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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, 20 November 13
PANAMAX MARKET RESUMED ITS NEGATIVE MOVEMENT FOR A SECOND WEEK IN A ROW - INTERMODAL
COALspot.com: The recovery noted the week prior in the dry Bulk market proved to be short-lived, as the BDI slipped back down to the low 1,500 point ...
Wednesday, 20 November 13
TAIPOWER TO IMPORT 0.825 MMT OF 5000 GAR COAL FOR Q2' 14
COALspot.com: Taiwan Power Company intends to procure 825,000 metric tons of general sub-bituminous coal with calorific value not lesser than 5,000 ...
Wednesday, 20 November 13
CAPES AND PANAMAXES SOFTENING; SMALLER SIZE SEGMENTS FIRMING FURTHER - INTERMODAL
Chartering (Wet: Firm+ / Dry: Stable- )
The BDI has closed off the week on the red, with rates for Capes and Panamaxes softening and those fo ...
Tuesday, 19 November 13
INDONESIAN GOVERNMENT'S DECLARED COAL PRICE REFERENCE UP 1.98% IN NOVEMBER
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia has increased government declared coal bench mark price by US$ 1.52 / MT ...
Tuesday, 19 November 13
WEEKLY COAL EXPORTS FROM NEWCASTLE PORT INCREASED BY 20.59%
COALspot.com: In the week ended November 18, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totaled 2.92& ...
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- Cement Manufacturers Association - India
- Electricity Generating Authority of Thailand
- Samtan Co., Ltd - South Korea
- IEA Clean Coal Centre - UK
- GVK Power & Infra Limited - India
- The University of Queensland
- Rashtriya Ispat Nigam Limited - India
- New Zealand Coal & Carbon
- Kepco SPC Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Salva Resources Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Therma Luzon, Inc, Philippines
- Bhushan Steel Limited - India
- Georgia Ports Authority, United States
- Metalloyd Limited - United Kingdom
- Ministry of Finance - Indonesia
- Formosa Plastics Group - Taiwan
- SMC Global Power, Philippines
- Baramulti Group, Indonesia
- Africa Commodities Group - South Africa
- Maharashtra Electricity Regulatory Commission - India
- Jindal Steel & Power Ltd - India
- White Energy Company Limited
- Price Waterhouse Coopers - Russia
- Planning Commission, India
- Energy Link Ltd, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Sakthi Sugars Limited - India
- Holcim Trading Pte Ltd - Singapore
- Timah Investasi Mineral - Indoneisa
- IHS Mccloskey Coal Group - USA
- Madhucon Powers Ltd - India
- Sojitz Corporation - Japan
- Sree Jayajothi Cements Limited - India
- Posco Energy - South Korea
- Thai Mozambique Logistica
- Agrawal Coal Company - India
- Vijayanagar Sugar Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Goldman Sachs - Singapore
- Borneo Indobara - Indonesia
- London Commodity Brokers - England
- Gujarat Mineral Development Corp Ltd - India
- Anglo American - United Kingdom
- Directorate General of MIneral and Coal - Indonesia
- Essar Steel Hazira Ltd - India
- GAC Shipping (India) Pvt Ltd
- Chettinad Cement Corporation Ltd - India
- Indika Energy - Indonesia
- Standard Chartered Bank - UAE
- Mercuria Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Kaltim Prima Coal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Karbindo Abesyapradhi - Indoneisa
- Makarim & Taira - Indonesia
- Bulk Trading Sa - Switzerland
- Coalindo Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Bayan Resources Tbk. - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- McConnell Dowell - Australia
- Sindya Power Generating Company Private Ltd
- Jaiprakash Power Ventures ltd
- Gujarat Sidhee Cement - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kumho Petrochemical, South Korea
- Australian Coal Association
- Toyota Tsusho Corporation, Japan
- Alfred C Toepfer International GmbH - Germany
- CIMB Investment Bank - Malaysia
- Meralco Power Generation, Philippines
- Heidelberg Cement - Germany
- LBH Netherlands Bv - Netherlands
- Antam Resourcindo - Indonesia
- Australian Commodity Traders Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Romanian Commodities Exchange
- Renaissance Capital - South Africa
- Electricity Authority, New Zealand
- PTC India Limited - India
- Banpu Public Company Limited - Thailand
- ICICI Bank Limited - India
- Carbofer General Trading SA - India
- Singapore Mercantile Exchange
- VISA Power Limited - India
- Sarangani Energy Corporation, Philippines
- Malabar Cements Ltd - India
- CNBM International Corporation - China
- Orica Australia Pty. Ltd.
