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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$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Thursday, 18 July 13
DRY BULK MARKETS RETAINS RECENT GAINS, MOVES SIDEWAYS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has kept on moving sideways this week, as evidenced by the latest trends of the industry's benchmark, the Baltic Dry Index (BDI ...
Wednesday, 17 July 13
NEWCASTLE COAL EXPORTS FELL 3.85% ON WEEK
COALspot.com: Newcastle port in Australia has loaded 2,860,149 tons of coal for the week ended 0700 hours 15 July 2013, Newcastle Port Corp. s ...
Wednesday, 17 July 13
TORN BETWEEN A CREDIT CRUNCH AND SUSTAINABLE GROWTH - GEORGE DERMATIS
COALspot.com: In 2012 China expanded at a rate of 7.8%, its worst annual performance in 13 years, raising criticism over the newly appointed governm ...
Monday, 15 July 13
INDONESIAN GOVERNMENT HAS REVISED DOWN ITS JULY BENCH-MARK COAL PRICE TO US$ 81.69 PER MT
COALspot. com - Indonesian Coal Price Reference dropped 3.75 % and hitting a 2013 low. The Indonesian government has revised down its owned coal ben ...
Monday, 15 July 13
INDO COAL SWAPS ARE STRUGGLING FOR RIGHT DIRECTION
COALspot.com – Indo coal swaps are struggling to find the right direction. Sub-Bit Indonesia coal swaps (FOB ) for average August 2013 d ...
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- Ceylon Electricity Board - Sri Lanka
- Central Electricity Authority - India
- PowerSource Philippines DevCo
- PNOC Exploration Corporation - Philippines
- Vedanta Resources Plc - India
- Salva Resources Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- SMG Consultants - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Jaiprakash Power Ventures ltd
- Leighton Contractors Pty Ltd - Australia
- Aditya Birla Group - India
- Commonwealth Bank - Australia
- Karbindo Abesyapradhi - Indoneisa
- Orica Mining Services - Indonesia
- Metalloyd Limited - United Kingdom
- Baramulti Group, Indonesia
- Ind-Barath Power Infra Limited - India
- Latin American Coal - Colombia
- Energy Development Corp, Philippines
- Bhatia International Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Australian Coal Association
- Oldendorff Carriers - Singapore
- Vizag Seaport Private Limited - India
- Savvy Resources Ltd - HongKong
- Wilmar Investment Holdings
- South Luzon Thermal Energy Corporation
- Altura Mining Limited, Indonesia
- Dalmia Cement Bharat India
- Riau Bara Harum - Indonesia
- Independent Power Producers Association of India
- Planning Commission, India
- Siam City Cement - Thailand
- Romanian Commodities Exchange
- ICICI Bank Limited - India
- New Zealand Coal & Carbon
- Indian Oil Corporation Limited
- Tamil Nadu electricity Board
- Thai Mozambique Logistica
- Binh Thuan Hamico - Vietnam
- Sindya Power Generating Company Private Ltd
- Sakthi Sugars Limited - India
- Samtan Co., Ltd - South Korea
- Electricity Generating Authority of Thailand
- Semirara Mining and Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Price Waterhouse Coopers - Russia
- Therma Luzon, Inc, Philippines
- SN Aboitiz Power Inc, Philippines
- Uttam Galva Steels Limited - India
- Simpson Spence & Young - Indonesia
- Mjunction Services Limited - India
- International Coal Ventures Pvt Ltd - India
- Ministry of Transport, Egypt
- Economic Council, Georgia
- McConnell Dowell - Australia
- Alfred C Toepfer International GmbH - Germany
- Indonesian Coal Mining Association
- Bulk Trading Sa - Switzerland
- The University of Queensland
- Siam City Cement PLC, Thailand
- Meenaskhi Energy Private Limited - India
- Renaissance Capital - South Africa
- Mercator Lines Limited - India
- Marubeni Corporation - India
- Global Business Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- The Treasury - Australian Government
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Finance - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Sical Logistics Limited - India
- Ministry of Mines - Canada
- Indo Tambangraya Megah - Indonesia
- Banpu Public Company Limited - Thailand
- Intertek Mineral Services - Indonesia
- Antam Resourcindo - Indonesia
- IEA Clean Coal Centre - UK
- Barasentosa Lestari - Indonesia
- GAC Shipping (India) Pvt Ltd
- Borneo Indobara - Indonesia
- Trasteel International SA, Italy
- CNBM International Corporation - China
- Bukit Makmur.PT - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Edison Trading Spa - Italy
