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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, 22 July 13
INDO COAL SWAP FOR AUGUST 13 DELIVERY GAINED ON WEEK BUT LOST ON DAY AND MONTH
COALspot.com – Sub-Bit Indonesia coal swaps (FOB ) for average August 2013 delivery slightly up on week but fell on day and month on Fri ...
Friday, 19 July 13
U.S.COAL PRODUCTION TOTALED APPROXIMATELY 19.60 MMST WEEK ENDED JULY 13
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 19.60 million short tons (mmst) of ...
Friday, 19 July 13
TNPL IS LOOKING FOR 300 K MT OF 6000 GAD COAL FOR FIVE MONTH
COALspot.com - Tamil Nadu Newsprint & Papers Ltd. , an Indian paper maker, is seeking 300,000 metric tons ± 5% (In 5 shipments about 60,0 ...
Thursday, 18 July 13
3RD ANNUAL FLOATING TERMINALS, INDONESIA
Commercial applications for offshore transshipment facilities
Floating Terminal solutions are increasingly being deployed by miners, independent ...
Thursday, 18 July 13
THE CAPE MARKET APPEARS TO BE HOLDING FIRM - FEARNLEYS AS
Handy
In the Pacific, market maintained similar levels during the week. There is several Indo coal orders in the market, ships passing Singapore fi ...
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- Semirara Mining and Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Iligan Light & Power Inc, Philippines
- Binh Thuan Hamico - Vietnam
- The State Trading Corporation of India Ltd
- Gujarat Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Sical Logistics Limited - India
- Australian Commodity Traders Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Dalmia Cement Bharat India
- AsiaOL BioFuels Corp., Philippines
- Kobexindo Tractors - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- Madhucon Powers Ltd - India
- Medco Energi Mining Internasional
- Semirara Mining Corp, Philippines
- Wilmar Investment Holdings
- International Coal Ventures Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Romanian Commodities Exchange
- Jaiprakash Power Ventures ltd
- Maheswari Brothers Coal Limited - India
- Orica Australia Pty. Ltd.
- Ministry of Finance - Indonesia
- PowerSource Philippines DevCo
- Central Electricity Authority - India
- Videocon Industries ltd - India
- Rashtriya Ispat Nigam Limited - India
- San Jose City I Power Corp, Philippines
- Directorate Of Revenue Intelligence - India
- London Commodity Brokers - England
- Chettinad Cement Corporation Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Leighton Contractors Pty Ltd - Australia
- Coastal Gujarat Power Limited - India
- Vizag Seaport Private Limited - India
- Uttam Galva Steels Limited - India
- Globalindo Alam Lestari - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Energy Development Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- GVK Power & Infra Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Simpson Spence & Young - Indonesia
- Gujarat Sidhee Cement - India
- South Luzon Thermal Energy Corporation
- Bukit Baiduri Energy - Indonesia
- Malabar Cements Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Alfred C Toepfer International GmbH - Germany
- European Bulk Services B.V. - Netherlands
- Manunggal Multi Energi - Indonesia
- Siam City Cement PLC, Thailand
- CIMB Investment Bank - Malaysia
- Essar Steel Hazira Ltd - India
- Global Business Power Corporation, Philippines
- PTC India Limited - India
- Attock Cement Pakistan Limited
- Thiess Contractors Indonesia
- Global Coal Blending Company Limited - Australia
- Indo Tambangraya Megah - Indonesia
- Timah Investasi Mineral - Indoneisa
- Ind-Barath Power Infra Limited - India
- Commonwealth Bank - Australia
- Sojitz Corporation - Japan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Energy - Thailand
- Therma Luzon, Inc, Philippines
- Siam City Cement - Thailand
- Deloitte Consulting - India
- SMC Global Power, Philippines
- Sree Jayajothi Cements Limited - India
- The University of Queensland
- Posco Energy - South Korea
- Vedanta Resources Plc - India
- Agrawal Coal Company - India
- Karaikal Port Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Pendopo Energi Batubara - Indonesia
- Ambuja Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Straits Asia Resources Limited - Singapore
- Electricity Authority, New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- CNBM International Corporation - China
