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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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Monday, 06 May 13
INDONESIAN COAL PRICE REFERENCE FALLS CONTINUE
COALspot.com - The Indonesian government’s declared coal bench mark price has lost $ 3.23 / MT in May 2013.
The monthly coal pr ...
Sunday, 05 May 13
SUB-BIT FOB INDONESIA COAL - MIXED TREND; API 8 CFR SOUTH CHINA COAL - POSITIVE TREND
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for average June 2013 delivery has gained 0.28 percent and API 8 CFR South China Coal shipment&nb ...
Saturday, 04 May 13
INDONESIA TO INDIA PANAMAX FREIGHT : FLAT TO SOFT - CAPT. REDDY
COALspot.com - The demand for iron ore picked up and its pushed up the cape size index by 7.86 pct. Cape index closed at 1,344 points. The BDI ...
Friday, 03 May 13
US PRODUCED 17.9 MILLION SHORT TONS (MMST) OF COAL IN A WEEK
COALspot.com - U.S. produced totaled approximately 17.9 million short tons (mmst) in a week (For the week ended April 27, 2013), EIA said in its lat ...
Friday, 03 May 13
SHIP OWNERS ARE INVESTING HEAVILY IN DRY BULK CARRIER NEWBUILDINGS ONCE MORE: IS THERE ANY RATIONALE? - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Despite the fact that the dry bulk market remains heavily oversupplied and just as the orderbook of newbuildings had began to shrink, it seems that sh ...
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- Mercator Lines Limited - India
- Timah Investasi Mineral - Indoneisa
- Larsen & Toubro Limited - India
- Sical Logistics Limited - India
- CNBM International Corporation - China
- Energy Development Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Siam City Cement PLC, Thailand
- Bhatia International Limited - India
- Sarangani Energy Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Wood Mackenzie - Singapore
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- Mjunction Services Limited - India
- San Jose City I Power Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- Siam City Cement - Thailand
- Intertek Mineral Services - Indonesia
- IEA Clean Coal Centre - UK
- Gujarat Electricity Regulatory Commission - India
- Uttam Galva Steels Limited - India
- Eastern Coal Council - USA
- Bangladesh Power Developement Board
- Tata Chemicals Ltd - India
- Ind-Barath Power Infra Limited - India
- SN Aboitiz Power Inc, Philippines
- Energy Link Ltd, New Zealand
- Indo Tambangraya Megah - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- CIMB Investment Bank - Malaysia
- Bhoruka Overseas - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMG Consultants - Indonesia
- Posco Energy - South Korea
- Baramulti Group, Indonesia
- Directorate Of Revenue Intelligence - India
- Chamber of Mines of South Africa
- Kobexindo Tractors - Indoneisa
- Sojitz Corporation - Japan
- TNB Fuel Sdn Bhd - Malaysia
- Ambuja Cements Ltd - India
- Indogreen Group - Indonesia
- Merrill Lynch Commodities Europe
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- Metalloyd Limited - United Kingdom
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- VISA Power Limited - India
- Jindal Steel & Power Ltd - India
- Petron Corporation, Philippines
- Georgia Ports Authority, United States
- Renaissance Capital - South Africa
- Indika Energy - Indonesia
- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- Aditya Birla Group - India
- Semirara Mining and Power Corporation, Philippines
- Coalindo Energy - Indonesia
- Romanian Commodities Exchange
- Marubeni Corporation - India
- Trasteel International SA, Italy
- Salva Resources Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Edison Trading Spa - Italy
- Australian Coal Association
- Ministry of Transport, Egypt
- Gujarat Mineral Development Corp Ltd - India
- Savvy Resources Ltd - HongKong
- Asmin Koalindo Tuhup - Indonesia
- Mintek Dendrill Indonesia
- Jaiprakash Power Ventures ltd
- Eastern Energy - Thailand
- Therma Luzon, Inc, Philippines
- Sree Jayajothi Cements Limited - India
- GVK Power & Infra Limited - India
- Toyota Tsusho Corporation, Japan
- Essar Steel Hazira Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- New Zealand Coal & Carbon
- Global Business Power Corporation, Philippines
- Bharathi Cement Corporation - India
- Minerals Council of Australia
- The State Trading Corporation of India Ltd
- Lanco Infratech Ltd - India
- Heidelberg Cement - Germany
- Vedanta Resources Plc - India