- Anglo American - United Kingdom
- Bharathi Cement Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- Petron Corporation, Philippines
- Makarim & Taira - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kartika Selabumi Mining - Indonesia
- Mintek Dendrill Indonesia
- Indika Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Gujarat Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- Port Waratah Coal Services - Australia
- Power Finance Corporation Ltd., India
- Georgia Ports Authority, United States
- Malabar Cements Ltd - India
- CIMB Investment Bank - Malaysia
- India Bulls Power Limited - India
- GMR Energy Limited - India
- Chettinad Cement Corporation Ltd - India
- LBH Netherlands Bv - Netherlands
- Parry Sugars Refinery, India
- Attock Cement Pakistan Limited
- Lanco Infratech Ltd - India
- Thiess Contractors Indonesia
- Eastern Coal Council - USA
- Videocon Industries ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Central Java Power - Indonesia
- VISA Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Mercuria Energy - Indonesia
- ASAPP Information Group - India
- Meralco Power Generation, Philippines
- Sojitz Corporation - Japan
- Africa Commodities Group - South Africa
- SMC Global Power, Philippines
- Eastern Energy - Thailand
- Cement Manufacturers Association - India
- PTC India Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Grasim Industreis Ltd - India
- Medco Energi Mining Internasional
- IHS Mccloskey Coal Group - USA
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sree Jayajothi Cements Limited - India
- OPG Power Generation Pvt Ltd - India
- Singapore Mercantile Exchange
- Formosa Plastics Group - Taiwan
- Sinarmas Energy and Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- European Bulk Services B.V. - Netherlands
- Tata Chemicals Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhushan Steel Limited - India
- Standard Chartered Bank - UAE
- Goldman Sachs - Singapore
- Global Green Power PLC Corporation, Philippines
- Coalindo Energy - Indonesia
- Parliament of New Zealand
- GN Power Mariveles Coal Plant, Philippines
- Interocean Group of Companies - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chamber of Mines of South Africa
- Agrawal Coal Company - India
- Gujarat Sidhee Cement - India
- London Commodity Brokers - England
- Miang Besar Coal Terminal - Indonesia
- Madhucon Powers Ltd - India
- Kumho Petrochemical, South Korea
- Minerals Council of Australia
- Bukit Baiduri Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Bahari Cakrawala Sebuku - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Star Paper Mills Limited - India
- Rio Tinto Coal - Australia
- Kideco Jaya Agung - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Larsen & Toubro Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- GVK Power & Infra Limited - India
- Bayan Resources Tbk. - Indonesia
- White Energy Company Limited
- Deloitte Consulting - India
- Iligan Light & Power Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Heidelberg Cement - Germany
- AsiaOL BioFuels Corp., Philippines
- Orica Australia Pty. Ltd.
- Pipit Mutiara Jaya. PT, Indonesia
- Coal and Oil Company - UAE
- Indogreen Group - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Maheswari Brothers Coal Limited - India
- Australian Commodity Traders Exchange
- Essar Steel Hazira Ltd - India
- Straits Asia Resources Limited - Singapore
- Coastal Gujarat Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- Merrill Lynch Commodities Europe
- Kaltim Prima Coal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- The State Trading Corporation of India Ltd
- Kepco SPC Power Corporation, Philippines
- Carbofer General Trading SA - India
- Posco Energy - South Korea
- Gujarat Mineral Development Corp Ltd - India
- Wood Mackenzie - Singapore
- Energy Link Ltd, New Zealand
- Globalindo Alam Lestari - Indonesia
- Kobexindo Tractors - Indoneisa
- Ambuja Cements Ltd - India
- Jindal Steel & Power Ltd - India
- MS Steel International - UAE
- Xindia Steels Limited - India
- Manunggal Multi Energi - Indonesia
- TeaM Sual Corporation - Philippines
- Electricity Authority, New Zealand
- Pendopo Energi Batubara - Indonesia
- San Jose City I Power Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bangladesh Power Developement Board
- Cigading International Bulk Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Indian Energy Exchange, India
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