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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$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Tuesday, 15 October 13
CHINA COAL IMPORTS TO KEEP GROWING IN THE YEARS TO COME, ALBEIT AT A SLOWER RATE - EVA TZIMA / NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
In its latest monthly report, shipbroker Intermodal highlighted the growing role of coal in the energy mix. According to Intermodal's research anal ...
Tuesday, 15 October 13
NEWCASTLE PORT SHIPPED 6.50% MORE COAL W-O-W
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port up 6.50 per cent week on week to 3.19 million mt for ...
Monday, 14 October 13
MEMR OF INDONESIA SETS THE COAL'S SPOT PRICE AT US$ 76.61 FOR OCT'13 DELIVERY
COALspot. com - The Indonesian government has revised down government declared coal bench mark price by US$ 0.28/ MT to US$ 76.61 for October 2013 d ...
Monday, 14 October 13
CARBON POLICIES UNLIKELY TO PREVENT A COAL-FUELLED WORLD - WOOD MACKENZIE
China will propel coal growth but US, Europe and Asia will sustain global demand.
At the World Energy Congress (WEC) today Wood Mackenzie's Pres ...
Sunday, 13 October 13
Q4'13 DELIVERY SUB-BIT INDO COAL SWAP FALLS SEVEN STRAIGHT WEEK
COALspot.com – Sub-Bit Indonesia coal swap (FOB ) for average Q4 2013 delivery fell 1.72 percept month on month on Friday 11 October 201 ...
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Petron Corporation, Philippines
- Thiess Contractors Indonesia
- Ministry of Transport, Egypt
- Global Green Power PLC Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Toyota Tsusho Corporation, Japan
- Australian Coal Association
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- Wood Mackenzie - Singapore
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- Bharathi Cement Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- European Bulk Services B.V. - Netherlands
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- TNB Fuel Sdn Bhd - Malaysia
- San Jose City I Power Corp, Philippines
- Chamber of Mines of South Africa
- Samtan Co., Ltd - South Korea
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- Metalloyd Limited - United Kingdom
- Aboitiz Power Corporation - Philippines
- MS Steel International - UAE
- Pendopo Energi Batubara - Indonesia
- Madhucon Powers Ltd - India
- White Energy Company Limited
- Sarangani Energy Corporation, Philippines
- Indian Oil Corporation Limited
- Sojitz Corporation - Japan
- Orica Mining Services - Indonesia
- Latin American Coal - Colombia
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- Romanian Commodities Exchange
- PTC India Limited - India
- IEA Clean Coal Centre - UK
- Krishnapatnam Port Company Ltd. - India
- Semirara Mining and Power Corporation, Philippines
- Carbofer General Trading SA - India
- Trasteel International SA, Italy
- Leighton Contractors Pty Ltd - Australia
- SMC Global Power, Philippines
- CNBM International Corporation - China
- Bangladesh Power Developement Board
- Siam City Cement - Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Binh Thuan Hamico - Vietnam
- Heidelberg Cement - Germany
- Xindia Steels Limited - India
- Indogreen Group - Indonesia
- Tamil Nadu electricity Board
- Meralco Power Generation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Indika Energy - Indonesia
- Videocon Industries ltd - India
- Karaikal Port Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Jorong Barutama Greston.PT - Indonesia
- Mjunction Services Limited - India
- Riau Bara Harum - Indonesia
- Semirara Mining Corp, Philippines
- Parry Sugars Refinery, India
- GAC Shipping (India) Pvt Ltd
- Bulk Trading Sa - Switzerland
- South Luzon Thermal Energy Corporation
- Tata Chemicals Ltd - India
- Antam Resourcindo - Indonesia
- Siam City Cement PLC, Thailand
- Alfred C Toepfer International GmbH - Germany
- Pipit Mutiara Jaya. PT, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- GMR Energy Limited - India
- Sindya Power Generating Company Private Ltd
- Maheswari Brothers Coal Limited - India
- Sakthi Sugars Limited - India
- Coal and Oil Company - UAE
- Bahari Cakrawala Sebuku - Indonesia
- Australian Commodity Traders Exchange
- Simpson Spence & Young - Indonesia
- Directorate Of Revenue Intelligence - India
- Edison Trading Spa - Italy
- Bukit Baiduri Energy - Indonesia
- Economic Council, Georgia
