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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$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Monday, 05 August 13
INDO GOVERNMENT'S DECLARED HBA IN AUGUST '13 FALL TO LOWEST LEVEL SINCE JANUARY '10
COALspot. com - HBA fell to US$ 76.70 this month, the lowest since January 2010. Indonesian Coal Price Reference fell 6.11% and hitting a 2013 ...
Sunday, 04 August 13
COAL SWAP MARKET HAS LOST DIRECTION; STRUGGLING TO CATCH UP
COALspot.com – Sub-Bit Indonesia coal swaps (FOB ) for average October 2013 delivery slightly down on day, week and month on Friday, 2 A ...
Sunday, 04 August 13
INDONESIA TO INDIA SUPRAMAX FREIGHT SOFT DUE TO HOLIDAYS IN INDONESIA - VISTAAR
COALspot.com : The freight market was fairly steady this week with the BDI recovering towards north since second half of the week with the support o ...
Friday, 02 August 13
DRY BULK MARKET STABILIZES ON RENEWED MARKET ACTIVITY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has kept its positive footing this week, although it's still a far cry to deem the market situation as a growing one, especiall ...
Friday, 02 August 13
ASIA ACCOUNTS FOR 27.95 PERCENT OF US COAL EXPORTS IN Q1, 2013
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.80 million short tons (mmst) of ...
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- Indian Energy Exchange, India
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- Eastern Coal Council - USA
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- Directorate General of MIneral and Coal - Indonesia
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- Central Electricity Authority - India
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- Marubeni Corporation - India
- Alfred C Toepfer International GmbH - Germany
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- Baramulti Group, Indonesia
- Petron Corporation, Philippines
- Sojitz Corporation - Japan
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- Meenaskhi Energy Private Limited - India
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- Heidelberg Cement - Germany
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- Coalindo Energy - Indonesia
- SMC Global Power, Philippines
- OPG Power Generation Pvt Ltd - India
- Siam City Cement - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Miang Besar Coal Terminal - Indonesia
- Borneo Indobara - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Bhatia International Limited - India
- Rashtriya Ispat Nigam Limited - India
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- Therma Luzon, Inc, Philippines
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- Bahari Cakrawala Sebuku - Indonesia
- Minerals Council of Australia
- ASAPP Information Group - India
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- Australian Coal Association
- Posco Energy - South Korea
- Semirara Mining Corp, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Central Java Power - Indonesia
- Georgia Ports Authority, United States
- Cigading International Bulk Terminal - Indonesia
- Commonwealth Bank - Australia
- Indogreen Group - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Intertek Mineral Services - Indonesia
- Directorate Of Revenue Intelligence - India
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- Madhucon Powers Ltd - India
- London Commodity Brokers - England
- VISA Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Electricity Authority, New Zealand
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- GMR Energy Limited - India
- Vedanta Resources Plc - India
- Globalindo Alam Lestari - Indonesia
- White Energy Company Limited
- Karbindo Abesyapradhi - Indoneisa
- IHS Mccloskey Coal Group - USA
- Global Business Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Samtan Co., Ltd - South Korea
- Lanco Infratech Ltd - India
- IEA Clean Coal Centre - UK
- Bukit Baiduri Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
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- Ministry of Finance - Indonesia
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- Rio Tinto Coal - Australia
- Billiton Holdings Pty Ltd - Australia
- Chamber of Mines of South Africa
- Gujarat Sidhee Cement - India
- Global Green Power PLC Corporation, Philippines
- Mercator Lines Limited - India
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- Edison Trading Spa - Italy
- Standard Chartered Bank - UAE
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- Wilmar Investment Holdings
- Salva Resources Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Larsen & Toubro Limited - India
- Ambuja Cements Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Africa Commodities Group - South Africa
- Attock Cement Pakistan Limited
- Energy Link Ltd, New Zealand
- Orica Mining Services - Indonesia
- Essar Steel Hazira Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Australian Commodity Traders Exchange
- CNBM International Corporation - China
- Deloitte Consulting - India
- Chettinad Cement Corporation Ltd - India
- Renaissance Capital - South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- Coastal Gujarat Power Limited - India
- Power Finance Corporation Ltd., India
- Neyveli Lignite Corporation Ltd, - India
- Simpson Spence & Young - Indonesia
- Bangladesh Power Developement Board
- Pendopo Energi Batubara - Indonesia
- Independent Power Producers Association of India
- Aditya Birla Group - India
- Global Coal Blending Company Limited - Australia
- Gujarat Electricity Regulatory Commission - India
- Sical Logistics Limited - India
- Metalloyd Limited - United Kingdom
- Mercuria Energy - Indonesia
- Tamil Nadu electricity Board
- Medco Energi Mining Internasional
- Kobexindo Tractors - Indoneisa
- Bulk Trading Sa - Switzerland
- Bhushan Steel Limited - India
- Indonesian Coal Mining Association
- Orica Australia Pty. Ltd.
- Videocon Industries ltd - India
- Jindal Steel & Power Ltd - India
- Economic Council, Georgia
- Bayan Resources Tbk. - Indonesia
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Mintek Dendrill Indonesia
- Binh Thuan Hamico - Vietnam
- Petrochimia International Co. Ltd.- Taiwan
- Toyota Tsusho Corporation, Japan
- Energy Development Corp, Philippines
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- GAC Shipping (India) Pvt Ltd
- San Jose City I Power Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
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- TNB Fuel Sdn Bhd - Malaysia
- Sindya Power Generating Company Private Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Kumho Petrochemical, South Korea
- Ind-Barath Power Infra Limited - India
- Banpu Public Company Limited - Thailand
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- Meralco Power Generation, Philippines
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- Romanian Commodities Exchange
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- Eastern Energy - Thailand
- The State Trading Corporation of India Ltd
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