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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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Sunday, 10 November 13
PANAMAX COAL FREIGHT RATES REMAIN UNDER PRESSURE; SUPRAMAX BIGGEST GAINER - REDDY
COALspot.com: The freight market was up this week with all indices increased except for Panamax index.
The BDI was up by 56 points closing at 158 ...
Friday, 08 November 13
DRY BULK MARKET BOUNCES BACK ON RENEWED DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market staged a mild comeback this week, as the industry's benchmark, the Baltic Dry Index (BDI) inched forward step by step and bit b ...
Friday, 08 November 13
US'S OCTOBER COAL PRODUCTION INCREASED BY 1.78% M-M - EIA
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.3 million short tons (mmst) of coal in ...
Thursday, 07 November 13
FORMOSA PLASTICS SEEKS 80K MT OF 5850 GAR COAL
COALspot.com: Taiwan's Formosa Plastics Group is inviting bids for 80,000 mt of bituminous coal for delivery in Nov - Dec'13 for its Chi ...
Thursday, 07 November 13
INDONESIAN COAL EXPORT VOLUME INCREASED; REVENUE DECREASED
COALspot.com: Indonesia, the 15th largest economy, 4th largest coal producer in the world and world's largest multi grade coal exporter shipp ...
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- Meralco Power Generation, Philippines
- GVK Power & Infra Limited - India
- ASAPP Information Group - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Leighton Contractors Pty Ltd - Australia
- Goldman Sachs - Singapore
- GMR Energy Limited - India
- Wood Mackenzie - Singapore
- Barasentosa Lestari - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- South Luzon Thermal Energy Corporation
- Latin American Coal - Colombia
- Neyveli Lignite Corporation Ltd, - India
- Sindya Power Generating Company Private Ltd
- Krishnapatnam Port Company Ltd. - India
- Renaissance Capital - South Africa
- Siam City Cement PLC, Thailand
- Global Coal Blending Company Limited - Australia
- Aboitiz Power Corporation - Philippines
- London Commodity Brokers - England
- Salva Resources Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Bharathi Cement Corporation - India
- Miang Besar Coal Terminal - Indonesia
- Samtan Co., Ltd - South Korea
- Wilmar Investment Holdings
- GN Power Mariveles Coal Plant, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- PNOC Exploration Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Interocean Group of Companies - India
- Cigading International Bulk Terminal - Indonesia
- Power Finance Corporation Ltd., India
- PetroVietnam Power Coal Import and Supply Company
- Indian Oil Corporation Limited
- Dalmia Cement Bharat India
- Coal and Oil Company - UAE
- Indonesian Coal Mining Association
- Metalloyd Limited - United Kingdom
- Sree Jayajothi Cements Limited - India
- Mintek Dendrill Indonesia
- Standard Chartered Bank - UAE
- Mercator Lines Limited - India
- Heidelberg Cement - Germany
- Sinarmas Energy and Mining - Indonesia
- Larsen & Toubro Limited - India
- Indika Energy - Indonesia
- PTC India Limited - India
- Timah Investasi Mineral - Indoneisa
- Petron Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Simpson Spence & Young - Indonesia
- Maheswari Brothers Coal Limited - India
- Alfred C Toepfer International GmbH - Germany
- Coalindo Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Vijayanagar Sugar Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- The University of Queensland
- Sical Logistics Limited - India
- Chamber of Mines of South Africa
- Deloitte Consulting - India
- Meenaskhi Energy Private Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Trasteel International SA, Italy
- Bukit Asam (Persero) Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- CNBM International Corporation - China
- Essar Steel Hazira Ltd - India
- Australian Commodity Traders Exchange
- Billiton Holdings Pty Ltd - Australia
- Gujarat Mineral Development Corp Ltd - India
- Gujarat Sidhee Cement - India
- Merrill Lynch Commodities Europe
- Thiess Contractors Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Jindal Steel & Power Ltd - India
- Rio Tinto Coal - Australia
- Indogreen Group - Indonesia
- Jaiprakash Power Ventures ltd
- IEA Clean Coal Centre - UK
- Directorate Of Revenue Intelligence - India
- Port Waratah Coal Services - Australia
- CIMB Investment Bank - Malaysia
- ICICI Bank Limited - India
- SN Aboitiz Power Inc, Philippines
