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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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Tuesday, 09 July 13
CAPESIZE: SHOT UP; PANAMAXES: NOT SO LUCK; SUPRAS: SLIGHTLY BETTER; HANDIES: SOFT - INTERMODAL
COALspot.com : June 2013 Recap
A renewed Capesize market this month (June 2013) was the cause for much of the overall noteworthy performanc ...
Tuesday, 09 July 13
THE 11TH DEEP COAL PROCESSING FORUM 2013
Press Release : The 11th Deep Coal Processing Forum 2013 will be held in November Beijing China.
CDMC Events is pleased to announce that 11 ...
Monday, 08 July 13
ECO-FRIENDLY COAL FOR CHINA - VALUE FOR THE ENVIRONMENT AND VALUE FOR THE POWER GENERATOR - BY: LINDSAY JUNIPER
COALspot.com : January 2013 saw an episode of extreme particulate pollution in Beijing 35 times worse than the safe level recommended by the World H ...
Sunday, 07 July 13
FREIGHT MARKET IS EXPECTED TO BE SOFT TO STABLE NEXT WEEK- VISTAAR
COALspot.com - The freight market softened for the week ended 5 July 2013, and experienced a decline in all sectors, including BDI. Bulk dry Index d ...
Sunday, 07 July 13
COAL PRICES REMAIN UNDER PRESSURE
COALspot.com – Coal swaps for the year 2014 indicate that, the pressure on coal prices will continue at least until next year. Ave ...
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- Makarim & Taira - Indonesia
- Indonesian Coal Mining Association
- Holcim Trading Pte Ltd - Singapore
- Directorate Of Revenue Intelligence - India
- Gujarat Mineral Development Corp Ltd - India
- Bharathi Cement Corporation - India
- Binh Thuan Hamico - Vietnam
- Kartika Selabumi Mining - Indonesia
- IEA Clean Coal Centre - UK
- Parry Sugars Refinery, India
- Dalmia Cement Bharat India
- Power Finance Corporation Ltd., India
- Attock Cement Pakistan Limited
- Energy Development Corp, Philippines
- Essar Steel Hazira Ltd - India
- Uttam Galva Steels Limited - India
- Sindya Power Generating Company Private Ltd
- Tata Chemicals Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Thai Mozambique Logistica
- Heidelberg Cement - Germany
- TNB Fuel Sdn Bhd - Malaysia
- Globalindo Alam Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- SMC Global Power, Philippines
- Barasentosa Lestari - Indonesia
- Xindia Steels Limited - India
- Africa Commodities Group - South Africa
- Directorate General of MIneral and Coal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Kaltim Prima Coal - Indonesia
- Marubeni Corporation - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Indogreen Group - Indonesia
- Sakthi Sugars Limited - India
- Formosa Plastics Group - Taiwan
- Riau Bara Harum - Indonesia
- Sojitz Corporation - Japan
- Medco Energi Mining Internasional
- Independent Power Producers Association of India
- Krishnapatnam Port Company Ltd. - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- CNBM International Corporation - China
- CIMB Investment Bank - Malaysia
- Tamil Nadu electricity Board
- Port Waratah Coal Services - Australia
- Singapore Mercantile Exchange
- South Luzon Thermal Energy Corporation
- Meralco Power Generation, Philippines
- Central Electricity Authority - India
- Toyota Tsusho Corporation, Japan
- Mercuria Energy - Indonesia
- Star Paper Mills Limited - India
- Baramulti Group, Indonesia
- Rashtriya Ispat Nigam Limited - India
- The Treasury - Australian Government
- Planning Commission, India
- Gujarat Electricity Regulatory Commission - India
- Coastal Gujarat Power Limited - India
- Orica Australia Pty. Ltd.
