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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, 17 October 13
CHINA'S COAL IMPORTS DOWN 9.4% TO 25.96 MMT IN AUGUST
COALspot.com: China's August Imported coal volumes down 9.4% m-m but up 27% y-y, BNP said in its latest China Coal & Power report released on 1 ...
Wednesday, 16 October 13
NEW STRATEGIES AND OPPORTUNITIES IN A RAPIDLY EVOLVING COAL INDUSTRY
The 12th Annual Coal Markets assumes even more significance as the industry seeks more market information, inputs on trade strategies, supply and de ...
Wednesday, 16 October 13
CAPES: RATES DROPPED; PANAMAX: ADVANCED - INTERMODAL
After a month and a half of straight weekly positive closings, the BDI has finished the week in the red. Monday started slow as holidays in the East ...
Wednesday, 16 October 13
WILL THIS LATEST DRY BULK MARKET UPTREND PROVE TO BE AS LONG-LIVED OR JUST ANOTHER MOMENTARY SPIKE? - CHRISTOS MANZTIOS
COALspot.com: So here we are again facing the same old question: Will this latest market uptrend prove to be as long-lived as all owners hope or jus ...
Wednesday, 16 October 13
KOSEP TO IMPORT 0.49 MILLION TONS OF 4600 NAR COAL FOR JAN - FEB '14
COALspot.com - Korea South-East Power Co., a Korean generator and distributor of electricity on behalf of five Korean Gencos intends to procure 490, ...
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- Orica Australia Pty. Ltd.
- Electricity Authority, New Zealand
- Eastern Coal Council - USA
- IHS Mccloskey Coal Group - USA
- Coalindo Energy - Indonesia
- Siam City Cement - Thailand
- Riau Bara Harum - Indonesia
- Australian Coal Association
- Rio Tinto Coal - Australia
- Commonwealth Bank - Australia
- Bangladesh Power Developement Board
- Renaissance Capital - South Africa
- Latin American Coal - Colombia
- SMC Global Power, Philippines
- Iligan Light & Power Inc, Philippines
- Grasim Industreis Ltd - India
- Vedanta Resources Plc - India
- The State Trading Corporation of India Ltd
- Eastern Energy - Thailand
- Bukit Baiduri Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kartika Selabumi Mining - Indonesia
- Aboitiz Power Corporation - Philippines
- Antam Resourcindo - Indonesia
- ASAPP Information Group - India
- Toyota Tsusho Corporation, Japan
- Mintek Dendrill Indonesia
- Medco Energi Mining Internasional
- Indika Energy - Indonesia
- The Treasury - Australian Government
- Tamil Nadu electricity Board
- Cement Manufacturers Association - India
- Directorate Of Revenue Intelligence - India
- Madhucon Powers Ltd - India
- Formosa Plastics Group - Taiwan
- Essar Steel Hazira Ltd - India
- European Bulk Services B.V. - Netherlands
- Coal and Oil Company - UAE
- Borneo Indobara - Indonesia
- Indogreen Group - Indonesia
- Xindia Steels Limited - India
- Minerals Council of Australia
- Manunggal Multi Energi - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Ambuja Cements Ltd - India
- Pendopo Energi Batubara - Indonesia
- Banpu Public Company Limited - Thailand
- Port Waratah Coal Services - Australia
- Asmin Koalindo Tuhup - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Karaikal Port Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Global Coal Blending Company Limited - Australia
- Semirara Mining and Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Larsen & Toubro Limited - India
- SN Aboitiz Power Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Neyveli Lignite Corporation Ltd, - India
- Maheswari Brothers Coal Limited - India
- Simpson Spence & Young - Indonesia
- Kepco SPC Power Corporation, Philippines
- Edison Trading Spa - Italy
- Coastal Gujarat Power Limited - India
- Timah Investasi Mineral - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- McConnell Dowell - Australia
- Thiess Contractors Indonesia
- GAC Shipping (India) Pvt Ltd
- Bhatia International Limited - India
- MS Steel International - UAE
- Bhushan Steel Limited - India
- Videocon Industries ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Orica Mining Services - Indonesia
- Dalmia Cement Bharat India
- Wilmar Investment Holdings
- Ministry of Mines - Canada
- Georgia Ports Authority, United States
- Romanian Commodities Exchange
- Energy Development Corp, Philippines
- Indian Energy Exchange, India
- SMG Consultants - Indonesia
- TeaM Sual Corporation - Philippines
- Kumho Petrochemical, South Korea
- Chamber of Mines of South Africa
- Marubeni Corporation - India
- VISA Power Limited - India