- Carbofer General Trading SA - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jorong Barutama Greston.PT - Indonesia
- Edison Trading Spa - Italy
- McConnell Dowell - Australia
- TeaM Sual Corporation - Philippines
- Bhoruka Overseas - Indonesia
- SMG Consultants - Indonesia
- Iligan Light & Power Inc, Philippines
- Bhushan Steel Limited - India
- Malabar Cements Ltd - India
- Star Paper Mills Limited - India
- Price Waterhouse Coopers - Russia
- Eastern Coal Council - USA
- Singapore Mercantile Exchange
- Grasim Industreis Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Africa Commodities Group - South Africa
- Kapuas Tunggal Persada - Indonesia
- Borneo Indobara - Indonesia
- Baramulti Group, Indonesia
- Chettinad Cement Corporation Ltd - India
- Banpu Public Company Limited - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Romanian Commodities Exchange
- Sojitz Corporation - Japan
- Kumho Petrochemical, South Korea
- Aditya Birla Group - India
- Global Business Power Corporation, Philippines
- Indian Energy Exchange, India
- Vizag Seaport Private Limited - India
- Anglo American - United Kingdom
- Holcim Trading Pte Ltd - Singapore
- Kartika Selabumi Mining - Indonesia
- The State Trading Corporation of India Ltd
- Kohat Cement Company Ltd. - Pakistan
- Thai Mozambique Logistica
- PowerSource Philippines DevCo
- Indo Tambangraya Megah - Indonesia
- Energy Development Corp, Philippines
- Oldendorff Carriers - Singapore
- Planning Commission, India
- Kalimantan Lumbung Energi - Indonesia
- Mercuria Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- MS Steel International - UAE
- Madhucon Powers Ltd - India
- Semirara Mining Corp, Philippines
- Orica Mining Services - Indonesia
- Georgia Ports Authority, United States
- Kobexindo Tractors - Indoneisa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- VISA Power Limited - India
- Australian Coal Association
- New Zealand Coal & Carbon
- Bayan Resources Tbk. - Indonesia
- Manunggal Multi Energi - Indonesia
- Independent Power Producers Association of India
- Central Java Power - Indonesia
- Central Electricity Authority - India
- Cement Manufacturers Association - India
- Parliament of New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Pendopo Energi Batubara - Indonesia
- Altura Mining Limited, Indonesia
- Formosa Plastics Group - Taiwan
- The Treasury - Australian Government
- Tata Chemicals Ltd - India
- Electricity Authority, New Zealand
- Attock Cement Pakistan Limited
- Energy Link Ltd, New Zealand
- Siam City Cement - Thailand
- Eastern Energy - Thailand
- Bangladesh Power Developement Board
- Pipit Mutiara Jaya. PT, Indonesia
- Mjunction Services Limited - India
- IHS Mccloskey Coal Group - USA
- Economic Council, Georgia
- Straits Asia Resources Limited - Singapore
- Ministry of Transport, Egypt
- Kideco Jaya Agung - Indonesia
- Electricity Generating Authority of Thailand
- Toyota Tsusho Corporation, Japan
- Medco Energi Mining Internasional
- Bukit Makmur.PT - Indonesia
- India Bulls Power Limited - India
- Commonwealth Bank - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Xindia Steels Limited - India
- Parry Sugars Refinery, India
- Ind-Barath Power Infra Limited - India
- International Coal Ventures Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Minerals Council of Australia
- Ambuja Cements Ltd - India
- Binh Thuan Hamico - Vietnam
- Coastal Gujarat Power Limited - India
- Agrawal Coal Company - India
- Bulk Trading Sa - Switzerland
- Makarim & Taira - Indonesia
- Sarangani Energy Corporation, Philippines
- Tamil Nadu electricity Board
- Posco Energy - South Korea
- Savvy Resources Ltd - HongKong
- Orica Australia Pty. Ltd.
- Karaikal Port Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Videocon Industries ltd - India
- Intertek Mineral Services - Indonesia
- White Energy Company Limited
- Global Green Power PLC Corporation, Philippines
- Ministry of Finance - Indonesia
- Lanco Infratech Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Ministry of Mines - Canada
- European Bulk Services B.V. - Netherlands
- Gujarat Electricity Regulatory Commission - India
- Marubeni Corporation - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMC Global Power, Philippines
- Vedanta Resources Plc - India
- Bhatia International Limited - India
- Bukit Baiduri Energy - Indonesia
- Uttam Galva Steels Limited - India
- Therma Luzon, Inc, Philippines
- Sakthi Sugars Limited - India
- Antam Resourcindo - Indonesia
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