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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, 13 November 13
Q3' 14 CFR SOUTH CHINA COAL SWAPS CLOSED HIGHER THAN Q1' 14 PRICES
COALspot.com : API 8 CFR South China Coal swaps for average Q1 14 delivery gained 0.55 percept W-W on Friday 8 November 2013. The CFR South China Co ...
Wednesday, 13 November 13
THE SOFTENING HAS AFFECTED THE BIGGER SIZE SEGMENTS; SMALLER ONES STILL APPEAR TO BE VERY STABLE - INTERMODAL
After a month and a half of back to back weekly declines, the dry bulk market has finally reversed its negative course. We believe that there should ...
Wednesday, 13 November 13
DRY BULK MARKET HAS REVERSED ITS NEGATIVE COURSE - INTERMODAL
Chartering (Wet: Firm+ / Dry: Stable+ )
The Dry Bulk market has reversed its negative course this past week with rates for Capes making up fo ...
Wednesday, 13 November 13
NEWCASTLE COAL EXPORTS PLUNGE 12.40% IN W/E 10 NOVEMBER FROM THE PRIOR WEEK
COALspot.com: In the week ended November 11, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totaled 2.42 ...
Monday, 11 November 13
TAMIL NADU STATE OWNED POWER GENERATOR TO IMPORT 3.7 MMT OF 6000 GAD COAL
COALspot.com - TANGEDCO, Tamil Nadu Generation & Distribution Corporation Ltd, Tamil Nadu state owned power generator & distributor intends ...
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- CNBM International Corporation - China
- SMC Global Power, Philippines
- Orica Australia Pty. Ltd.
- Truba Alam Manunggal Engineering.Tbk - Indonesia
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- Bhatia International Limited - India
- Parliament of New Zealand
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- Energy Link Ltd, New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Latin American Coal - Colombia
- Manunggal Multi Energi - Indonesia
- Formosa Plastics Group - Taiwan
- Indian Energy Exchange, India
- Tamil Nadu electricity Board
- Larsen & Toubro Limited - India
- Altura Mining Limited, Indonesia
- The University of Queensland
- Karbindo Abesyapradhi - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- Commonwealth Bank - Australia
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- GVK Power & Infra Limited - India
- Thai Mozambique Logistica
- Sojitz Corporation - Japan
- Krishnapatnam Port Company Ltd. - India
- International Coal Ventures Pvt Ltd - India
- Mjunction Services Limited - India
- Energy Development Corp, Philippines
- MS Steel International - UAE
- Antam Resourcindo - Indonesia
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- Chettinad Cement Corporation Ltd - India
- OPG Power Generation Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Wilmar Investment Holdings
- Edison Trading Spa - Italy
- Trasteel International SA, Italy
- Sindya Power Generating Company Private Ltd
- IEA Clean Coal Centre - UK
- Intertek Mineral Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Eastern Coal Council - USA
- TNB Fuel Sdn Bhd - Malaysia
- Kideco Jaya Agung - Indonesia
- Marubeni Corporation - India
- IHS Mccloskey Coal Group - USA
- SMG Consultants - Indonesia
- South Luzon Thermal Energy Corporation
- Kobexindo Tractors - Indoneisa
- Meralco Power Generation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Banpu Public Company Limited - Thailand
- Siam City Cement PLC, Thailand
- PowerSource Philippines DevCo
- Merrill Lynch Commodities Europe
- Independent Power Producers Association of India
- Thiess Contractors Indonesia
- Gujarat Sidhee Cement - India
- Bukit Makmur.PT - Indonesia
- Billiton Holdings Pty Ltd - Australia
- New Zealand Coal & Carbon
- Petron Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Jaiprakash Power Ventures ltd
- Global Coal Blending Company Limited - Australia
- White Energy Company Limited
- Ministry of Transport, Egypt
- Ministry of Finance - Indonesia
- Videocon Industries ltd - India
- Deloitte Consulting - India
- European Bulk Services B.V. - Netherlands
- TeaM Sual Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Malabar Cements Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Central Electricity Authority - India
- Heidelberg Cement - Germany
- Africa Commodities Group - South Africa
- McConnell Dowell - Australia
- Vedanta Resources Plc - India
- Aditya Birla Group - India
- Binh Thuan Hamico - Vietnam
- Asmin Koalindo Tuhup - Indonesia
- Iligan Light & Power Inc, Philippines
- Economic Council, Georgia
