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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, 29 May 13
SHIP OWNERS KEEP ON SPENDING ON NEWBUILDINGS AS PRICES ARE DEEMED TOO LOW TO RESIST - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
It's been yet another week on increased newbuilding ordering activity with Hellenic ship owners appearing rathe active, on the back of attractive f ...
Tuesday, 28 May 13
NEWCASTLE PORT SHIPPED 9.76 PERCENT MORE COAL W/E 27 MAY 2013
COALspot.com - Newcastle port in Australia has loaded 2,420,366 tons of coal for week ended 0700 hours 27 May 2013, Newcastle Port Corp. said ...
Sunday, 26 May 13
AMPLE SUPPLY, LOW DEMAND KEEP COAL PRICES UNDER PRESSURE
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for average July 2013 delivery have lost 0.07 percent and API 8 CFR South China Coal shipment los ...
Friday, 24 May 13
ENGAGEMENT WITH POTENTIAL STRATEGIC AND OFF TAKE PARTNERS ACCELERATING - REALM RESOURCES
COALspot.com - Following the recent completion of the Feasibility Study, the Realm Resources Ltd. (ASX: RRP) has focused on securing strategic ...
Friday, 24 May 13
US'S COAL PRODUCTION INCREASED WEEK ON WEEK
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 18.90 million short tons (mmst) of ...
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- Bhoruka Overseas - Indonesia
- San Jose City I Power Corp, Philippines
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- Holcim Trading Pte Ltd - Singapore
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- Gujarat Sidhee Cement - India
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- Samtan Co., Ltd - South Korea
- Directorate Of Revenue Intelligence - India
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- PetroVietnam Power Coal Import and Supply Company
- Timah Investasi Mineral - Indoneisa
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- Meenaskhi Energy Private Limited - India
- Economic Council, Georgia
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- Makarim & Taira - Indonesia
- Malabar Cements Ltd - India
- Central Java Power - Indonesia
- Global Business Power Corporation, Philippines
- Interocean Group of Companies - India
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- Salva Resources Pvt Ltd - India
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- Bangladesh Power Developement Board
- Global Green Power PLC Corporation, Philippines
- Electricity Authority, New Zealand
- Orica Mining Services - Indonesia
- Jaiprakash Power Ventures ltd
- International Coal Ventures Pvt Ltd - India
- Latin American Coal - Colombia
- GVK Power & Infra Limited - India
- Vedanta Resources Plc - India
- Uttam Galva Steels Limited - India
- Kapuas Tunggal Persada - Indonesia
- Indonesian Coal Mining Association
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ceylon Electricity Board - Sri Lanka
- Planning Commission, India
- McConnell Dowell - Australia
- Kalimantan Lumbung Energi - Indonesia
- Wilmar Investment Holdings
- Indogreen Group - Indonesia
- New Zealand Coal & Carbon
- Ministry of Finance - Indonesia
- Iligan Light & Power Inc, Philippines
- Semirara Mining Corp, Philippines
- Simpson Spence & Young - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Baramulti Group, Indonesia
- Marubeni Corporation - India
- Commonwealth Bank - Australia
- Independent Power Producers Association of India
- Georgia Ports Authority, United States
- Larsen & Toubro Limited - India
- Jorong Barutama Greston.PT - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Carbofer General Trading SA - India
- Savvy Resources Ltd - HongKong
- ICICI Bank Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Antam Resourcindo - Indonesia
- Star Paper Mills Limited - India
- Orica Australia Pty. Ltd.
