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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, 04 June 13
WOOD MACKENZIE SAYS THE CHINA'S THERMAL COAL DEMAND WILL REACH NEARLY 7BTPA BY 2030
COALspot.com - The Illusion of Peak Coal' says that despite efforts to limit coal consumption and seek alternative fuel options, China's strong ap ...
Saturday, 01 June 13
COAL PRICES STRUGGLE TO FIRM UP
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for average July 2013 delivery have gained 0.18 percent week on week and 0.03 percent ...
Saturday, 01 June 13
THE FREIGHT MARKET FOR S7 AND S8 SECTORS ARE EXPECTED TO BE SOFT - VISTAAR
COALspot.com – The freights are remains weak week ended 31 May 2013, as BDI fell 2.05 pct and closed at 809 points on 31 May 2013.
The Cape ...
Friday, 31 May 13
US PRODUCED 18.5 MILLION SHORT TONS OF COAL W/E 25 MAY 2013
COALspot.com – United states the world’s second largest coal producer produced totalled approximately 18.50 million short tons (mmst) of ...
Thursday, 30 May 13
HANDY: RBCT ROUND WAS AROUND USD 9K + 300 BB - FEARNRESEARCH
Handy
THE Atlantic market remained flat. The USG-Feast was at USD 19k and Black Sea-Feast was at USD 12k. The Pacific market remained quiet with no ...
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- Barasentosa Lestari - Indonesia
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- Minerals Council of Australia
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- Economic Council, Georgia
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- Larsen & Toubro Limited - India
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- Bangladesh Power Developement Board
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- Bhushan Steel Limited - India
- Therma Luzon, Inc, Philippines
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- Meralco Power Generation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Mercuria Energy - Indonesia
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- Directorate General of MIneral and Coal - Indonesia
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- Marubeni Corporation - India
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- Tata Chemicals Ltd - India
- Energy Development Corp, Philippines
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- Global Coal Blending Company Limited - Australia
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- Power Finance Corporation Ltd., India
- Australian Commodity Traders Exchange
- White Energy Company Limited
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- Coalindo Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Commonwealth Bank - Australia
- Ministry of Mines - Canada
- Essar Steel Hazira Ltd - India
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
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- Australian Coal Association
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- Heidelberg Cement - Germany
- Jaiprakash Power Ventures ltd
- Price Waterhouse Coopers - Russia
- Petrochimia International Co. Ltd.- Taiwan
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- LBH Netherlands Bv - Netherlands
- The University of Queensland
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- Indonesian Coal Mining Association
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- Semirara Mining Corp, Philippines
- Makarim & Taira - Indonesia
- Dalmia Cement Bharat India
- Miang Besar Coal Terminal - Indonesia
- New Zealand Coal & Carbon
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- Sical Logistics Limited - India
- Karbindo Abesyapradhi - Indoneisa
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- Krishnapatnam Port Company Ltd. - India
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Eastern Energy - Thailand
- Salva Resources Pvt Ltd - India
- Attock Cement Pakistan Limited
- Indian Oil Corporation Limited
- Iligan Light & Power Inc, Philippines
- Indogreen Group - Indonesia
- Indika Energy - Indonesia
- Electricity Authority, New Zealand
- Parry Sugars Refinery, India
- IEA Clean Coal Centre - UK
- Bharathi Cement Corporation - India
- GVK Power & Infra Limited - India
- Merrill Lynch Commodities Europe
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- Malabar Cements Ltd - India
- Intertek Mineral Services - Indonesia
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- Orica Australia Pty. Ltd.
- Metalloyd Limited - United Kingdom
- PNOC Exploration Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Xindia Steels Limited - India
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- Sindya Power Generating Company Private Ltd
- Trasteel International SA, Italy
- Africa Commodities Group - South Africa
- OPG Power Generation Pvt Ltd - India
- Orica Mining Services - Indonesia
- Renaissance Capital - South Africa
- Parliament of New Zealand
- Coastal Gujarat Power Limited - India
- International Coal Ventures Pvt Ltd - India
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- Rashtriya Ispat Nigam Limited - India
- Ministry of Transport, Egypt
- Anglo American - United Kingdom
- Madhucon Powers Ltd - India
- Bayan Resources Tbk. - Indonesia
- Independent Power Producers Association of India
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- Formosa Plastics Group - Taiwan
- Kohat Cement Company Ltd. - Pakistan
- Posco Energy - South Korea
- Goldman Sachs - Singapore
- Carbofer General Trading SA - India
- ICICI Bank Limited - India
- Bhoruka Overseas - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kumho Petrochemical, South Korea
- PTC India Limited - India
- CNBM International Corporation - China
- Grasim Industreis Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Coal and Oil Company - UAE
- SMC Global Power, Philippines
- Sarangani Energy Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- IHS Mccloskey Coal Group - USA
- Truba Alam Manunggal Engineering.Tbk - Indonesia
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- Energy Link Ltd, New Zealand
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- European Bulk Services B.V. - Netherlands
- Planning Commission, India
- Electricity Generating Authority of Thailand
- Ministry of Finance - Indonesia
- Global Business Power Corporation, Philippines
- Siam City Cement - Thailand
- Georgia Ports Authority, United States
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