- Jindal Steel & Power Ltd - India
- Electricity Generating Authority of Thailand
- Rio Tinto Coal - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Semirara Mining and Power Corporation, Philippines
- Borneo Indobara - Indonesia
- Price Waterhouse Coopers - Russia
- The Treasury - Australian Government
- Offshore Bulk Terminal Pte Ltd, Singapore
- Maheswari Brothers Coal Limited - India
- Essar Steel Hazira Ltd - India
- Sical Logistics Limited - India
- Therma Luzon, Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Ambuja Cements Ltd - India
- Romanian Commodities Exchange
- Mercuria Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Riau Bara Harum - Indonesia
- Anglo American - United Kingdom
- Sakthi Sugars Limited - India
- Rashtriya Ispat Nigam Limited - India
- Port Waratah Coal Services - Australia
- Semirara Mining Corp, Philippines
- Indian Oil Corporation Limited
- Central Java Power - Indonesia
- Siam City Cement - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Indo Tambangraya Megah - Indonesia
- Lanco Infratech Ltd - India
- Tata Chemicals Ltd - India
- Goldman Sachs - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Wood Mackenzie - Singapore
- Metalloyd Limited - United Kingdom
- Aboitiz Power Corporation - Philippines
- Cement Manufacturers Association - India
- Xindia Steels Limited - India
- Barasentosa Lestari - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- PTC India Limited - India
- Jorong Barutama Greston.PT - Indonesia
- VISA Power Limited - India
- Attock Cement Pakistan Limited
- LBH Netherlands Bv - Netherlands
- Planning Commission, India
- Globalindo Alam Lestari - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dalmia Cement Bharat India
- Kepco SPC Power Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Indika Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bangladesh Power Developement Board
- Coal and Oil Company - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Bhushan Steel Limited - India
- Power Finance Corporation Ltd., India
- Kartika Selabumi Mining - Indonesia
- Madhucon Powers Ltd - India
- Renaissance Capital - South Africa
- Agrawal Coal Company - India
- India Bulls Power Limited - India
- Simpson Spence & Young - Indonesia
- Bhoruka Overseas - Indonesia
- PNOC Exploration Corporation - Philippines
- Georgia Ports Authority, United States
- Mercator Lines Limited - India
- Bharathi Cement Corporation - India
- Kaltim Prima Coal - Indonesia
- GMR Energy Limited - India
- ASAPP Information Group - India
- Indonesian Coal Mining Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Authority, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Ceylon Electricity Board - Sri Lanka
- Posco Energy - South Korea
- Savvy Resources Ltd - HongKong
- Coastal Gujarat Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Orica Mining Services - Indonesia
- ICICI Bank Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Toyota Tsusho Corporation, Japan
- Global Green Power PLC Corporation, Philippines
- London Commodity Brokers - England
- Kapuas Tunggal Persada - Indonesia
- Sree Jayajothi Cements Limited - India
- Singapore Mercantile Exchange
- Standard Chartered Bank - UAE
- Directorate Of Revenue Intelligence - India
- Miang Besar Coal Terminal - Indonesia
- Indogreen Group - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Chamber of Mines of South Africa
- Uttam Galva Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Parry Sugars Refinery, India
- AsiaOL BioFuels Corp., Philippines
- Australian Commodity Traders Exchange
- Baramulti Group, Indonesia
- Carbofer General Trading SA - India
- Interocean Group of Companies - India
- GN Power Mariveles Coal Plant, Philippines
- Sarangani Energy Corporation, Philippines
- Star Paper Mills Limited - India
- Samtan Co., Ltd - South Korea
- Meenaskhi Energy Private Limited - India
- Karaikal Port Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Coalindo Energy - Indonesia
- Oldendorff Carriers - Singapore
- Mintek Dendrill Indonesia
- Leighton Contractors Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Kumho Petrochemical, South Korea
- Ministry of Mines - Canada
- Bulk Trading Sa - Switzerland
- Australian Coal Association
- Eastern Energy - Thailand
- Straits Asia Resources Limited - Singapore
- Minerals Council of Australia
- San Jose City I Power Corp, Philippines
- Vizag Seaport Private Limited - India
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