indonesia
- London Commodity Brokers - England
- Salva Resources Pvt Ltd - India
- Borneo Indobara - Indonesia
- New Zealand Coal & Carbon
- Vizag Seaport Private Limited - India
- Bhushan Steel Limited - India
- Heidelberg Cement - Germany
- Eastern Coal Council - USA
- Bharathi Cement Corporation - India
- Tata Chemicals Ltd - India
- Kepco SPC Power Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Merrill Lynch Commodities Europe
- Energy Development Corp, Philippines
- CIMB Investment Bank - Malaysia
- European Bulk Services B.V. - Netherlands
- Ministry of Finance - Indonesia
- Sree Jayajothi Cements Limited - India
- Krishnapatnam Port Company Ltd. - India
- Altura Mining Limited, Indonesia
- Indo Tambangraya Megah - Indonesia
- Thai Mozambique Logistica
- Mjunction Services Limited - India
- Toyota Tsusho Corporation, Japan
- Bukit Baiduri Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Mines - Canada
- Asmin Koalindo Tuhup - Indonesia
- Pendopo Energi Batubara - Indonesia
- PTC India Limited - India
- Coal and Oil Company - UAE
- Indonesian Coal Mining Association
- Globalindo Alam Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Mintek Dendrill Indonesia
- MS Steel International - UAE
- Metalloyd Limited - United Kingdom
- Bhoruka Overseas - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Holcim Trading Pte Ltd - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- GAC Shipping (India) Pvt Ltd
- Lanco Infratech Ltd - India
- Renaissance Capital - South Africa
- Rio Tinto Coal - Australia
- Dalmia Cement Bharat India
- Medco Energi Mining Internasional
- Vedanta Resources Plc - India
- Electricity Generating Authority of Thailand
- Rashtriya Ispat Nigam Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Interocean Group of Companies - India
- Posco Energy - South Korea
- Riau Bara Harum - Indonesia
- Edison Trading Spa - Italy
- Ministry of Transport, Egypt
- Kumho Petrochemical, South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Barasentosa Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
- Sindya Power Generating Company Private Ltd
- Karbindo Abesyapradhi - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Billiton Holdings Pty Ltd - Australia
- Attock Cement Pakistan Limited
- ICICI Bank Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Port Waratah Coal Services - Australia
- Gujarat Mineral Development Corp Ltd - India
- Price Waterhouse Coopers - Russia
- Binh Thuan Hamico - Vietnam
- Antam Resourcindo - Indonesia
- Indika Energy - Indonesia
- Siam City Cement PLC, Thailand
- Larsen & Toubro Limited - India
- Semirara Mining and Power Corporation, Philippines
- Carbofer General Trading SA - India
- OPG Power Generation Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- GMR Energy Limited - India
- Electricity Authority, New Zealand
- Orica Australia Pty. Ltd.
- Baramulti Group, Indonesia
- Samtan Co., Ltd - South Korea
- Kartika Selabumi Mining - Indonesia
- Marubeni Corporation - India
- Intertek Mineral Services - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- Manunggal Multi Energi - Indonesia
- Semirara Mining Corp, Philippines
- Bulk Trading Sa - Switzerland
- Ambuja Cements Ltd - India
- Meenaskhi Energy Private Limited - India
- Kobexindo Tractors - Indoneisa
- SMC Global Power, Philippines
- Savvy Resources Ltd - HongKong
- Jindal Steel & Power Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Australian Coal Association
- Directorate General of MIneral and Coal - Indonesia
- Grasim Industreis Ltd - India
- India Bulls Power Limited - India
- Straits Asia Resources Limited - Singapore
- Indogreen Group - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Minerals Council of Australia
- Karaikal Port Pvt Ltd - India
- Singapore Mercantile Exchange
- Goldman Sachs - Singapore
- Bayan Resources Tbk. - Indonesia
- Africa Commodities Group - South Africa
- CNBM International Corporation - China
- Sakthi Sugars Limited - India
- Iligan Light & Power Inc, Philippines
- Petron Corporation, Philippines
- PowerSource Philippines DevCo
- Chettinad Cement Corporation Ltd - India
- Indian Energy Exchange, India
- Kapuas Tunggal Persada - Indonesia
- Ind-Barath Power Infra Limited - India
- Chamber of Mines of South Africa
- VISA Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- White Energy Company Limited
- Wilmar Investment Holdings
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