- Oldendorff Carriers - Singapore
- Bukit Makmur.PT - Indonesia
- Mintek Dendrill Indonesia
- Altura Mining Limited, Indonesia
- Electricity Generating Authority of Thailand
- White Energy Company Limited
- Mercator Lines Limited - India
- Kepco SPC Power Corporation, Philippines
- Mjunction Services Limited - India
- Petron Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Metalloyd Limited - United Kingdom
- Carbofer General Trading SA - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kohat Cement Company Ltd. - Pakistan
- New Zealand Coal & Carbon
- Directorate General of MIneral and Coal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Mines - Canada
- Krishnapatnam Port Company Ltd. - India
- Australian Coal Association
- SN Aboitiz Power Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- The Treasury - Australian Government
- Formosa Plastics Group - Taiwan
- Intertek Mineral Services - Indonesia
- Merrill Lynch Commodities Europe
- GAC Shipping (India) Pvt Ltd
- Indonesian Coal Mining Association
- Billiton Holdings Pty Ltd - Australia
- Standard Chartered Bank - UAE
- Tamil Nadu electricity Board
- Tata Chemicals Ltd - India
- ICICI Bank Limited - India
- Heidelberg Cement - Germany
- Aditya Birla Group - India
- Maharashtra Electricity Regulatory Commission - India
- Antam Resourcindo - Indonesia
- Kumho Petrochemical, South Korea
- Savvy Resources Ltd - HongKong
- Goldman Sachs - Singapore
- Chamber of Mines of South Africa
- Singapore Mercantile Exchange
- Indian Energy Exchange, India
- Eastern Coal Council - USA
- Barasentosa Lestari - Indonesia
- Sakthi Sugars Limited - India
- Power Finance Corporation Ltd., India
- TNB Fuel Sdn Bhd - Malaysia
- Lanco Infratech Ltd - India
- Borneo Indobara - Indonesia
- Toyota Tsusho Corporation, Japan
- Central Java Power - Indonesia
- Independent Power Producers Association of India
- Price Waterhouse Coopers - Russia
- Bharathi Cement Corporation - India
- Baramulti Group, Indonesia
- Indogreen Group - Indonesia
- OPG Power Generation Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Port Waratah Coal Services - Australia
- Economic Council, Georgia
- Minerals Council of Australia
- McConnell Dowell - Australia
- Indika Energy - Indonesia
- Bhushan Steel Limited - India
- Thai Mozambique Logistica
- Edison Trading Spa - Italy
- Riau Bara Harum - Indonesia
- VISA Power Limited - India
- Wood Mackenzie - Singapore
- Sarangani Energy Corporation, Philippines
- Makarim & Taira - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Banpu Public Company Limited - Thailand
- Rio Tinto Coal - Australia
- Cigading International Bulk Terminal - Indonesia
- Marubeni Corporation - India
- Anglo American - United Kingdom
- Larsen & Toubro Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Indian Oil Corporation Limited
- Trasteel International SA, Italy
- Energy Link Ltd, New Zealand
- India Bulls Power Limited - India
- Georgia Ports Authority, United States
- Star Paper Mills Limited - India
- Africa Commodities Group - South Africa
- Planning Commission, India
- Cement Manufacturers Association - India
- Parliament of New Zealand
- Orica Mining Services - Indonesia
- Ministry of Transport, Egypt
- Petrochimia International Co. Ltd.- Taiwan
- ASAPP Information Group - India
- Latin American Coal - Colombia
- Bayan Resources Tbk. - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kaltim Prima Coal - Indonesia
- Coalindo Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Sindya Power Generating Company Private Ltd
- LBH Netherlands Bv - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- Xindia Steels Limited - India
- Interocean Group of Companies - India
- Kideco Jaya Agung - Indonesia
- Bangladesh Power Developement Board
- PNOC Exploration Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Kartika Selabumi Mining - Indonesia
- Bhoruka Overseas - Indonesia
- TeaM Sual Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- MS Steel International - UAE
- Renaissance Capital - South Africa
- Coal and Oil Company - UAE
- Parry Sugars Refinery, India
- Mercuria Energy - Indonesia
- IEA Clean Coal Centre - UK
- GMR Energy Limited - India
- Meralco Power Generation, Philippines
- Bhatia International Limited - India
- SMG Consultants - Indonesia
- Grasim Industreis Ltd - India
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