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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$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Saturday, 07 December 13
A RARE TIME IN RECENT SHIPPING MARKET HISTORY: BOTH DRY BULK AND VLCC TANKER EARNINGS ARE ON THE RISE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Around this time of year, back in 2008, i.e. five years ago, the shipping markets were plagued with the aftermath of the global financial crisis tha ...
Friday, 06 December 13
INDONESIAN PARLIAMENT REJECTED A GOVERNMENT PROPOSAL TO EASE THE BAN ON EXPORTING UNPROCESSED ORE
COALspot.com: Indonesian House of Representatives rejected a proposal from Energy and Mineral Resources Minister Jero Wacik on to ease the ban on ex ...
Friday, 06 December 13
THE MINISTRY OF ENERGY & MINERAL RESOURCES OF INDONESIA FIXED DEC'13 HBA AT US$ 80.31
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia has increased government declared coal bench mark price by US$ 2.18 / MT ...
Friday, 06 December 13
US PRODUCED APPROXIMATELY 82.8 MILLION SHORT TONS OF COAL IN NOVEMBER 2013
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.00 million short tons (mmst) of coal in ...
Friday, 06 December 13
PANAMAXES HAVE BEEN THE ' WEAPON OF CHOICE' BY MOST DRY BULK SHIP OWNERS DURING 2013 - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Low ship prices, the direct consequence of subdued freight rates for the larger part of 2013 have been the main driving force behind this year's ag ...
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- Chettinad Cement Corporation Ltd - India
- Jaiprakash Power Ventures ltd
- Latin American Coal - Colombia
- Kohat Cement Company Ltd. - Pakistan
- Vedanta Resources Plc - India
- Meenaskhi Energy Private Limited - India
- Kapuas Tunggal Persada - Indonesia
- Kumho Petrochemical, South Korea
- TeaM Sual Corporation - Philippines
- Mercator Lines Limited - India
- Semirara Mining and Power Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Meralco Power Generation, Philippines
- Xindia Steels Limited - India
- Vizag Seaport Private Limited - India
- Siam City Cement PLC, Thailand
- Makarim & Taira - Indonesia
- Kartika Selabumi Mining - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Romanian Commodities Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- PNOC Exploration Corporation - Philippines
- Deloitte Consulting - India
- Billiton Holdings Pty Ltd - Australia
- Bhatia International Limited - India
- Mercuria Energy - Indonesia
- Economic Council, Georgia
- GVK Power & Infra Limited - India
- International Coal Ventures Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Posco Energy - South Korea
- Semirara Mining Corp, Philippines
- Parliament of New Zealand
- Larsen & Toubro Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Pendopo Energi Batubara - Indonesia
- Bangladesh Power Developement Board
- Bayan Resources Tbk. - Indonesia
- Australian Commodity Traders Exchange
- Bahari Cakrawala Sebuku - Indonesia
- GAC Shipping (India) Pvt Ltd
- Sree Jayajothi Cements Limited - India
- Power Finance Corporation Ltd., India
- Sarangani Energy Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- SN Aboitiz Power Inc, Philippines
- Rio Tinto Coal - Australia
- Attock Cement Pakistan Limited
- Formosa Plastics Group - Taiwan
- Eastern Coal Council - USA
- Agrawal Coal Company - India
- Coal and Oil Company - UAE
- Barasentosa Lestari - Indonesia
- Wood Mackenzie - Singapore
- European Bulk Services B.V. - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Energy - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Salva Resources Pvt Ltd - India
- The University of Queensland
- Minerals Council of Australia
- Australian Coal Association
- Heidelberg Cement - Germany
- CIMB Investment Bank - Malaysia
- Sakthi Sugars Limited - India
- Simpson Spence & Young - Indonesia
- Holcim Trading Pte Ltd - Singapore
- OPG Power Generation Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Antam Resourcindo - Indonesia
- Borneo Indobara - Indonesia
- Medco Energi Mining Internasional
- Indo Tambangraya Megah - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Goldman Sachs - Singapore
- PTC India Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Global Green Power PLC Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Coastal Gujarat Power Limited - India
- PowerSource Philippines DevCo
- Lanco Infratech Ltd - India
- ASAPP Information Group - India
- Therma Luzon, Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- India Bulls Power Limited - India
- LBH Netherlands Bv - Netherlands