- Tamil Nadu electricity Board
- Deloitte Consulting - India
- Miang Besar Coal Terminal - Indonesia
- Directorate Of Revenue Intelligence - India
- Videocon Industries ltd - India
- Indian Energy Exchange, India
- Ind-Barath Power Infra Limited - India
- South Luzon Thermal Energy Corporation
- Wood Mackenzie - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Power Finance Corporation Ltd., India
- Xindia Steels Limited - India
- Indo Tambangraya Megah - Indonesia
- Central Electricity Authority - India
- The State Trading Corporation of India Ltd
- Bharathi Cement Corporation - India
- Iligan Light & Power Inc, Philippines
- Coal and Oil Company - UAE
- Minerals Council of Australia
- Grasim Industreis Ltd - India
- Ambuja Cements Ltd - India
- San Jose City I Power Corp, Philippines
- TeaM Sual Corporation - Philippines
- Dalmia Cement Bharat India
- Mintek Dendrill Indonesia
- Ministry of Mines - Canada
- Kobexindo Tractors - Indoneisa
- Semirara Mining Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Mjunction Services Limited - India
- OPG Power Generation Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Altura Mining Limited, Indonesia
- Globalindo Alam Lestari - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Attock Cement Pakistan Limited
- Tata Chemicals Ltd - India
- Binh Thuan Hamico - Vietnam
- Bukit Baiduri Energy - Indonesia
- Independent Power Producers Association of India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Eastern Coal Council - USA
- Merrill Lynch Commodities Europe
- Petron Corporation, Philippines
- Vedanta Resources Plc - India
- Kideco Jaya Agung - Indonesia
- Global Green Power PLC Corporation, Philippines
- Medco Energi Mining Internasional
- ASAPP Information Group - India
- Star Paper Mills Limited - India
- SN Aboitiz Power Inc, Philippines
- Savvy Resources Ltd - HongKong
- Bangladesh Power Developement Board
- Indian Oil Corporation Limited
- Simpson Spence & Young - Indonesia
- Vizag Seaport Private Limited - India
- Straits Asia Resources Limited - Singapore
- Port Waratah Coal Services - Australia
- Barasentosa Lestari - Indonesia
- The Treasury - Australian Government
- Chamber of Mines of South Africa
- PetroVietnam Power Coal Import and Supply Company
- Parry Sugars Refinery, India
- Bhoruka Overseas - Indonesia
- Aboitiz Power Corporation - Philippines
- Aditya Birla Group - India
- Eastern Energy - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Interocean Group of Companies - India
- European Bulk Services B.V. - Netherlands
- Karaikal Port Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Orica Mining Services - Indonesia
- Parliament of New Zealand
- Riau Bara Harum - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Marubeni Corporation - India
- Oldendorff Carriers - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- International Coal Ventures Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- SMG Consultants - Indonesia
- Central Java Power - Indonesia
- Lanco Infratech Ltd - India
- Mercator Lines Limited - India
- Leighton Contractors Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- Rio Tinto Coal - Australia
- Bukit Makmur.PT - Indonesia
- Kartika Selabumi Mining - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Sical Logistics Limited - India
- Bhatia International Limited - India
- Siam City Cement - Thailand
- Energy Development Corp, Philippines
- Commonwealth Bank - Australia
- Kapuas Tunggal Persada - Indonesia
- Gujarat Electricity Regulatory Commission - India
- GMR Energy Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Uttam Galva Steels Limited - India
- Wilmar Investment Holdings
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indogreen Group - Indonesia
- Pendopo Energi Batubara - Indonesia
- Indonesian Coal Mining Association
- Thiess Contractors Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Edison Trading Spa - Italy
- Global Coal Blending Company Limited - Australia
- Meenaskhi Energy Private Limited - India
- MS Steel International - UAE
- Semirara Mining and Power Corporation, Philippines
- Economic Council, Georgia
- Trasteel International SA, Italy
- Ministry of Transport, Egypt
- Krishnapatnam Port Company Ltd. - India
- Intertek Mineral Services - Indonesia
- Global Business Power Corporation, Philippines
- Larsen & Toubro Limited - India
- India Bulls Power Limited - India
- PowerSource Philippines DevCo
- Latin American Coal - Colombia
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