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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$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Friday, 05 July 13
THE DRY BULK MARKET IS GOING FROM STRENGTH TO STRENGTH - INTERMODAL
The Capesize sector has been one that has gone through a wild rollercoaster of emotions this past decade, ranging from the exuberance witnessed duri ...
Thursday, 04 July 13
CHALLENGER SIGNS FORMAL EXCLUSIVE MINING AND MARKETING AGREEMENT FOR ABBR PROJECT IN CENTRAL KALIMANTAN
COALspot.com - Challenger Deep Resources Corp., through its subsidiary PT Bestindo Energy has signed the formal exclusive Mining and Marketing agree ...
Thursday, 04 July 13
ASX LISTED QBL TO ACQUIRE INTERESTS IN MOZAMBIQUE COAL EXPLORATION LICENSES
- QBL to acquire interests in two Mozambique exploration licences prospective for coal
- Licenses located in the highly prospective Zambezi basin, ...
Thursday, 04 July 13
HANDY : INDO/CHINA, CHARTERERS RATING AROUND US$ 10,000 - FEARNLEYS AS
Handy
The Feast market firmed slightly up as mid-July cargos entered the market, but charterers seems not in hurry to cover them and looking for ch ...
Wednesday, 03 July 13
NEWCASTLE COAL EXPORTS DIP 24.79 PER CENT WOW
COALspot.com - Newcastle Coal exports fell 24.79% to 2.33 million tons WoW.
Newcastle port in Australia has loaded 2,332,513 tons of coal for the ...
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- Leighton Contractors Pty Ltd - Australia
- Gujarat Sidhee Cement - India
- Coal and Oil Company - UAE
- Africa Commodities Group - South Africa
- Standard Chartered Bank - UAE
- Videocon Industries ltd - India
- Kaltim Prima Coal - Indonesia
- Thiess Contractors Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Banpu Public Company Limited - Thailand
- Parliament of New Zealand
- Semirara Mining and Power Corporation, Philippines
- Bhushan Steel Limited - India
- Indian Oil Corporation Limited
- Karaikal Port Pvt Ltd - India
- Bangladesh Power Developement Board
- Sojitz Corporation - Japan
- Jorong Barutama Greston.PT - Indonesia
- White Energy Company Limited
- New Zealand Coal & Carbon
- Malabar Cements Ltd - India
- Manunggal Multi Energi - Indonesia
- Coastal Gujarat Power Limited - India
- SN Aboitiz Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Posco Energy - South Korea
- Indika Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Wilmar Investment Holdings
- South Luzon Thermal Energy Corporation
- IHS Mccloskey Coal Group - USA
- Vijayanagar Sugar Pvt Ltd - India
- Singapore Mercantile Exchange
- Intertek Mineral Services - Indonesia
- Bukit Makmur.PT - Indonesia
- Eastern Energy - Thailand
- Medco Energi Mining Internasional
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Central Java Power - Indonesia
- Port Waratah Coal Services - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement - Thailand
- Savvy Resources Ltd - HongKong
- Formosa Plastics Group - Taiwan
- Meralco Power Generation, Philippines
- Anglo American - United Kingdom
- GMR Energy Limited - India
- India Bulls Power Limited - India
- Minerals Council of Australia
- Australian Commodity Traders Exchange
- The State Trading Corporation of India Ltd
- Global Green Power PLC Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petron Corporation, Philippines
- Tata Chemicals Ltd - India
- Romanian Commodities Exchange
- Sinarmas Energy and Mining - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- GVK Power & Infra Limited - India
- CIMB Investment Bank - Malaysia
- Renaissance Capital - South Africa
- Orica Mining Services - Indonesia
- Carbofer General Trading SA - India
- Larsen & Toubro Limited - India
- MS Steel International - UAE
- OPG Power Generation Pvt Ltd - India
- Thai Mozambique Logistica
- Economic Council, Georgia
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- Alfred C Toepfer International GmbH - Germany
- Cement Manufacturers Association - India
- Aditya Birla Group - India
- Attock Cement Pakistan Limited
- LBH Netherlands Bv - Netherlands
- Indonesian Coal Mining Association
- Jindal Steel & Power Ltd - India
- Maheswari Brothers Coal Limited - India
- Timah Investasi Mineral - Indoneisa
- Energy Development Corp, Philippines
- Lanco Infratech Ltd - India
- Interocean Group of Companies - India
- Electricity Authority, New Zealand
