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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, 27 July 13
INDONESIA TO INDIA SUPRAMAX FREIGHT RATES ARE EXPECTED TO REMAIN STEADY - CAPT.REDDY
COALspot.com : The freight market seemed to soften this week with BDI , Cape and Panamax indices dropped average 5 percent on week.
The BDI was d ...
Thursday, 25 July 13
CAPESIZE : PACIFIC AND ATLANTIC RATES ARE HOLDING STEADY - FEARNLEYS AS
Handy
The Far East market remains quiet even if some Indo coal trip orders were fed in the market at early this week. Prompt ships passing Singapor ...
Thursday, 25 July 13
SUMMER LULL CHIPPING AWAY RECENT GAINS IN DRY BULK FREIGHT RATES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
In what seems to be establishing as a permanent trend, at least for the time being, the dry bulk market kept on retreating yesterday, even if this r ...
Tuesday, 23 July 13
NEWCASTLE'S COAL EXPORTS CLIMB 17.82% ON WEEK, PORT'S DATA SHOWS
COALspot.com: Newcastle port in Australia has loaded 3,369,865 tons of coal for the week ended 0700 hours 22 July 2013, Newcastle Port Corp. s ...
Monday, 22 July 13
DRY BULK MARKET DIFFICULT TO MAINTAIN POSITIVE DRIVE CLAIMS SHIPBROKER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has seen a significant recovery in recent weeks, leading most ship classes to earnings above their operating expenses, thus brin ...
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- Vedanta Resources Plc - India
- Marubeni Corporation - India
- Xindia Steels Limited - India
- Kobexindo Tractors - Indoneisa
- Goldman Sachs - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Sidhee Cement - India
- Intertek Mineral Services - Indonesia
- Straits Asia Resources Limited - Singapore
- Karaikal Port Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Gujarat Electricity Regulatory Commission - India
- PetroVietnam Power Coal Import and Supply Company
- Australian Commodity Traders Exchange
- Riau Bara Harum - Indonesia
- Eastern Coal Council - USA
- Wilmar Investment Holdings
- Carbofer General Trading SA - India
- Deloitte Consulting - India
- Videocon Industries ltd - India
- Kaltim Prima Coal - Indonesia
- Energy Development Corp, Philippines
- Siam City Cement - Thailand
- Electricity Generating Authority of Thailand
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- Thai Mozambique Logistica
- Baramulti Group, Indonesia
- Bhushan Steel Limited - India
- LBH Netherlands Bv - Netherlands
- Samtan Co., Ltd - South Korea
- Directorate Of Revenue Intelligence - India
- Formosa Plastics Group - Taiwan
- Posco Energy - South Korea
- Sarangani Energy Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Singapore Mercantile Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- International Coal Ventures Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Merrill Lynch Commodities Europe
- Cement Manufacturers Association - India
- Ind-Barath Power Infra Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Therma Luzon, Inc, Philippines
- Jindal Steel & Power Ltd - India
- Indian Energy Exchange, India
- Indo Tambangraya Megah - Indonesia
- Vizag Seaport Private Limited - India
- Parliament of New Zealand
- Meenaskhi Energy Private Limited - India
- Makarim & Taira - Indonesia
- Australian Coal Association
- The State Trading Corporation of India Ltd
- Coal and Oil Company - UAE
- Antam Resourcindo - Indonesia
- European Bulk Services B.V. - Netherlands
- Rio Tinto Coal - Australia
- Global Business Power Corporation, Philippines
- Agrawal Coal Company - India
- IEA Clean Coal Centre - UK
- Indonesian Coal Mining Association
- Port Waratah Coal Services - Australia
- Star Paper Mills Limited - India
- Kideco Jaya Agung - Indonesia
- Orica Australia Pty. Ltd.
