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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.
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Friday, 07 June 13
MEDITERRANEAN COAL MARKETS
Press Release: 3rd International Conference Mediterranean Coal Markets will be held on 16-17th of September 2013, Istanbul, Turkey, Ceylan Intercont ...
Friday, 07 June 13
US'S COAL PRODUCTION INCREASED BY 0.54 PER CENT THE WEEK ENDED JUNE 1
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 18.60 million short tons (mmst) of ...
Thursday, 06 June 13
WE ARE SEEING SOME FRESH INDO COAL TO CHINA AND INDIA - FEARNRESEARCH
Handy
In the Atlantic, the Gulf remains firm for the next week with a few orders in the market. The Supramaxes are seeing around low 20k for fronth ...
Wednesday, 05 June 13
DON'T AVOID PAYING COAL ROYALTY TO THE GOVERNMENT - INDONESIAN ENERGY MINISTER
COALspot.com – “Every country has the right to make policies to protect their national interests”, Energy and Mineral Resources Mi ...
Tuesday, 04 June 13
NEWCASTLE PORT SHIPPED 2.56 MILLION TONS OF COAL IN A WEEK
COALspot.com - Newcastle port in Australia has loaded 2,563,596 tons of coal for week ended 0700 hours 3 June 2013, Newcastle Port Corp. said ...
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- PetroVietnam Power Coal Import and Supply Company
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- Attock Cement Pakistan Limited
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- Antam Resourcindo - Indonesia
- Alfred C Toepfer International GmbH - Germany
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- Coal and Oil Company - UAE
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- Wood Mackenzie - Singapore
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- Tata Chemicals Ltd - India
- Minerals Council of Australia
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- Krishnapatnam Port Company Ltd. - India
- Global Business Power Corporation, Philippines
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- Eastern Energy - Thailand
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- Commonwealth Bank - Australia
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- Indonesian Coal Mining Association
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- Banpu Public Company Limited - Thailand
- Jorong Barutama Greston.PT - Indonesia
- SMC Global Power, Philippines
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- Romanian Commodities Exchange
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- Sindya Power Generating Company Private Ltd
- Petrochimia International Co. Ltd.- Taiwan
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- Grasim Industreis Ltd - India
- Cigading International Bulk Terminal - Indonesia
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- South Luzon Thermal Energy Corporation
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- International Coal Ventures Pvt Ltd - India
- Energy Development Corp, Philippines
- Uttam Galva Steels Limited - India
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- Economic Council, Georgia
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- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Mineral Development Corp Ltd - India
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