- Baramulti Group, Indonesia
- Parry Sugars Refinery, India
- Merrill Lynch Commodities Europe
- Gujarat Sidhee Cement - India
- Star Paper Mills Limited - India
- Gujarat Electricity Regulatory Commission - India
- Maheswari Brothers Coal Limited - India
- Standard Chartered Bank - UAE
- IEA Clean Coal Centre - UK
- Kaltim Prima Coal - Indonesia
- Intertek Mineral Services - Indonesia
- Tata Chemicals Ltd - India
- Aditya Birla Group - India
- Indonesian Coal Mining Association
- MS Steel International - UAE
- Kideco Jaya Agung - Indonesia
- Grasim Industreis Ltd - India
- SMC Global Power, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Krishnapatnam Port Company Ltd. - India
- GMR Energy Limited - India
- Rashtriya Ispat Nigam Limited - India
- Savvy Resources Ltd - HongKong
- Bhushan Steel Limited - India
- London Commodity Brokers - England
- Bukit Baiduri Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Essar Steel Hazira Ltd - India
- Renaissance Capital - South Africa
- Samtan Co., Ltd - South Korea
- Marubeni Corporation - India
- Videocon Industries ltd - India
- Global Coal Blending Company Limited - Australia
- Interocean Group of Companies - India
- Madhucon Powers Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indogreen Group - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Altura Mining Limited, Indonesia
- Indika Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Bukit Makmur.PT - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Chamber of Mines of South Africa
- Oldendorff Carriers - Singapore
- Coalindo Energy - Indonesia
- Edison Trading Spa - Italy
- Petron Corporation, Philippines
- Cement Manufacturers Association - India
- Cigading International Bulk Terminal - Indonesia
- Tamil Nadu electricity Board
- Anglo American - United Kingdom
- Wilmar Investment Holdings
- Orica Mining Services - Indonesia
- Karaikal Port Pvt Ltd - India
- Indian Energy Exchange, India
- Jindal Steel & Power Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Electricity Generating Authority of Thailand
- Sinarmas Energy and Mining - Indonesia
- Orica Australia Pty. Ltd.
- Africa Commodities Group - South Africa
- VISA Power Limited - India
- Ind-Barath Power Infra Limited - India
- Binh Thuan Hamico - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- Trasteel International SA, Italy
- CNBM International Corporation - China
- The Treasury - Australian Government
- Siam City Cement - Thailand
- Leighton Contractors Pty Ltd - Australia
- IHS Mccloskey Coal Group - USA
- SMG Consultants - Indonesia
- Ministry of Mines - Canada
- Alfred C Toepfer International GmbH - Germany
- Mintek Dendrill Indonesia
- Thiess Contractors Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- Energy Development Corp, Philippines
- Ministry of Transport, Egypt
- Thai Mozambique Logistica
- Independent Power Producers Association of India
- Global Business Power Corporation, Philippines
- White Energy Company Limited
- Metalloyd Limited - United Kingdom
- Indian Oil Corporation Limited
- Georgia Ports Authority, United States
- PetroVietnam Power Coal Import and Supply Company
- Carbofer General Trading SA - India
- New Zealand Coal & Carbon
- Port Waratah Coal Services - Australia
- Uttam Galva Steels Limited - India
- Bharathi Cement Corporation - India
- Iligan Light & Power Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- South Luzon Thermal Energy Corporation
- McConnell Dowell - Australia
- Central Java Power - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Mjunction Services Limited - India
- Straits Asia Resources Limited - Singapore
- Bulk Trading Sa - Switzerland
- Singapore Mercantile Exchange
- Electricity Authority, New Zealand
- Kepco SPC Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- ICICI Bank Limited - India
- Sical Logistics Limited - India
- Planning Commission, India
- Central Electricity Authority - India
- Ministry of Finance - Indonesia
- Dalmia Cement Bharat India
- Globalindo Alam Lestari - Indonesia
- Ambuja Cements Ltd - India
- Malabar Cements Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Toyota Tsusho Corporation, Japan
- Sojitz Corporation - Japan
- AsiaOL BioFuels Corp., Philippines
- Energy Link Ltd, New Zealand
- Bhoruka Overseas - Indonesia
- Riau Bara Harum - Indonesia
- The State Trading Corporation of India Ltd
- Timah Investasi Mineral - Indoneisa
- Commonwealth Bank - Australia
- Price Waterhouse Coopers - Russia
- Directorate Of Revenue Intelligence - India
- San Jose City I Power Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
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