- Kideco Jaya Agung - Indonesia
- Aditya Birla Group - India
- Global Business Power Corporation, Philippines
- Ministry of Finance - Indonesia
- Mintek Dendrill Indonesia
- OPG Power Generation Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- TeaM Sual Corporation - Philippines
- Kumho Petrochemical, South Korea
- Miang Besar Coal Terminal - Indonesia
- Bhushan Steel Limited - India
- Attock Cement Pakistan Limited
- Kepco SPC Power Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Bayan Resources Tbk. - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Medco Energi Mining Internasional
- GVK Power & Infra Limited - India
- London Commodity Brokers - England
- Meenaskhi Energy Private Limited - India
- Billiton Holdings Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Sree Jayajothi Cements Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CIMB Investment Bank - Malaysia
- Barasentosa Lestari - Indonesia
- Eastern Coal Council - USA
- Indian Energy Exchange, India
- Deloitte Consulting - India
- Baramulti Group, Indonesia
- Planning Commission, India
- Price Waterhouse Coopers - Russia
- Rio Tinto Coal - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Posco Energy - South Korea
- Renaissance Capital - South Africa
- GN Power Mariveles Coal Plant, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Ambuja Cements Ltd - India
- ASAPP Information Group - India
- The University of Queensland
- Energy Development Corp, Philippines
- Eastern Energy - Thailand
- Sical Logistics Limited - India
- Borneo Indobara - Indonesia
- Therma Luzon, Inc, Philippines
- Bhatia International Limited - India
- Vizag Seaport Private Limited - India
- Indonesian Coal Mining Association
- Standard Chartered Bank - UAE
- Mercator Lines Limited - India
- Commonwealth Bank - Australia
- McConnell Dowell - Australia
- The State Trading Corporation of India Ltd
- VISA Power Limited - India
- ICICI Bank Limited - India
- Central Java Power - Indonesia
- Uttam Galva Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- Cigading International Bulk Terminal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Lanco Infratech Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Jindal Steel & Power Ltd - India
- India Bulls Power Limited - India
- Ministry of Mines - Canada
- Essar Steel Hazira Ltd - India
- Banpu Public Company Limited - Thailand
- Central Electricity Authority - India
- Merrill Lynch Commodities Europe
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercuria Energy - Indonesia
- Electricity Authority, New Zealand
- Oldendorff Carriers - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Globalindo Alam Lestari - Indonesia
- Energy Link Ltd, New Zealand
- Cement Manufacturers Association - India
- Marubeni Corporation - India
- Star Paper Mills Limited - India
- Gujarat Sidhee Cement - India
- Gujarat Mineral Development Corp Ltd - India
- Kartika Selabumi Mining - Indonesia
- Manunggal Multi Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Goldman Sachs - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Makarim & Taira - Indonesia
- LBH Netherlands Bv - Netherlands
- Bukit Makmur.PT - Indonesia
- Minerals Council of Australia
- PowerSource Philippines DevCo
- Thai Mozambique Logistica
- Holcim Trading Pte Ltd - Singapore
- Vedanta Resources Plc - India
- Bhoruka Overseas - Indonesia
- Dalmia Cement Bharat India
- Port Waratah Coal Services - Australia
- Ind-Barath Power Infra Limited - India
- Intertek Mineral Services - Indonesia
- Coastal Gujarat Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- IHS Mccloskey Coal Group - USA
- Formosa Plastics Group - Taiwan
- Coalindo Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Altura Mining Limited, Indonesia
- New Zealand Coal & Carbon
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- PNOC Exploration Corporation - Philippines
- International Coal Ventures Pvt Ltd - India
- Wilmar Investment Holdings
- Georgia Ports Authority, United States
- Independent Power Producers Association of India
- Electricity Generating Authority of Thailand
- Salva Resources Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Orica Australia Pty. Ltd.
- Chettinad Cement Corporation Ltd - India
- Singapore Mercantile Exchange
- Larsen & Toubro Limited - India
- The Treasury - Australian Government
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