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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, 07 November 13
THE ENERGY INDUSTRY'S RISING WATER CHALLENGE - WOOD MACKENZIE
Water poses a variety of business risks for the energy industry, and could play an influential role in shaping the future energy supply mix, accordi ...
Thursday, 07 November 13
HANDY : INDO/CHINA ROUNDS ARE SEEING BIDS AT AROUND $16K
Handy
In the Atlantic we have seen more activity this week with several fixtures being concluded at firm rates. USG/Feast been reported at 30k and ...
Wednesday, 06 November 13
THE BIGGER SIZE SEGMENTS LOST GROUND WHILE SUPRAS AND HANDIES HELD ON TO THEIR GAINS - INTERMODAL
Chartering (Wet: Stable+ / Dry: Stable- )
A mirror image of the week prior for the Dry Bulk market, as once more the bigger size segments los ...
Wednesday, 06 November 13
WILL NEW ORDERS DRIVE THE MARKET DOWN AGAIN ONCE DELIVERIES COMMENCE
"While there are many concerns on whether the new orders will drive the market down again once deliveries commence, the second half of 2013 has ...
Tuesday, 05 November 13
AUSTRALIA'S NEWCASTLE PORT SEES DROP IN COAL EXPORTS W-W
COALspot.com: In the week ended November 4, Power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totaled 2.77 m ...
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- Sree Jayajothi Cements Limited - India
- Gujarat Electricity Regulatory Commission - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Marubeni Corporation - India
- Iligan Light & Power Inc, Philippines
- MS Steel International - UAE
- Bayan Resources Tbk. - Indonesia
- Bhatia International Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- PowerSource Philippines DevCo
- Directorate General of MIneral and Coal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Aditya Birla Group - India
- Jaiprakash Power Ventures ltd
- CIMB Investment Bank - Malaysia
- Krishnapatnam Port Company Ltd. - India
- Ambuja Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- Global Business Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Indian Energy Exchange, India
- Billiton Holdings Pty Ltd - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- International Coal Ventures Pvt Ltd - India
- Dalmia Cement Bharat India
- Power Finance Corporation Ltd., India
- OPG Power Generation Pvt Ltd - India
- Indika Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bharathi Cement Corporation - India
- Jindal Steel & Power Ltd - India
- Meenaskhi Energy Private Limited - India
- Kideco Jaya Agung - Indonesia
- Renaissance Capital - South Africa
- Sical Logistics Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Planning Commission, India
- Pipit Mutiara Jaya. PT, Indonesia
- Riau Bara Harum - Indonesia
- Trasteel International SA, Italy
- Africa Commodities Group - South Africa
- PTC India Limited - India
- SMG Consultants - Indonesia
- GMR Energy Limited - India
- Globalindo Alam Lestari - Indonesia
- London Commodity Brokers - England
- The Treasury - Australian Government
- Larsen & Toubro Limited - India
- Mjunction Services Limited - India
- GAC Shipping (India) Pvt Ltd
- Maheswari Brothers Coal Limited - India
- Ministry of Mines - Canada
- Ministry of Finance - Indonesia
- Interocean Group of Companies - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- GN Power Mariveles Coal Plant, Philippines
- Eastern Energy - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Tamil Nadu electricity Board
- Kaltim Prima Coal - Indonesia
- Manunggal Multi Energi - Indonesia
- VISA Power Limited - India
- Kobexindo Tractors - Indoneisa
- Wood Mackenzie - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chamber of Mines of South Africa
- The State Trading Corporation of India Ltd
- Malabar Cements Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Standard Chartered Bank - UAE
- Bhushan Steel Limited - India
- Energy Development Corp, Philippines
- Bukit Makmur.PT - Indonesia
- Mercuria Energy - Indonesia
- Rio Tinto Coal - Australia
- Pendopo Energi Batubara - Indonesia
- The University of Queensland
- Borneo Indobara - Indonesia
- Bulk Trading Sa - Switzerland
- Thai Mozambique Logistica
- Sojitz Corporation - Japan
- Kumho Petrochemical, South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Coal and Oil Company - UAE
- Goldman Sachs - Singapore
- Deloitte Consulting - India
- Orica Mining Services - Indonesia
- Siam City Cement - Thailand
- New Zealand Coal & Carbon
- Tata Chemicals Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Georgia Ports Authority, United States
