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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, 13 June 13
HANDY: SHORT PERIOD WERE FIXED AT AROUND USD 9000 LEVEL
Handy
Despite falling rates for bigger sizes, the Supras in Atlantic are seeing some improvements with fresh biz. US Gulf positions fetching tick a ...
Thursday, 13 June 13
BIMCO EXPECTS SUBDUED CAPESIZE EARNINGS FOR THE COMING WEEKS - HELLENIC SHIPPING NEWS
Bulk is not only about China even though it is a key driver. In this section, we have taken a closer look at the European seaborne coal markets, whi ...
Thursday, 13 June 13
RIO TINTO AGREES SALE OF EAGLE PROJECT FOR AN ESTIMATED US$325 MILLION IN CASH
COALspot.com - Rio Tinto has reached a binding agreement to sell its Eagle project to Lundin Mining Corporation for an estimated US$325 million in c ...
Thursday, 13 June 13
HARD COAL IMPORTS RISE SHARPLY IN GERMANY IN Q1 2013 - COAL IMPORTERS ASSOCIATION
Coal-fired Power Plants in Germany: Pillars of the Grid and the Energy Turnaround; Hard Coal Consumption and Hard Coal Imports Rise Sharply in Germa ...
Wednesday, 12 June 13
INDONESIAN COAL PRICE REFERENCE SLIDES TO 2013 LOW
COALspot.com - Indonesian Coal Price Reference continues to take its lumps this month, dropping about 0.54 % and hitting a 2013 low. The Indonesian ...
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- PetroVietnam Power Coal Import and Supply Company
- Marubeni Corporation - India
- Videocon Industries ltd - India
- Therma Luzon, Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vijayanagar Sugar Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Energy Development Corp, Philippines
- Indogreen Group - Indonesia
- The State Trading Corporation of India Ltd
- Mintek Dendrill Indonesia
- Kumho Petrochemical, South Korea
- Banpu Public Company Limited - Thailand
- Binh Thuan Hamico - Vietnam
- European Bulk Services B.V. - Netherlands
- Grasim Industreis Ltd - India
- CNBM International Corporation - China
- Thai Mozambique Logistica
- Thiess Contractors Indonesia
- Mercuria Energy - Indonesia
- Siam City Cement PLC, Thailand
- Aboitiz Power Corporation - Philippines
- Bangladesh Power Developement Board
- Neyveli Lignite Corporation Ltd, - India
- Miang Besar Coal Terminal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Commonwealth Bank - Australia
- Anglo American - United Kingdom
- Intertek Mineral Services - Indonesia
- Aditya Birla Group - India
- Xindia Steels Limited - India
- SN Aboitiz Power Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Vedanta Resources Plc - India
- Gujarat Electricity Regulatory Commission - India
- India Bulls Power Limited - India
- Manunggal Multi Energi - Indonesia
- New Zealand Coal & Carbon
- Ministry of Transport, Egypt
- Baramulti Group, Indonesia
- OPG Power Generation Pvt Ltd - India
- Sojitz Corporation - Japan
- Straits Asia Resources Limited - Singapore
- Africa Commodities Group - South Africa
- Kaltim Prima Coal - Indonesia
- London Commodity Brokers - England
- Siam City Cement - Thailand
- Samtan Co., Ltd - South Korea
- Directorate Of Revenue Intelligence - India
- Romanian Commodities Exchange
- Independent Power Producers Association of India
- McConnell Dowell - Australia
- Maharashtra Electricity Regulatory Commission - India
- AsiaOL BioFuels Corp., Philippines
- Ambuja Cements Ltd - India
- Uttam Galva Steels Limited - India
- San Jose City I Power Corp, Philippines
- Sindya Power Generating Company Private Ltd
- Wood Mackenzie - Singapore
- Simpson Spence & Young - Indonesia
- Vizag Seaport Private Limited - India
- Meralco Power Generation, Philippines
- ICICI Bank Limited - India
- Timah Investasi Mineral - Indoneisa
- TeaM Sual Corporation - Philippines
- Altura Mining Limited, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Essar Steel Hazira Ltd - India
- PNOC Exploration Corporation - Philippines
- Rio Tinto Coal - Australia
- Bharathi Cement Corporation - India
- Ceylon Electricity Board - Sri Lanka
- Power Finance Corporation Ltd., India
- Sical Logistics Limited - India
- SMG Consultants - Indonesia
- Makarim & Taira - Indonesia
- Oldendorff Carriers - Singapore
- Tata Chemicals Ltd - India
- Economic Council, Georgia
- VISA Power Limited - India
- Orica Mining Services - Indonesia
- Merrill Lynch Commodities Europe
- Renaissance Capital - South Africa
- Kepco SPC Power Corporation, Philippines
- Chamber of Mines of South Africa
- Edison Trading Spa - Italy