- New Zealand Coal & Carbon
- Mjunction Services Limited - India
- Therma Luzon, Inc, Philippines
- Jaiprakash Power Ventures ltd
- Star Paper Mills Limited - India
- Standard Chartered Bank - UAE
- Parry Sugars Refinery, India
- Kaltim Prima Coal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sinarmas Energy and Mining - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Mercuria Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Anglo American - United Kingdom
- Intertek Mineral Services - Indonesia
- Sarangani Energy Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Billiton Holdings Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Holcim Trading Pte Ltd - Singapore
- Savvy Resources Ltd - HongKong
- Electricity Generating Authority of Thailand
- Meenaskhi Energy Private Limited - India
- Jorong Barutama Greston.PT - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Baramulti Group, Indonesia
- Semirara Mining Corp, Philippines
- Gujarat Sidhee Cement - India
- Independent Power Producers Association of India
- Thai Mozambique Logistica
- Petron Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Salva Resources Pvt Ltd - India
- Mercator Lines Limited - India
- Global Green Power PLC Corporation, Philippines
- Global Business Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Kobexindo Tractors - Indoneisa
- Siam City Cement PLC, Thailand
- Ministry of Finance - Indonesia
- Aditya Birla Group - India
- International Coal Ventures Pvt Ltd - India
- GVK Power & Infra Limited - India
- Bayan Resources Tbk. - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Sakthi Sugars Limited - India
- Central Java Power - Indonesia
- CNBM International Corporation - China
- ICICI Bank Limited - India
- Economic Council, Georgia
- Barasentosa Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Agrawal Coal Company - India
- Kohat Cement Company Ltd. - Pakistan
- Merrill Lynch Commodities Europe
- Malabar Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- Interocean Group of Companies - India
- Sical Logistics Limited - India
- Meralco Power Generation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Africa Commodities Group - South Africa
- Makarim & Taira - Indonesia
- Central Electricity Authority - India
- Parliament of New Zealand
- LBH Netherlands Bv - Netherlands
- Kapuas Tunggal Persada - Indonesia
- South Luzon Thermal Energy Corporation
- Sree Jayajothi Cements Limited - India
- Heidelberg Cement - Germany
- The University of Queensland
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rashtriya Ispat Nigam Limited - India
- Samtan Co., Ltd - South Korea
- GMR Energy Limited - India
- Straits Asia Resources Limited - Singapore
- Wood Mackenzie - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Indo Tambangraya Megah - Indonesia
- Oldendorff Carriers - Singapore
- Ministry of Transport, Egypt
- Deloitte Consulting - India
- Indonesian Coal Mining Association
- India Bulls Power Limited - India
- Kideco Jaya Agung - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Lanco Infratech Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- Bulk Trading Sa - Switzerland
- Trasteel International SA, Italy
- Maharashtra Electricity Regulatory Commission - India
- Indian Oil Corporation Limited
- IEA Clean Coal Centre - UK
- Alfred C Toepfer International GmbH - Germany
- Miang Besar Coal Terminal - Indonesia
- White Energy Company Limited
- PowerSource Philippines DevCo
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sojitz Corporation - Japan
- Australian Commodity Traders Exchange
- Attock Cement Pakistan Limited
- Posco Energy - South Korea
- Sindya Power Generating Company Private Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Metalloyd Limited - United Kingdom
- London Commodity Brokers - England
- Chettinad Cement Corporation Ltd - India
- Tata Chemicals Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Carbofer General Trading SA - India
- Power Finance Corporation Ltd., India
- Gujarat Mineral Development Corp Ltd - India
- Singapore Mercantile Exchange
- Vizag Seaport Private Limited - India
- Bharathi Cement Corporation - India
- Altura Mining Limited, Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Link Ltd, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Planning Commission, India
- PTC India Limited - India
- CIMB Investment Bank - Malaysia
- Uttam Galva Steels Limited - India
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