- Sarangani Energy Corporation, Philippines
- SMC Global Power, Philippines
- Electricity Generating Authority of Thailand
- CNBM International Corporation - China
- Salva Resources Pvt Ltd - India
- Xindia Steels Limited - India
- Global Green Power PLC Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Petron Corporation, Philippines
- Merrill Lynch Commodities Europe
- Medco Energi Mining Internasional
- Baramulti Group, Indonesia
- LBH Netherlands Bv - Netherlands
- Vedanta Resources Plc - India
- Antam Resourcindo - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Posco Energy - South Korea
- TeaM Sual Corporation - Philippines
- Karbindo Abesyapradhi - Indoneisa
- Simpson Spence & Young - Indonesia
- Star Paper Mills Limited - India
- Indo Tambangraya Megah - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sinarmas Energy and Mining - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Directorate Of Revenue Intelligence - India
- Videocon Industries ltd - India
- Central Electricity Authority - India
- Asmin Koalindo Tuhup - Indonesia
- Anglo American - United Kingdom
- Port Waratah Coal Services - Australia
- Minerals Council of Australia
- McConnell Dowell - Australia
- ICICI Bank Limited - India
- Savvy Resources Ltd - HongKong
- Makarim & Taira - Indonesia
- Oldendorff Carriers - Singapore
- Parliament of New Zealand
- Rashtriya Ispat Nigam Limited - India
- Ministry of Transport, Egypt
- Romanian Commodities Exchange
- Meralco Power Generation, Philippines
- Semirara Mining Corp, Philippines
- Edison Trading Spa - Italy
- Intertek Mineral Services - Indonesia
- Wilmar Investment Holdings
- Cigading International Bulk Terminal - Indonesia
- Singapore Mercantile Exchange
- Metalloyd Limited - United Kingdom
- Coalindo Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Sakthi Sugars Limited - India
- Uttam Galva Steels Limited - India
- Australian Coal Association
- Indogreen Group - Indonesia
- India Bulls Power Limited - India
- Bhoruka Overseas - Indonesia
- Bukit Baiduri Energy - Indonesia
- Attock Cement Pakistan Limited
- PNOC Exploration Corporation - Philippines
- White Energy Company Limited
- Global Coal Blending Company Limited - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Agrawal Coal Company - India
- Chettinad Cement Corporation Ltd - India
- Economic Council, Georgia
- Toyota Tsusho Corporation, Japan
- GVK Power & Infra Limited - India
- Formosa Plastics Group - Taiwan
- Indian Oil Corporation Limited
- Orica Australia Pty. Ltd.
- Energy Link Ltd, New Zealand
- Kapuas Tunggal Persada - Indonesia
- Madhucon Powers Ltd - India
- Bangladesh Power Developement Board
- Vizag Seaport Private Limited - India
- Mercator Lines Limited - India
- Samtan Co., Ltd - South Korea
- Kartika Selabumi Mining - Indonesia
- Price Waterhouse Coopers - Russia
- SN Aboitiz Power Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Australian Commodity Traders Exchange
- Carbofer General Trading SA - India
- ASAPP Information Group - India
- Essar Steel Hazira Ltd - India
- Commonwealth Bank - Australia
- Grasim Industreis Ltd - India
- IEA Clean Coal Centre - UK
- Electricity Authority, New Zealand
- Parry Sugars Refinery, India
- Sindya Power Generating Company Private Ltd
- Heidelberg Cement - Germany
- Maharashtra Electricity Regulatory Commission - India
- Lanco Infratech Ltd - India
- Mintek Dendrill Indonesia
- Binh Thuan Hamico - Vietnam
- Timah Investasi Mineral - Indoneisa
- Bahari Cakrawala Sebuku - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Central Java Power - Indonesia
- Cement Manufacturers Association - India
- Gujarat Mineral Development Corp Ltd - India
- Independent Power Producers Association of India
- Gujarat Sidhee Cement - India
- Banpu Public Company Limited - Thailand
- Eastern Coal Council - USA
- Semirara Mining and Power Corporation, Philippines
- Indonesian Coal Mining Association
- Coastal Gujarat Power Limited - India
- Siam City Cement PLC, Thailand
- AsiaOL BioFuels Corp., Philippines
- Barasentosa Lestari - Indonesia
- Leighton Contractors Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- San Jose City I Power Corp, Philippines
- Thiess Contractors Indonesia
- Latin American Coal - Colombia
- Karaikal Port Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- European Bulk Services B.V. - Netherlands
- Altura Mining Limited, Indonesia
- Kepco SPC Power Corporation, Philippines
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