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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, 01 August 13
CAPESIZE: THE FLOW OF CARGOES REMAINS RELATIVELY STABLE, AND THE PACIFIC IS LOOKING PROMISING - FEARNLEYS AS
Handy
The Pacific market is still facing low activity, so no wonder that the tonnage list is getting longer. It´s still Ramadan and only a fe ...
Wednesday, 31 July 13
COAL GASIFICATION
IBC’s Coal Gasification conference explores the opportunities for coal gasification investment and development in Asia.
With depleting dome ...
Wednesday, 31 July 13
SUPRAMAX : THE PACIFIC BASIN WAS MOVING ON A POSITIVE PATH - EVA TZIMA
COALspot.com: Cape - Despite holding their ground fairly well early on in the week, Capes in the Atlantic basin gave in to the mounting pressure fro ...
Tuesday, 30 July 13
HARD COAL ON THE WAY TO BECOMING THE WORLD'S MOST IMPORTANT ENERGY SOURCE - VDKI
Press Release : Hard coal continued to be the world’s fastest-growing fossil primary energy source in 2012. It covered about 28% of the world ...
Tuesday, 30 July 13
WIJAYA TRI UTAMA PURCHASES MICROCOAL TECHNOLOGIES' CLEAN COAL UPGRADING FACILITY
- First MCI commercial scale application of proprietary microwave technology to upgrade coal thermal output and reduce pollutants
- MicroCoal to re ...
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- Globalindo Alam Lestari - Indonesia
- Independent Power Producers Association of India
- Anglo American - United Kingdom
- Krishnapatnam Port Company Ltd. - India
- Tata Chemicals Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Timah Investasi Mineral - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- SMG Consultants - Indonesia
- Petron Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Coal Council - USA
- Gujarat Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Savvy Resources Ltd - HongKong
- Cement Manufacturers Association - India
- Sindya Power Generating Company Private Ltd
- Indian Oil Corporation Limited
- GAC Shipping (India) Pvt Ltd
- Australian Commodity Traders Exchange
- Medco Energi Mining Internasional
- Mintek Dendrill Indonesia
- OPG Power Generation Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Edison Trading Spa - Italy
- Singapore Mercantile Exchange
- Orica Australia Pty. Ltd.
- Bhatia International Limited - India
- Cigading International Bulk Terminal - Indonesia
- Directorate Of Revenue Intelligence - India
- Wood Mackenzie - Singapore
- VISA Power Limited - India
- SN Aboitiz Power Inc, Philippines
- SMC Global Power, Philippines
- Coalindo Energy - Indonesia
- Merrill Lynch Commodities Europe
- Xindia Steels Limited - India
- Metalloyd Limited - United Kingdom
- CIMB Investment Bank - Malaysia
- Straits Asia Resources Limited - Singapore
- Ministry of Finance - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Antam Resourcindo - Indonesia
- PowerSource Philippines DevCo
- CNBM International Corporation - China
- Larsen & Toubro Limited - India
- Makarim & Taira - Indonesia
- Trasteel International SA, Italy
- Indonesian Coal Mining Association
- Attock Cement Pakistan Limited
- Billiton Holdings Pty Ltd - Australia
- Neyveli Lignite Corporation Ltd, - India
- Aboitiz Power Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Siam City Cement PLC, Thailand
- Renaissance Capital - South Africa
- Videocon Industries ltd - India
- Borneo Indobara - Indonesia
- Ind-Barath Power Infra Limited - India
- Riau Bara Harum - Indonesia
- Agrawal Coal Company - India
- Economic Council, Georgia
- LBH Netherlands Bv - Netherlands
- Ceylon Electricity Board - Sri Lanka
- Heidelberg Cement - Germany
- Gujarat Mineral Development Corp Ltd - India
- Parry Sugars Refinery, India
- Grasim Industreis Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Carbofer General Trading SA - India
- Bulk Trading Sa - Switzerland
- The University of Queensland
- Marubeni Corporation - India
- Bayan Resources Tbk. - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- PNOC Exploration Corporation - Philippines
- Posco Energy - South Korea
- Kaltim Prima Coal - Indonesia
- Power Finance Corporation Ltd., India
- Banpu Public Company Limited - Thailand
- Coal and Oil Company - UAE
- Vedanta Resources Plc - India
- Directorate General of MIneral and Coal - Indonesia
- Mercuria Energy - Indonesia
- IEA Clean Coal Centre - UK
- Planning Commission, India
- Kumho Petrochemical, South Korea
