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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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Friday, 01 December 23
COAL MINERS GROUP EXPECTS INDONESIA’S 2023 COAL OUTPUT TO SURPASS TARGET - REUTERS
The Indonesian Coal Mining Association (ICMA) expects the country’s 2023 coal output to surpass the official target of 695 million metric ton ...
Friday, 24 November 23
COAL IMPORTS TO INDIA IN OCTOBER 2023 REACHED HIGHEST LEVELS IN NEARLY A YEAR AND A HALF - VESSELSVALUE, VESON NAUTICAL
In October, coal imports to India reached 13.8 mt in October 2023, according to Oceanbolt, a Veson Nautical solution, the highest level since May 2 ...
Friday, 24 November 23
COAL SHIPMENTS TO ADVANCED ECONOMIES DOWN 17% SO FAR IN 2023 - BIMCO
In the first ten months of 2023, coal shipments to advanced economies fell by 17% y/y, as demand for electricity declined and the share of electric ...
Friday, 24 November 23
INTELLIGENT COAL MINES CONTRIBUTE TO IMPROVING SAFETY STANDARDS - CHINA DAILY
Mechanization, automation and intelligent upgrades have contributed to improved safety in coal mines, though the level of development of intelligen ...
Friday, 24 November 23
WHY AUSTRALIA'S COAL MINES ARE GETTING BIGGER - IEEFA
Australia’s largest coal mines are getting larger. Mines in New South Wales (NSW) are ramping up production following the state’s recov ...
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- Bulk Trading Sa - Switzerland
- MS Steel International - UAE
- Indonesian Coal Mining Association
- Rashtriya Ispat Nigam Limited - India
- Edison Trading Spa - Italy
- Barasentosa Lestari - Indonesia
- Leighton Contractors Pty Ltd - Australia
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- Africa Commodities Group - South Africa
- Iligan Light & Power Inc, Philippines
- Ambuja Cements Ltd - India
- The Treasury - Australian Government
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- White Energy Company Limited
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- Semirara Mining and Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
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- Aditya Birla Group - India
- Petrochimia International Co. Ltd.- Taiwan
- Mintek Dendrill Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Larsen & Toubro Limited - India
- Heidelberg Cement - Germany
- Banpu Public Company Limited - Thailand
- Port Waratah Coal Services - Australia
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- Siam City Cement PLC, Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
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- Global Coal Blending Company Limited - Australia
- Ministry of Mines - Canada
- Australian Coal Association
- Bukit Makmur.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Marubeni Corporation - India
- Meenaskhi Energy Private Limited - India
- Bharathi Cement Corporation - India
- Karbindo Abesyapradhi - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- Metalloyd Limited - United Kingdom
- Renaissance Capital - South Africa
- Gujarat Sidhee Cement - India
- Electricity Generating Authority of Thailand
- Medco Energi Mining Internasional
- Indian Oil Corporation Limited
- Mercuria Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Videocon Industries ltd - India
- Electricity Authority, New Zealand
- Power Finance Corporation Ltd., India
- Kumho Petrochemical, South Korea
- Australian Commodity Traders Exchange
- Kapuas Tunggal Persada - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Rio Tinto Coal - Australia
- Tata Chemicals Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Antam Resourcindo - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Formosa Plastics Group - Taiwan
- SMG Consultants - Indonesia
- Globalindo Alam Lestari - Indonesia
- Indika Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- European Bulk Services B.V. - Netherlands
- Global Green Power PLC Corporation, Philippines
- GVK Power & Infra Limited - India
- Star Paper Mills Limited - India
- South Luzon Thermal Energy Corporation
- Miang Besar Coal Terminal - Indonesia
- Madhucon Powers Ltd - India
- Price Waterhouse Coopers - Russia
- Jaiprakash Power Ventures ltd
- Orica Australia Pty. Ltd.
- Eastern Energy - Thailand
- ASAPP Information Group - India
- McConnell Dowell - Australia
- Aboitiz Power Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Intertek Mineral Services - Indonesia
- PowerSource Philippines DevCo
- Commonwealth Bank - Australia
- Economic Council, Georgia
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- Gujarat Mineral Development Corp Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- Energy Development Corp, Philippines
- Posco Energy - South Korea
- VISA Power Limited - India
- Bhoruka Overseas - Indonesia
- Bayan Resources Tbk. - Indonesia
- Planning Commission, India
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- Coalindo Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Xindia Steels Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Energy Link Ltd, New Zealand
- SN Aboitiz Power Inc, Philippines
- PTC India Limited - India
- Petron Corporation, Philippines
- Vizag Seaport Private Limited - India
- Coastal Gujarat Power Limited - India
- Directorate Of Revenue Intelligence - India
- Toyota Tsusho Corporation, Japan
- Samtan Co., Ltd - South Korea
- Ministry of Transport, Egypt
- Bhushan Steel Limited - India
- Agrawal Coal Company - India
- GN Power Mariveles Coal Plant, Philippines
- Kepco SPC Power Corporation, Philippines
- Baramulti Group, Indonesia
- Riau Bara Harum - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Timah Investasi Mineral - Indoneisa
- Deloitte Consulting - India
- Georgia Ports Authority, United States
- Sree Jayajothi Cements Limited - India
- GMR Energy Limited - India
- Bhatia International Limited - India
- Parliament of New Zealand
- Therma Luzon, Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- GAC Shipping (India) Pvt Ltd
- Binh Thuan Hamico - Vietnam
- Latin American Coal - Colombia
- TeaM Sual Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Cement Manufacturers Association - India
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- Dalmia Cement Bharat India
- Meralco Power Generation, Philippines
- Vedanta Resources Plc - India
- New Zealand Coal & Carbon
- The University of Queensland
- ICICI Bank Limited - India
- Lanco Infratech Ltd - India
- Standard Chartered Bank - UAE
- Trasteel International SA, Italy
- Mjunction Services Limited - India
- Central Electricity Authority - India
- Indogreen Group - Indonesia
- Uttam Galva Steels Limited - India
- Thai Mozambique Logistica
- Kartika Selabumi Mining - Indonesia
- Sojitz Corporation - Japan
- Bangladesh Power Developement Board
- Borneo Indobara - Indonesia
- Altura Mining Limited, Indonesia
- Global Business Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Sindya Power Generating Company Private Ltd
- Savvy Resources Ltd - HongKong
- Wilmar Investment Holdings
- Bukit Baiduri Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- CNBM International Corporation - China
- Anglo American - United Kingdom
- Parry Sugars Refinery, India
- Alfred C Toepfer International GmbH - Germany
- PNOC Exploration Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- CIMB Investment Bank - Malaysia
- Malabar Cements Ltd - India
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- Salva Resources Pvt Ltd - India
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- Ministry of Finance - Indonesia
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- India Bulls Power Limited - India
- Romanian Commodities Exchange
- Sakthi Sugars Limited - India
- Siam City Cement - Thailand
- Indo Tambangraya Megah - Indonesia
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- IEA Clean Coal Centre - UK
- Wood Mackenzie - Singapore
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- London Commodity Brokers - England
- Kaltim Prima Coal - Indonesia
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- OPG Power Generation Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
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