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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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Friday, 18 October 13
WOOD MACKENZIE FORECASTS CHINA WILL OUTWEIGH THE REST OF THE WORLD FOR BASE METALS DEMAND BY 2017
China set to account for 52% of 117mt base metals market by 2017
China is on track to exceed rest of the World demand by 2017, becoming the singl ...
Friday, 18 October 13
DRY BULK MARKET ON "PAUSE" MODE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has been on "pause" mode over the past week, after China's return from the week long holidays. The industry's benchm ...
Friday, 18 October 13
US PRODUCED 6.7% MORE COAL W-W
COALspot.com – United States the world’s second largest coal producer produced approximately 18.9 million short tons (mmst) of coal in a ...
Thursday, 17 October 13
CAPESIZE: RATES ARE AGAIN MOVING UPWARDS - FEARNRESEARCH
Handy
Activities were obviously slowed down in the Pacific basin. There were only few coal movements which fixed around USD 15-16k for ships in Sin ...
Thursday, 17 October 13
SGX TO LAUNCH "SGX THERMAL COAL FUTURES" NEXT MONDAY
COALspot.com: SGX is to launch two thermal coal futures contracts, SGX API 8 CFR China Coal Index Futures and SGX IHS McCloskey Indonesian Sub-bit F ...
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- Sical Logistics Limited - India
- Billiton Holdings Pty Ltd - Australia
- Minerals Council of Australia
- PTC India Limited - India
- VISA Power Limited - India
- Mercuria Energy - Indonesia
- SMG Consultants - Indonesia
- Ministry of Finance - Indonesia
- Parry Sugars Refinery, India
- Tamil Nadu electricity Board
- Global Business Power Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Heidelberg Cement - Germany
- Deloitte Consulting - India
- Ambuja Cements Ltd - India
- Eastern Energy - Thailand
- Kartika Selabumi Mining - Indonesia
- GVK Power & Infra Limited - India
- Mercator Lines Limited - India
- Rio Tinto Coal - Australia
- Kapuas Tunggal Persada - Indonesia
- Energy Development Corp, Philippines
- Goldman Sachs - Singapore
- Malabar Cements Ltd - India
- Latin American Coal - Colombia
- Australian Commodity Traders Exchange
- Independent Power Producers Association of India
- ICICI Bank Limited - India
- Kobexindo Tractors - Indoneisa
- Sindya Power Generating Company Private Ltd
- Manunggal Multi Energi - Indonesia
- Madhucon Powers Ltd - India
- Siam City Cement - Thailand
- Electricity Authority, New Zealand
- GN Power Mariveles Coal Plant, Philippines
- Orica Australia Pty. Ltd.
- Bukit Asam (Persero) Tbk - Indonesia
- Lanco Infratech Ltd - India
- Meenaskhi Energy Private Limited - India
- Central Java Power - Indonesia
- Kideco Jaya Agung - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indonesian Coal Mining Association
- Cigading International Bulk Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- Romanian Commodities Exchange
- Salva Resources Pvt Ltd - India
- Indian Energy Exchange, India
- Karaikal Port Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Economic Council, Georgia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhatia International Limited - India
- Altura Mining Limited, Indonesia
- Directorate Of Revenue Intelligence - India
- Holcim Trading Pte Ltd - Singapore
- Agrawal Coal Company - India
- Binh Thuan Hamico - Vietnam
- Leighton Contractors Pty Ltd - Australia
- Gujarat Sidhee Cement - India
- Attock Cement Pakistan Limited
- Wood Mackenzie - Singapore
- Sakthi Sugars Limited - India
- Parliament of New Zealand
- Coal and Oil Company - UAE
- Formosa Plastics Group - Taiwan
- Wilmar Investment Holdings
- Ministry of Transport, Egypt
- PetroVietnam Power Coal Import and Supply Company
- LBH Netherlands Bv - Netherlands
- Semirara Mining Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Therma Luzon, Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Sojitz Corporation - Japan
- OPG Power Generation Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Makarim & Taira - Indonesia
- Kepco SPC Power Corporation, Philippines
- Central Electricity Authority - India
- London Commodity Brokers - England
- Marubeni Corporation - India
- Essar Steel Hazira Ltd - India
- Global Coal Blending Company Limited - Australia
- Miang Besar Coal Terminal - Indonesia
- Trasteel International SA, Italy
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petron Corporation, Philippines
- Africa Commodities Group - South Africa
- Asmin Koalindo Tuhup - Indonesia