- Coastal Gujarat Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- McConnell Dowell - Australia
- Bharathi Cement Corporation - India
- Attock Cement Pakistan Limited
- Semirara Mining Corp, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Power Finance Corporation Ltd., India
- Indian Oil Corporation Limited
- Renaissance Capital - South Africa
- Aboitiz Power Corporation - Philippines
- Mercuria Energy - Indonesia
- SMG Consultants - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jorong Barutama Greston.PT - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Georgia Ports Authority, United States
- Essar Steel Hazira Ltd - India
- Bangladesh Power Developement Board
- Kartika Selabumi Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- Sakthi Sugars Limited - India
- Madhucon Powers Ltd - India
- Binh Thuan Hamico - Vietnam
- The University of Queensland
- South Luzon Thermal Energy Corporation
- GN Power Mariveles Coal Plant, Philippines
- AsiaOL BioFuels Corp., Philippines
- Interocean Group of Companies - India
- Salva Resources Pvt Ltd - India
- Heidelberg Cement - Germany
- Coalindo Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Metalloyd Limited - United Kingdom
- Ministry of Finance - Indonesia
- India Bulls Power Limited - India
- Planning Commission, India
- Sinarmas Energy and Mining - Indonesia
- Indogreen Group - Indonesia
- Minerals Council of Australia
- San Jose City I Power Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Tata Chemicals Ltd - India
- Ambuja Cements Ltd - India
- Latin American Coal - Colombia
- VISA Power Limited - India
- London Commodity Brokers - England
- Thiess Contractors Indonesia
- IHS Mccloskey Coal Group - USA
- PTC India Limited - India
- Central Java Power - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Maheswari Brothers Coal Limited - India
- Borneo Indobara - Indonesia
- Kumho Petrochemical, South Korea
- GAC Shipping (India) Pvt Ltd
- Banpu Public Company Limited - Thailand
- Global Green Power PLC Corporation, Philippines
- Chamber of Mines of South Africa
- Central Electricity Authority - India
- Ministry of Mines - Canada
- Bhatia International Limited - India
- Mercator Lines Limited - India
- Orica Mining Services - Indonesia
- Eastern Energy - Thailand
- Grasim Industreis Ltd - India
- Kepco SPC Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Edison Trading Spa - Italy
- Leighton Contractors Pty Ltd - Australia
- Sojitz Corporation - Japan
- SMC Global Power, Philippines
- Semirara Mining and Power Corporation, Philippines
- MS Steel International - UAE
- TeaM Sual Corporation - Philippines
- PNOC Exploration Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Chettinad Cement Corporation Ltd - India
- Petron Corporation, Philippines
- Malabar Cements Ltd - India
- Trasteel International SA, Italy
- Bukit Baiduri Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Global Coal Blending Company Limited - Australia
- Uttam Galva Steels Limited - India
- Ministry of Transport, Egypt
- Altura Mining Limited, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Barasentosa Lestari - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Price Waterhouse Coopers - Russia
- PowerSource Philippines DevCo
- Larsen & Toubro Limited - India
- Mjunction Services Limited - India
- Alfred C Toepfer International GmbH - Germany
- Mintek Dendrill Indonesia
- Electricity Authority, New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Bayan Resources Tbk. - Indonesia
- Parry Sugars Refinery, India
- Bhoruka Overseas - Indonesia
- Siam City Cement PLC, Thailand
- Maharashtra Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- Simpson Spence & Young - Indonesia
- Meralco Power Generation, Philippines
- ASAPP Information Group - India
- Energy Link Ltd, New Zealand
- Iligan Light & Power Inc, Philippines
- SN Aboitiz Power Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Lanco Infratech Ltd - India
- The Treasury - Australian Government
- Asia Pacific Energy Resources Ventures Inc, Philippines
- White Energy Company Limited
- Medco Energi Mining Internasional
- Standard Chartered Bank - UAE
- Sical Logistics Limited - India
- Commonwealth Bank - Australia
- OPG Power Generation Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- GVK Power & Infra Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Indika Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Dalmia Cement Bharat India
- New Zealand Coal & Carbon
- Aditya Birla Group - India
- Romanian Commodities Exchange
- Tamil Nadu electricity Board
- Globalindo Alam Lestari - Indonesia
- Independent Power Producers Association of India
- Miang Besar Coal Terminal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Billiton Holdings Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- Anglo American - United Kingdom
- Cigading International Bulk Terminal - Indonesia
- ICICI Bank Limited - India
- Oldendorff Carriers - Singapore
- CNBM International Corporation - China
- Kalimantan Lumbung Energi - Indonesia
- GMR Energy Limited - India
- Wood Mackenzie - Singapore
- Africa Commodities Group - South Africa
- Bulk Trading Sa - Switzerland
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