- San Jose City I Power Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Grasim Industreis Ltd - India
- Indo Tambangraya Megah - Indonesia
- Toyota Tsusho Corporation, Japan
- TeaM Sual Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Jaiprakash Power Ventures ltd
- CNBM International Corporation - China
- ICICI Bank Limited - India
- Makarim & Taira - Indonesia
- Planning Commission, India
- Bukit Baiduri Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Sarangani Energy Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Xindia Steels Limited - India
- Baramulti Group, Indonesia
- Mjunction Services Limited - India
- Wood Mackenzie - Singapore
- Essar Steel Hazira Ltd - India
- Indian Energy Exchange, India
- SMG Consultants - Indonesia
- The Treasury - Australian Government
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
- Chamber of Mines of South Africa
- Ceylon Electricity Board - Sri Lanka
- Vedanta Resources Plc - India
- Ministry of Transport, Egypt
- Kartika Selabumi Mining - Indonesia
- McConnell Dowell - Australia
- Karbindo Abesyapradhi - Indoneisa
- VISA Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- Metalloyd Limited - United Kingdom
- Rio Tinto Coal - Australia
- Energy Link Ltd, New Zealand
- The University of Queensland
- Sakthi Sugars Limited - India
- Trasteel International SA, Italy
- Bhoruka Overseas - Indonesia
- Heidelberg Cement - Germany
- Ambuja Cements Ltd - India
- Global Coal Blending Company Limited - Australia
- Madhucon Powers Ltd - India
- Sical Logistics Limited - India
- Bhatia International Limited - India
- Tamil Nadu electricity Board
- Kapuas Tunggal Persada - Indonesia
- ASAPP Information Group - India
- Edison Trading Spa - Italy
- Siam City Cement PLC, Thailand
- Kideco Jaya Agung - Indonesia
- GAC Shipping (India) Pvt Ltd
- Semirara Mining Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Altura Mining Limited, Indonesia
- Goldman Sachs - Singapore
- Coalindo Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mintek Dendrill Indonesia
- Georgia Ports Authority, United States
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dalmia Cement Bharat India
- Electricity Generating Authority of Thailand
- Vizag Seaport Private Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Meenaskhi Energy Private Limited - India
- Eastern Coal Council - USA
- Star Paper Mills Limited - India
- Antam Resourcindo - Indonesia
- Commonwealth Bank - Australia
- IEA Clean Coal Centre - UK
- Independent Power Producers Association of India
- Barasentosa Lestari - Indonesia
- SMC Global Power, Philippines
- Salva Resources Pvt Ltd - India
- Ministry of Mines - Canada
- Kumho Petrochemical, South Korea
- Cigading International Bulk Terminal - Indonesia
- London Commodity Brokers - England
- PNOC Exploration Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Globalindo Alam Lestari - Indonesia
- Bharathi Cement Corporation - India
- Merrill Lynch Commodities Europe
- Bayan Resources Tbk. - Indonesia
- Uttam Galva Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Straits Asia Resources Limited - Singapore
- Latin American Coal - Colombia
- Sindya Power Generating Company Private Ltd
- Orica Australia Pty. Ltd.
- Asmin Koalindo Tuhup - Indonesia
- International Coal Ventures Pvt Ltd - India
- Mercator Lines Limited - India
- Borneo Indobara - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Indogreen Group - Indonesia
- Parry Sugars Refinery, India
- Riau Bara Harum - Indonesia
- Mercuria Energy - Indonesia
- Oldendorff Carriers - Singapore
- Deloitte Consulting - India
- Pendopo Energi Batubara - Indonesia
- Aboitiz Power Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Agrawal Coal Company - India
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Ministry of Finance - Indonesia
- Binh Thuan Hamico - Vietnam
- Bulk Trading Sa - Switzerland
- Therma Luzon, Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- PTC India Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Australian Coal Association
- Directorate Of Revenue Intelligence - India
- PowerSource Philippines DevCo
- Marubeni Corporation - India
- Holcim Trading Pte Ltd - Singapore
- Power Finance Corporation Ltd., India
- Kobexindo Tractors - Indoneisa
- Global Business Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
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