- Bangladesh Power Developement Board
- Kohat Cement Company Ltd. - Pakistan
- Star Paper Mills Limited - India
- PNOC Exploration Corporation - Philippines
- Indika Energy - Indonesia
- CNBM International Corporation - China
- Directorate General of MIneral and Coal - Indonesia
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- McConnell Dowell - Australia
- GAC Shipping (India) Pvt Ltd
- Edison Trading Spa - Italy
- Banpu Public Company Limited - Thailand
- Mjunction Services Limited - India
- Power Finance Corporation Ltd., India
- Bayan Resources Tbk. - Indonesia
- MS Steel International - UAE
- International Coal Ventures Pvt Ltd - India
- Bharathi Cement Corporation - India
- Sinarmas Energy and Mining - Indonesia
- IEA Clean Coal Centre - UK
- Standard Chartered Bank - UAE
- Ind-Barath Power Infra Limited - India
- Sree Jayajothi Cements Limited - India
- Ceylon Electricity Board - Sri Lanka
- Global Green Power PLC Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Thiess Contractors Indonesia
- India Bulls Power Limited - India
- Electricity Generating Authority of Thailand
- Riau Bara Harum - Indonesia
- ASAPP Information Group - India
- Straits Asia Resources Limited - Singapore
- Cement Manufacturers Association - India
- Renaissance Capital - South Africa
- Dalmia Cement Bharat India
- Krishnapatnam Port Company Ltd. - India
- Simpson Spence & Young - Indonesia
- IHS Mccloskey Coal Group - USA
- Neyveli Lignite Corporation Ltd, - India
- Aboitiz Power Corporation - Philippines
- SMC Global Power, Philippines
- Eastern Coal Council - USA
- Pendopo Energi Batubara - Indonesia
- Port Waratah Coal Services - Australia
- Australian Coal Association
- Kalimantan Lumbung Energi - Indonesia
- Anglo American - United Kingdom
- The Treasury - Australian Government
- Thai Mozambique Logistica
- Intertek Mineral Services - Indonesia
- White Energy Company Limited
- Ministry of Mines - Canada
- Interocean Group of Companies - India
- Bhoruka Overseas - Indonesia
- Kumho Petrochemical, South Korea
- The University of Queensland
- San Jose City I Power Corp, Philippines
- Borneo Indobara - Indonesia
- Videocon Industries ltd - India
- Orica Mining Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Rashtriya Ispat Nigam Limited - India
- Larsen & Toubro Limited - India
- Posco Energy - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Energy Link Ltd, New Zealand
- Chamber of Mines of South Africa
- Jaiprakash Power Ventures ltd
- Maharashtra Electricity Regulatory Commission - India
- Medco Energi Mining Internasional
- Jorong Barutama Greston.PT - Indonesia
- Meralco Power Generation, Philippines
- Sarangani Energy Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indogreen Group - Indonesia
- Baramulti Group, Indonesia
- Coalindo Energy - Indonesia
- Samtan Co., Ltd - South Korea
- The State Trading Corporation of India Ltd
- Singapore Mercantile Exchange
- Oldendorff Carriers - Singapore
- Bukit Makmur.PT - Indonesia
- Savvy Resources Ltd - HongKong
- Bhushan Steel Limited - India
- TeaM Sual Corporation - Philippines
- Mintek Dendrill Indonesia
- Xindia Steels Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Grasim Industreis Ltd - India
- Coastal Gujarat Power Limited - India
- Maheswari Brothers Coal Limited - India
- Planning Commission, India
- Indian Oil Corporation Limited
- Vedanta Resources Plc - India
- GMR Energy Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Siam City Cement PLC, Thailand
- Merrill Lynch Commodities Europe
- Aditya Birla Group - India
- Petrochimia International Co. Ltd.- Taiwan
- Offshore Bulk Terminal Pte Ltd, Singapore
- New Zealand Coal & Carbon
- TNB Fuel Sdn Bhd - Malaysia
- AsiaOL BioFuels Corp., Philippines
- Commonwealth Bank - Australia
- Vizag Seaport Private Limited - India
- South Luzon Thermal Energy Corporation
- Antam Resourcindo - Indonesia
- PowerSource Philippines DevCo
- Globalindo Alam Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- CIMB Investment Bank - Malaysia
- Barasentosa Lestari - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Gujarat Mineral Development Corp Ltd - India
- Chettinad Cement Corporation Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Carbofer General Trading SA - India
- European Bulk Services B.V. - Netherlands
- Georgia Ports Authority, United States
- Price Waterhouse Coopers - Russia
- Tata Chemicals Ltd - India
- Metalloyd Limited - United Kingdom
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