- Singapore Mercantile Exchange
- IEA Clean Coal Centre - UK
- Central Electricity Authority - India
- Siam City Cement PLC, Thailand
- Bhatia International Limited - India
- Therma Luzon, Inc, Philippines
- The State Trading Corporation of India Ltd
- Kobexindo Tractors - Indoneisa
- Sinarmas Energy and Mining - Indonesia
- Madhucon Powers Ltd - India
- Minerals Council of Australia
- Manunggal Multi Energi - Indonesia
- ASAPP Information Group - India
- Global Coal Blending Company Limited - Australia
- Grasim Industreis Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- SMC Global Power, Philippines
- Vizag Seaport Private Limited - India
- Tamil Nadu electricity Board
- Sakthi Sugars Limited - India
- Straits Asia Resources Limited - Singapore
- Xindia Steels Limited - India
- Thiess Contractors Indonesia
- MS Steel International - UAE
- European Bulk Services B.V. - Netherlands
- Banpu Public Company Limited - Thailand
- Anglo American - United Kingdom
- Standard Chartered Bank - UAE
- Riau Bara Harum - Indonesia
- Karaikal Port Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Bukit Asam (Persero) Tbk - Indonesia
- CNBM International Corporation - China
- Energy Development Corp, Philippines
- AsiaOL BioFuels Corp., Philippines
- Aboitiz Power Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Videocon Industries ltd - India
- Australian Coal Association
- Posco Energy - South Korea
- Sree Jayajothi Cements Limited - India
- Edison Trading Spa - Italy
- Kartika Selabumi Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Binh Thuan Hamico - Vietnam
- Indika Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Lanco Infratech Ltd - India
- SMG Consultants - Indonesia
- Bhushan Steel Limited - India
- Tata Chemicals Ltd - India
- Dalmia Cement Bharat India
- Chamber of Mines of South Africa
- GAC Shipping (India) Pvt Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jindal Steel & Power Ltd - India
- Kaltim Prima Coal - Indonesia
- Energy Link Ltd, New Zealand
- Aditya Birla Group - India
- Medco Energi Mining Internasional
- Merrill Lynch Commodities Europe
- CIMB Investment Bank - Malaysia
- Heidelberg Cement - Germany
- Parry Sugars Refinery, India
- Mintek Dendrill Indonesia
- Kideco Jaya Agung - Indonesia
- Ambuja Cements Ltd - India
- Sical Logistics Limited - India
- Power Finance Corporation Ltd., India
- PowerSource Philippines DevCo
- Indo Tambangraya Megah - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indian Oil Corporation Limited
- PTC India Limited - India
- Metalloyd Limited - United Kingdom
- Globalindo Alam Lestari - Indonesia
- GMR Energy Limited - India
- Parliament of New Zealand
- Petron Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Ministry of Mines - Canada
- Borneo Indobara - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Krishnapatnam Port Company Ltd. - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mjunction Services Limited - India
- Attock Cement Pakistan Limited
- PNOC Exploration Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Bharathi Cement Corporation - India
- Pendopo Energi Batubara - Indonesia
- Indian Energy Exchange, India
- Essar Steel Hazira Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Rio Tinto Coal - Australia
- Cement Manufacturers Association - India
- Coalindo Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Semirara Mining and Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Wood Mackenzie - Singapore
- South Luzon Thermal Energy Corporation
- Kumho Petrochemical, South Korea
- Port Waratah Coal Services - Australia
- Romanian Commodities Exchange
- Gujarat Mineral Development Corp Ltd - India
- The University of Queensland
- Asmin Koalindo Tuhup - Indonesia
- India Bulls Power Limited - India
- Sarangani Energy Corporation, Philippines
- Mercuria Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Agrawal Coal Company - India
- Ministry of Transport, Egypt
- TeaM Sual Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Renaissance Capital - South Africa
- Formosa Plastics Group - Taiwan
- Eastern Energy - Thailand
- Ind-Barath Power Infra Limited - India
- IHS Mccloskey Coal Group - USA
- Meralco Power Generation, Philippines
- The Treasury - Australian Government
- Africa Commodities Group - South Africa
- Mercator Lines Limited - India
- Deloitte Consulting - India
- SN Aboitiz Power Inc, Philippines
- Altura Mining Limited, Indonesia
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