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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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Thursday, 05 December 13
PANAMAX : THE FIRM TENDENCY CONTINUES - FEARNRESEARCH
Handy
It has been an active week for the Supramax and Handysize segment. USG is almost boiling and charterers looking to cover their December stems ...
Wednesday, 04 December 13
INDONESIAN COAL EXPORTS VOLUME AND REVENUE IN OCTOBER MARCHED TOWARDS NORTH
COALspot.com: Indonesia, the world's 4th largest coal producer and the largest multi grade coal exporter shipped over $1.76* billion worth of ...
Wednesday, 04 December 13
WEST AUSTRALIA IRON ORE FIXTURES ALSO CONTINUING TO PROVIDE A STEADY FLOW OF BUSINESS FOR CAPES - INTERMODAL
The Dry Bulk market has reversed course this past week, bringing back some of the lost excitement of the past month, as all size segments climbed hi ...
Wednesday, 04 December 13
THE BUYERS' DEMAND IS CONTINUOUSLY BULLISH - KONSTANTINOS KONTOMICHIS
The very low rates that prevailed for the bigger part of 2013 seem to have prepared the ground for buying opportunities for shipping investors. The ...
Wednesday, 04 December 13
SGX AND CFA TO COLLABORATE TO DEVELOP DERIVATIVES MARKETS IN CHINA AND SINGAPORE
Singapore Exchange (SGX) and the China Futures Association (CFA) are cooperating in the development of derivatives markets in China and Singapore.
...
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- Grasim Industreis Ltd - India
- Indian Energy Exchange, India
- Globalindo Alam Lestari - Indonesia
- India Bulls Power Limited - India
- Aditya Birla Group - India
- Electricity Generating Authority of Thailand
- Banpu Public Company Limited - Thailand
- Simpson Spence & Young - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Australian Coal Association
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GVK Power & Infra Limited - India
- Samtan Co., Ltd - South Korea
- Indian Oil Corporation Limited
- Orica Australia Pty. Ltd.
- Ceylon Electricity Board - Sri Lanka
- OPG Power Generation Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- The Treasury - Australian Government
- Mintek Dendrill Indonesia
- GAC Shipping (India) Pvt Ltd
- Africa Commodities Group - South Africa
- Larsen & Toubro Limited - India
- Bukit Makmur.PT - Indonesia
- Ministry of Transport, Egypt
- Manunggal Multi Energi - Indonesia
- Trasteel International SA, Italy
- Gujarat Sidhee Cement - India
- Neyveli Lignite Corporation Ltd, - India
- Bhushan Steel Limited - India
- Barasentosa Lestari - Indonesia
- Sojitz Corporation - Japan
- Uttam Galva Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coalindo Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- Iligan Light & Power Inc, Philippines
- Ministry of Mines - Canada
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Energy Link Ltd, New Zealand
- Renaissance Capital - South Africa
- Tata Chemicals Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Meenaskhi Energy Private Limited - India
- Intertek Mineral Services - Indonesia
- European Bulk Services B.V. - Netherlands
- Goldman Sachs - Singapore
- Ministry of Finance - Indonesia
- Bhoruka Overseas - Indonesia
- Anglo American - United Kingdom
- Eastern Energy - Thailand
- Malabar Cements Ltd - India
- Thiess Contractors Indonesia
- Central Electricity Authority - India
- Chamber of Mines of South Africa
- Thai Mozambique Logistica
- Kartika Selabumi Mining - Indonesia
- Siam City Cement - Thailand
- ASAPP Information Group - India
- Mercator Lines Limited - India
- Posco Energy - South Korea
- Karbindo Abesyapradhi - Indoneisa
- Metalloyd Limited - United Kingdom
- Kumho Petrochemical, South Korea
- Edison Trading Spa - Italy
- Straits Asia Resources Limited - Singapore
- Sinarmas Energy and Mining - Indonesia
- Jindal Steel & Power Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Mercuria Energy - Indonesia
- Romanian Commodities Exchange
- Kapuas Tunggal Persada - Indonesia
- San Jose City I Power Corp, Philippines
- Georgia Ports Authority, United States
- International Coal Ventures Pvt Ltd - India
- Electricity Authority, New Zealand
- Aboitiz Power Corporation - Philippines
- Medco Energi Mining Internasional
- Semirara Mining and Power Corporation, Philippines
- SMC Global Power, Philippines
- Global Business Power Corporation, Philippines
- Lanco Infratech Ltd - India
- Agrawal Coal Company - India