- GVK Power & Infra Limited - India
- Electricity Authority, New Zealand
- Star Paper Mills Limited - India
- Minerals Council of Australia
- Alfred C Toepfer International GmbH - Germany
- Kalimantan Lumbung Energi - Indonesia
- Bangladesh Power Developement Board
- Indogreen Group - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- London Commodity Brokers - England
- McConnell Dowell - Australia
- Commonwealth Bank - Australia
- Electricity Generating Authority of Thailand
- Latin American Coal - Colombia
- Ministry of Mines - Canada
- Sakthi Sugars Limited - India
- Aditya Birla Group - India
- Petrochimia International Co. Ltd.- Taiwan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Energy Development Corp, Philippines
- Dalmia Cement Bharat India
- Madhucon Powers Ltd - India
- Price Waterhouse Coopers - Russia
- Kapuas Tunggal Persada - Indonesia
- Sojitz Corporation - Japan
- Kobexindo Tractors - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Uttam Galva Steels Limited - India
- IHS Mccloskey Coal Group - USA
- Wilmar Investment Holdings
- Mjunction Services Limited - India
- Kepco SPC Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Malabar Cements Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Therma Luzon, Inc, Philippines
- Jindal Steel & Power Ltd - India
- Karaikal Port Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Ambuja Cements Ltd - India
- Indian Energy Exchange, India
- Standard Chartered Bank - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Rio Tinto Coal - Australia
- Deloitte Consulting - India
- Pendopo Energi Batubara - Indonesia
- Manunggal Multi Energi - Indonesia
- Formosa Plastics Group - Taiwan
- Iligan Light & Power Inc, Philippines
- Meralco Power Generation, Philippines
- White Energy Company Limited
- Baramulti Group, Indonesia
- European Bulk Services B.V. - Netherlands
- Thiess Contractors Indonesia
- Kideco Jaya Agung - Indonesia
- Bhoruka Overseas - Indonesia
- Siam City Cement - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Miang Besar Coal Terminal - Indonesia
- Energy Link Ltd, New Zealand
- Indika Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Asmin Koalindo Tuhup - Indonesia
- Interocean Group of Companies - India
- Global Business Power Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- Bukit Makmur.PT - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- The State Trading Corporation of India Ltd
- Australian Coal Association
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Meenaskhi Energy Private Limited - India
- Salva Resources Pvt Ltd - India
- India Bulls Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- ASAPP Information Group - India
- Goldman Sachs - Singapore
- Georgia Ports Authority, United States
- GMR Energy Limited - India
- Sarangani Energy Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Sical Logistics Limited - India
- Ministry of Transport, Egypt
- Oldendorff Carriers - Singapore
- Semirara Mining Corp, Philippines
- Global Green Power PLC Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Samtan Co., Ltd - South Korea
- Central Java Power - Indonesia
- Jaiprakash Power Ventures ltd
- Romanian Commodities Exchange
- Chettinad Cement Corporation Ltd - India
- Binh Thuan Hamico - Vietnam
- Parliament of New Zealand
- Maheswari Brothers Coal Limited - India
- Sinarmas Energy and Mining - Indonesia
- Central Electricity Authority - India
- Indo Tambangraya Megah - Indonesia
- New Zealand Coal & Carbon
- ICICI Bank Limited - India
- The Treasury - Australian Government
- Simpson Spence & Young - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Leighton Contractors Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- Thai Mozambique Logistica
- MS Steel International - UAE
- Kartika Selabumi Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Orica Mining Services - Indonesia
- Bhushan Steel Limited - India
- Port Waratah Coal Services - Australia
- Lanco Infratech Ltd - India
- PTC India Limited - India
- Mercator Lines Limited - India
- Tamil Nadu electricity Board
- Africa Commodities Group - South Africa
- South Luzon Thermal Energy Corporation
- Chamber of Mines of South Africa
- Kohat Cement Company Ltd. - Pakistan
- San Jose City I Power Corp, Philippines
- Vizag Seaport Private Limited - India
- TeaM Sual Corporation - Philippines
- Bharathi Cement Corporation - India
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