- Standard Chartered Bank - UAE
- Price Waterhouse Coopers - Russia
- Port Waratah Coal Services - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The University of Queensland
- The Treasury - Australian Government
- Kumho Petrochemical, South Korea
- Sindya Power Generating Company Private Ltd
- Samtan Co., Ltd - South Korea
- European Bulk Services B.V. - Netherlands
- OPG Power Generation Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Sidhee Cement - India
- Thai Mozambique Logistica
- Central Java Power - Indonesia
- Electricity Authority, New Zealand
- Oldendorff Carriers - Singapore
- Economic Council, Georgia
- Carbofer General Trading SA - India
- Medco Energi Mining Internasional
- Singapore Mercantile Exchange
- Parliament of New Zealand
- Attock Cement Pakistan Limited
- Bhushan Steel Limited - India
- Star Paper Mills Limited - India
- Australian Commodity Traders Exchange
- Manunggal Multi Energi - Indonesia
- India Bulls Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Aboitiz Power Corporation - Philippines
- Maheswari Brothers Coal Limited - India
- Interocean Group of Companies - India
- Leighton Contractors Pty Ltd - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bulk Trading Sa - Switzerland
- Banpu Public Company Limited - Thailand
- Madhucon Powers Ltd - India
- Commonwealth Bank - Australia
- SMC Global Power, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Rashtriya Ispat Nigam Limited - India
- Borneo Indobara - Indonesia
- Tamil Nadu electricity Board
- Antam Resourcindo - Indonesia
- Indonesian Coal Mining Association
- Dalmia Cement Bharat India
- Deloitte Consulting - India
- Parry Sugars Refinery, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Thiess Contractors Indonesia
- Mercuria Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Barasentosa Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Cement Manufacturers Association - India
- White Energy Company Limited
- Grasim Industreis Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Goldman Sachs - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Videocon Industries ltd - India
- Indian Oil Corporation Limited
- Anglo American - United Kingdom
- Indian Energy Exchange, India
- IHS Mccloskey Coal Group - USA
- Sakthi Sugars Limited - India
- Global Green Power PLC Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Bukit Baiduri Energy - Indonesia
- Makarim & Taira - Indonesia
- Coastal Gujarat Power Limited - India
- Electricity Generating Authority of Thailand
- TeaM Sual Corporation - Philippines
- Rio Tinto Coal - Australia
- Ministry of Mines - Canada
- Binh Thuan Hamico - Vietnam
- International Coal Ventures Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sinarmas Energy and Mining - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Orica Australia Pty. Ltd.
- PTC India Limited - India
- Latin American Coal - Colombia
- ASAPP Information Group - India
- McConnell Dowell - Australia
- Bukit Makmur.PT - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Independent Power Producers Association of India
- London Commodity Brokers - England
- ICICI Bank Limited - India
- Simpson Spence & Young - Indonesia
- Coal and Oil Company - UAE
- Cigading International Bulk Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Meralco Power Generation, Philippines
- Global Coal Blending Company Limited - Australia
- PNOC Exploration Corporation - Philippines
- Xindia Steels Limited - India
- South Luzon Thermal Energy Corporation
- Jorong Barutama Greston.PT - Indonesia
- Riau Bara Harum - Indonesia
- Meenaskhi Energy Private Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Kaltim Prima Coal - Indonesia
- Ministry of Finance - Indonesia
- Central Electricity Authority - India
- Vijayanagar Sugar Pvt Ltd - India
- MS Steel International - UAE
- LBH Netherlands Bv - Netherlands
- Pendopo Energi Batubara - Indonesia
- GMR Energy Limited - India
- Kapuas Tunggal Persada - Indonesia
- Vizag Seaport Private Limited - India
- Africa Commodities Group - South Africa
- Kartika Selabumi Mining - Indonesia
- Semirara Mining Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Formosa Plastics Group - Taiwan
- PowerSource Philippines DevCo
- Altura Mining Limited, Indonesia
- Orica Mining Services - Indonesia
- Agrawal Coal Company - India
- Karaikal Port Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Planning Commission, India
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