- Semirara Mining and Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Chettinad Cement Corporation Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Eastern Energy - Thailand
- Ministry of Finance - Indonesia
- Gujarat Sidhee Cement - India
- Latin American Coal - Colombia
- Madhucon Powers Ltd - India
- Price Waterhouse Coopers - Russia
- GAC Shipping (India) Pvt Ltd
- Attock Cement Pakistan Limited
- IEA Clean Coal Centre - UK
- SMC Global Power, Philippines
- Kohat Cement Company Ltd. - Pakistan
- GVK Power & Infra Limited - India
- Central Electricity Authority - India
- Bhatia International Limited - India
- Karaikal Port Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Electricity Generating Authority of Thailand
- Alfred C Toepfer International GmbH - Germany
- Indonesian Coal Mining Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- Salva Resources Pvt Ltd - India
- Parliament of New Zealand
- Bhushan Steel Limited - India
- Sakthi Sugars Limited - India
- Sree Jayajothi Cements Limited - India
- Rashtriya Ispat Nigam Limited - India
- Wilmar Investment Holdings
- Leighton Contractors Pty Ltd - Australia
- GMR Energy Limited - India
- Jaiprakash Power Ventures ltd
- Borneo Indobara - Indonesia
- Antam Resourcindo - Indonesia
- Toyota Tsusho Corporation, Japan
- White Energy Company Limited
- Ind-Barath Power Infra Limited - India
- Kartika Selabumi Mining - Indonesia
- Bhoruka Overseas - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Australian Coal Association
- Mercator Lines Limited - India
- Posco Energy - South Korea
- Kapuas Tunggal Persada - Indonesia
- Meenaskhi Energy Private Limited - India
- South Luzon Thermal Energy Corporation
- Australian Commodity Traders Exchange
- Singapore Mercantile Exchange
- International Coal Ventures Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Georgia Ports Authority, United States
- Asmin Koalindo Tuhup - Indonesia
- Parry Sugars Refinery, India
- IHS Mccloskey Coal Group - USA
- Pendopo Energi Batubara - Indonesia
- Bukit Baiduri Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Eastern Coal Council - USA
- Iligan Light & Power Inc, Philippines
- Dalmia Cement Bharat India
- Formosa Plastics Group - Taiwan
- Larsen & Toubro Limited - India
- Planning Commission, India
- Billiton Holdings Pty Ltd - Australia
- Cement Manufacturers Association - India
- Trasteel International SA, Italy
- Jindal Steel & Power Ltd - India
- Energy Link Ltd, New Zealand
- Global Coal Blending Company Limited - Australia
- Medco Energi Mining Internasional
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Mines - Canada
- Bulk Trading Sa - Switzerland
- Carbofer General Trading SA - India
- Star Paper Mills Limited - India
- Deloitte Consulting - India
- Maheswari Brothers Coal Limited - India
- Agrawal Coal Company - India
- Goldman Sachs - Singapore
- The University of Queensland
- Mjunction Services Limited - India
- Coal and Oil Company - UAE
- Heidelberg Cement - Germany
- Bahari Cakrawala Sebuku - Indonesia
- Indian Energy Exchange, India
- Global Business Power Corporation, Philippines
- Orica Australia Pty. Ltd.
- Krishnapatnam Port Company Ltd. - India
- Savvy Resources Ltd - HongKong
- Barasentosa Lestari - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Karbindo Abesyapradhi - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Oil Corporation Limited
- PTC India Limited - India
- Central Java Power - Indonesia
- The Treasury - Australian Government
- Cigading International Bulk Terminal - Indonesia
- Petron Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Electricity Authority, New Zealand
- Standard Chartered Bank - UAE
- Jorong Barutama Greston.PT - Indonesia
- Malabar Cements Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Interocean Group of Companies - India
- Bukit Asam (Persero) Tbk - Indonesia
- Lanco Infratech Ltd - India
- Coastal Gujarat Power Limited - India
- MS Steel International - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Port Waratah Coal Services - Australia
- Globalindo Alam Lestari - Indonesia
- Coalindo Energy - Indonesia
- PowerSource Philippines DevCo
- Minerals Council of Australia
- Bukit Makmur.PT - Indonesia
- Semirara Mining Corp, Philippines
- LBH Netherlands Bv - Netherlands
- ASAPP Information Group - India
- Riau Bara Harum - Indonesia
- Sarangani Energy Corporation, Philippines
- Tamil Nadu electricity Board
- Indika Energy - Indonesia
- CIMB Investment Bank - Malaysia
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