- LBH Netherlands Bv - Netherlands
- Orica Mining Services - Indonesia
- Bangladesh Power Developement Board
- Parliament of New Zealand
- Global Green Power PLC Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Economic Council, Georgia
- Deloitte Consulting - India
- VISA Power Limited - India
- Standard Chartered Bank - UAE
- Toyota Tsusho Corporation, Japan
- PTC India Limited - India
- Holcim Trading Pte Ltd - Singapore
- SMG Consultants - Indonesia
- Kideco Jaya Agung - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Kobexindo Tractors - Indoneisa
- Riau Bara Harum - Indonesia
- Port Waratah Coal Services - Australia
- Petron Corporation, Philippines
- South Luzon Thermal Energy Corporation
- TNB Fuel Sdn Bhd - Malaysia
- Mjunction Services Limited - India
- Vizag Seaport Private Limited - India
- Sree Jayajothi Cements Limited - India
- Directorate Of Revenue Intelligence - India
- Kohat Cement Company Ltd. - Pakistan
- Altura Mining Limited, Indonesia
- Gujarat Electricity Regulatory Commission - India
- CNBM International Corporation - China
- Sical Logistics Limited - India
- Rashtriya Ispat Nigam Limited - India
- Price Waterhouse Coopers - Russia
- Interocean Group of Companies - India
- Formosa Plastics Group - Taiwan
- PNOC Exploration Corporation - Philippines
- Ambuja Cements Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Borneo Indobara - Indonesia
- Singapore Mercantile Exchange
- Pendopo Energi Batubara - Indonesia
- Carbofer General Trading SA - India
- GMR Energy Limited - India
- SN Aboitiz Power Inc, Philippines
- Indogreen Group - Indonesia
- Power Finance Corporation Ltd., India
- Heidelberg Cement - Germany
- White Energy Company Limited
- Coastal Gujarat Power Limited - India
- Australian Commodity Traders Exchange
- Energy Development Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Indonesian Coal Mining Association
- CIMB Investment Bank - Malaysia
- Marubeni Corporation - India
- Indo Tambangraya Megah - Indonesia
- Baramulti Group, Indonesia
- Essar Steel Hazira Ltd - India
- Commonwealth Bank - Australia
- TeaM Sual Corporation - Philippines
- Merrill Lynch Commodities Europe
- Bhatia International Limited - India
- Meralco Power Generation, Philippines
- Vedanta Resources Plc - India
- Salva Resources Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Bukit Baiduri Energy - Indonesia
- Minerals Council of Australia
- Xindia Steels Limited - India
- Bharathi Cement Corporation - India
- Rio Tinto Coal - Australia
- Parry Sugars Refinery, India
- Star Paper Mills Limited - India
- Ind-Barath Power Infra Limited - India
- Bulk Trading Sa - Switzerland
- Attock Cement Pakistan Limited
- Wilmar Investment Holdings
- Planning Commission, India
- AsiaOL BioFuels Corp., Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Semirara Mining Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Oldendorff Carriers - Singapore
- PowerSource Philippines DevCo
- Savvy Resources Ltd - HongKong
- Makarim & Taira - Indonesia
- New Zealand Coal & Carbon
- London Commodity Brokers - England
- The University of Queensland
- Therma Luzon, Inc, Philippines
- ICICI Bank Limited - India
- Cement Manufacturers Association - India
- Siam City Cement PLC, Thailand
- Dalmia Cement Bharat India
- GN Power Mariveles Coal Plant, Philippines
- Antam Resourcindo - Indonesia
- Indika Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Madhucon Powers Ltd - India
- Central Java Power - Indonesia
- Coal and Oil Company - UAE
- Sakthi Sugars Limited - India
- The State Trading Corporation of India Ltd
- Petrochimia International Co. Ltd.- Taiwan
- IHS Mccloskey Coal Group - USA
- MS Steel International - UAE
- Alfred C Toepfer International GmbH - Germany
- Videocon Industries ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- IEA Clean Coal Centre - UK
- McConnell Dowell - Australia
- Global Coal Blending Company Limited - Australia
- Maheswari Brothers Coal Limited - India
- Independent Power Producers Association of India
- Tamil Nadu electricity Board
- Binh Thuan Hamico - Vietnam
- Kalimantan Lumbung Energi - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Eastern Coal Council - USA
- Wood Mackenzie - Singapore
- Kepco SPC Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cigading International Bulk Terminal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Latin American Coal - Colombia
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