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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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Wednesday, 19 June 13
NEWCASTLE SHIPPED 16.05 PERCENT LESS COAL W/E 17 JUNE 2013
COALspot.com - Newcastle port in Australia has loaded 2,606,071 tons of coal for the week ended 0700 hours 17 June 2013, Newcastle Port Corp. ...
Sunday, 16 June 13
WEAK DEMAND KEEPS COAL PRICES LOW
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for average July 2013 delivery have lost 2.94 percent week on week but gained 0.06 percent ...
Saturday, 15 June 13
S7 AND S8 ROUTES ARE EXPECTED TO BE STEADY NEXT WEEK - VISTAAR
COALspot.com - This week freight movement was fairly firm with news of China is rebuilding iron ore stockpiles, and ease import rules. Cape and Pana ...
Saturday, 15 June 13
SHIPPING CONFIDENCE REACHES HIGHEST LEVEL FOR TWO AND A HALF YEARS - MOORE STEPHENS
Overall confidence levels in the shipping industry rose to their highest level for two and a half years in the three months ended May 2013, accordin ...
Friday, 14 June 13
U.S. COAL PRODUCTION TOTALED APPROXIMATELY 18.20 MILLION SHORT TONS W/E 8 JUNE 2013
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 18.20 million short tons (mmst) of ...
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- Economic Council, Georgia
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- Orica Mining Services - Indonesia
- Heidelberg Cement - Germany
- TeaM Sual Corporation - Philippines
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- Coastal Gujarat Power Limited - India
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- Trasteel International SA, Italy
- The Treasury - Australian Government
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- Metalloyd Limited - United Kingdom
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- Planning Commission, India
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- Sindya Power Generating Company Private Ltd
- Edison Trading Spa - Italy
- Parliament of New Zealand
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- Indian Oil Corporation Limited
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- Globalindo Alam Lestari - Indonesia
- Energy Development Corp, Philippines
- Ambuja Cements Ltd - India
- Indika Energy - Indonesia
- Essar Steel Hazira Ltd - India
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- Semirara Mining Corp, Philippines
- Toyota Tsusho Corporation, Japan
- Meralco Power Generation, Philippines
- Global Green Power PLC Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- SMG Consultants - Indonesia
- Posco Energy - South Korea
- Pendopo Energi Batubara - Indonesia
- Tamil Nadu electricity Board
- Power Finance Corporation Ltd., India
- IEA Clean Coal Centre - UK
- Samtan Co., Ltd - South Korea
- GVK Power & Infra Limited - India
- Therma Luzon, Inc, Philippines
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- Bank of Tokyo Mitsubishi UFJ Ltd
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- Krishnapatnam Port Company Ltd. - India
- Gujarat Electricity Regulatory Commission - India
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- Pipit Mutiara Jaya. PT, Indonesia
- Port Waratah Coal Services - Australia
- White Energy Company Limited
- TNB Fuel Sdn Bhd - Malaysia
- VISA Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Indian Energy Exchange, India
- India Bulls Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PTC India Limited - India
- Singapore Mercantile Exchange
- Chamber of Mines of South Africa
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- Australian Coal Association
- Tata Chemicals Ltd - India
- Romanian Commodities Exchange
- Leighton Contractors Pty Ltd - Australia
- GN Power Mariveles Coal Plant, Philippines
- Wilmar Investment Holdings
- ASAPP Information Group - India
- Mercuria Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Altura Mining Limited, Indonesia
- Siam City Cement - Thailand
- Simpson Spence & Young - Indonesia
- Jaiprakash Power Ventures ltd
- Eastern Coal Council - USA
- Bharathi Cement Corporation - India
- Latin American Coal - Colombia
- Indo Tambangraya Megah - Indonesia
- Gujarat Sidhee Cement - India
- Price Waterhouse Coopers - Russia
- Ind-Barath Power Infra Limited - India
- Bhoruka Overseas - Indonesia
- Thai Mozambique Logistica
- Coal and Oil Company - UAE
- Medco Energi Mining Internasional
- Kumho Petrochemical, South Korea
- Barasentosa Lestari - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Independent Power Producers Association of India
- McConnell Dowell - Australia
- Eastern Energy - Thailand
- Asmin Koalindo Tuhup - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Coalindo Energy - Indonesia
- Deloitte Consulting - India
- Directorate Of Revenue Intelligence - India
- Renaissance Capital - South Africa
- Central Java Power - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Anglo American - United Kingdom
- Mjunction Services Limited - India
- Bukit Makmur.PT - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Aditya Birla Group - India
- Timah Investasi Mineral - Indoneisa
- Rio Tinto Coal - Australia
- Kohat Cement Company Ltd. - Pakistan
- Australian Commodity Traders Exchange
- Jorong Barutama Greston.PT - Indonesia
- Antam Resourcindo - Indonesia
- Wood Mackenzie - Singapore
- Kapuas Tunggal Persada - Indonesia
- Mintek Dendrill Indonesia
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- Parry Sugars Refinery, India
- Attock Cement Pakistan Limited
- Vedanta Resources Plc - India
- SMC Global Power, Philippines
- Carbofer General Trading SA - India
- Riau Bara Harum - Indonesia
- PowerSource Philippines DevCo
- Videocon Industries ltd - India
- ICICI Bank Limited - India
- Kalimantan Lumbung Energi - Indonesia
- IHS Mccloskey Coal Group - USA
- Ministry of Mines - Canada
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Goldman Sachs - Singapore
- Electricity Authority, New Zealand
- MS Steel International - UAE
- The State Trading Corporation of India Ltd
- Siam City Cement PLC, Thailand
- Cement Manufacturers Association - India
- Kideco Jaya Agung - Indonesia
- Kepco SPC Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
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- AsiaOL BioFuels Corp., Philippines
- Aboitiz Power Corporation - Philippines
- Ministry of Finance - Indonesia
- Bukit Baiduri Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Manunggal Multi Energi - Indonesia
- New Zealand Coal & Carbon
- Central Electricity Authority - India
- Sakthi Sugars Limited - India
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Bhatia International Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Jindal Steel & Power Ltd - India
- Georgia Ports Authority, United States
- CNBM International Corporation - China
- GMR Energy Limited - India
- Indonesian Coal Mining Association
- San Jose City I Power Corp, Philippines
- South Luzon Thermal Energy Corporation
- Commonwealth Bank - Australia
- Marubeni Corporation - India
- Banpu Public Company Limited - Thailand
- Kobexindo Tractors - Indoneisa
- OPG Power Generation Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- Bayan Resources Tbk. - Indonesia
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- Electricity Generating Authority of Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- Sree Jayajothi Cements Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Kaltim Prima Coal - Indonesia
- Dalmia Cement Bharat India
- Ceylon Electricity Board - Sri Lanka
- Interocean Group of Companies - India
- Africa Commodities Group - South Africa
- Sical Logistics Limited - India
- LBH Netherlands Bv - Netherlands
- Petrochimia International Co. Ltd.- Taiwan
- Lanco Infratech Ltd - India
- Sojitz Corporation - Japan
- Indogreen Group - Indonesia
- Mercator Lines Limited - India
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- Standard Chartered Bank - UAE
- The University of Queensland
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