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Aditya Birla Group - India
- International Coal Ventures Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Latin American Coal - Colombia
- San Jose City I Power Corp, Philippines
- Savvy Resources Ltd - HongKong
- Thiess Contractors Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Indian Energy Exchange, India
- Jaiprakash Power Ventures ltd
- Salva Resources Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Wilmar Investment Holdings
- Kepco SPC Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Chamber of Mines of South Africa
- White Energy Company Limited
- Kalimantan Lumbung Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Banpu Public Company Limited - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Bangladesh Power Developement Board
- Renaissance Capital - South Africa
- Bukit Baiduri Energy - Indonesia
- Anglo American - United Kingdom
- Manunggal Multi Energi - Indonesia
- Parliament of New Zealand
- Australian Commodity Traders Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Coal Council - USA
- Ind-Barath Power Infra Limited - India
- Lanco Infratech Ltd - India
- Ministry of Mines - Canada
- London Commodity Brokers - England
- Petron Corporation, Philippines
- Kumho Petrochemical, South Korea
- SN Aboitiz Power Inc, Philippines
- TeaM Sual Corporation - Philippines
- Malabar Cements Ltd - India
- Indika Energy - Indonesia
- Romanian Commodities Exchange
- Energy Link Ltd, New Zealand
- Bhushan Steel Limited - India
- Therma Luzon, Inc, Philippines
- Altura Mining Limited, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Bayan Resources Tbk. - Indonesia
- Gujarat Sidhee Cement - India
- Iligan Light & Power Inc, Philippines
- Semirara Mining Corp, Philippines
- Economic Council, Georgia
- Edison Trading Spa - Italy
- Antam Resourcindo - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- McConnell Dowell - Australia
- Billiton Holdings Pty Ltd - Australia
- GMR Energy Limited - India
- Grasim Industreis Ltd - India
- Vedanta Resources Plc - India
- Orica Mining Services - Indonesia
- Posco Energy - South Korea
- Coalindo Energy - Indonesia
- New Zealand Coal & Carbon
- Ministry of Transport, Egypt
- Interocean Group of Companies - India
- Asmin Koalindo Tuhup - Indonesia
- Sinarmas Energy and Mining - Indonesia
- ICICI Bank Limited - India
- Metalloyd Limited - United Kingdom
- Neyveli Lignite Corporation Ltd, - India
- Sree Jayajothi Cements Limited - India
- Georgia Ports Authority, United States
- GVK Power & Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Minerals Council of Australia
- Indian Oil Corporation Limited
- Ceylon Electricity Board - Sri Lanka
- Meenaskhi Energy Private Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sarangani Energy Corporation, Philippines
- India Bulls Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Mjunction Services Limited - India
- Cement Manufacturers Association - India
- AsiaOL BioFuels Corp., Philippines
- Pendopo Energi Batubara - Indonesia
- Ministry of Finance - Indonesia
- Central Java Power - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Vizag Seaport Private Limited - India
- SMG Consultants - Indonesia
- Siam City Cement - Thailand
- Wood Mackenzie - Singapore
- Eastern Energy - Thailand
- Electricity Generating Authority of Thailand
- PTC India Limited - India
- Global Coal Blending Company Limited - Australia
- Coal and Oil Company - UAE
- Standard Chartered Bank - UAE
- Mercator Lines Limited - India
- The University of Queensland
- Cigading International Bulk Terminal - Indonesia
- Rio Tinto Coal - Australia
- Karbindo Abesyapradhi - Indoneisa
- Intertek Mineral Services - Indonesia
- ASAPP Information Group - India
- Kobexindo Tractors - Indoneisa
- IHS Mccloskey Coal Group - USA
- Bhatia International Limited - India
- Sical Logistics Limited - India
- Indo Tambangraya Megah - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Timah Investasi Mineral - Indoneisa
- Bulk Trading Sa - Switzerland
- Samtan Co., Ltd - South Korea
- Simpson Spence & Young - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- VISA Power Limited - India
- Ambuja Cements Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Global Business Power Corporation, Philippines
- Agrawal Coal Company - India
- Mintek Dendrill Indonesia
- Australian Coal Association
- PetroVietnam Power Coal Import and Supply Company
- Commonwealth Bank - Australia
- Larsen & Toubro Limited - India
- Kideco Jaya Agung - Indonesia
- Goldman Sachs - Singapore
- Chettinad Cement Corporation Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Jindal Steel & Power Ltd - India
- Borneo Indobara - Indonesia
- Global Green Power PLC Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Merrill Lynch Commodities Europe
- Carbofer General Trading SA - India
- Semirara Mining and Power Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Deloitte Consulting - India
- Trasteel International SA, Italy
- The State Trading Corporation of India Ltd
- MS Steel International - UAE
- PNOC Exploration Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Leighton Contractors Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Electricity Authority, New Zealand
- PowerSource Philippines DevCo
- Bhoruka Overseas - Indonesia
- Siam City Cement PLC, Thailand
- Aboitiz Power Corporation - Philippines
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