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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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Monday, 07 October 13
SGX - CFR SOUTH CHINA COAL SWAPS END ALMOST FLAT
COALspot.com : SGX has launched API 8 CFR South China Coal Swap on 29 April 2013 and SGX replaced the previous swap.
API 8 CFR South China Coal s ...
Monday, 07 October 13
Q3'14 SUB-BIT FOB INDONESIA COAL SWAP CLOSED 6.53% HIGHER THAN Q4'13
COALspot.com – Sub-Bit Indonesia coal swap (FOB ) for average Q4 2013 delivery gained 0.53 % on day and fell 2.33 percept month on month ...
Sunday, 06 October 13
DRY BULK FREIGHT MARKET STAYS STEADY IN SPITE CHINESE HOLIDAYS - SOLYM CARRIERS SINGAPORE
COALspot.com: The freight market continued to remain firm in spite of Chinese holidays.
The BDI closed at 2,084 points on Friday 4 October or up ...
Saturday, 05 October 13
CAPESIZE EARNINGS SKYROCKET AS A RESULT OF INCREASED CHINA DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
An increased iron ore demand has triggered this latest dry bulk rally, which could get yet another boost during next week, when China is expected to ...
Friday, 04 October 13
NICKEL ORE SHIPMENTS - LESSONS LEARNED FROM LOSSES
One of the most pressing problems for the bulk shipping industry is the safe carriage of nickel ore. The increasing demand for this commodity is fue ...
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- Minerals Council of Australia
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- Kumho Petrochemical, South Korea
- Intertek Mineral Services - Indonesia
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- Africa Commodities Group - South Africa
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- White Energy Company Limited
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- Banpu Public Company Limited - Thailand
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- Price Waterhouse Coopers - Russia
- GN Power Mariveles Coal Plant, Philippines
- IEA Clean Coal Centre - UK
- Savvy Resources Ltd - HongKong
- Power Finance Corporation Ltd., India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Central Java Power - Indonesia
- Parliament of New Zealand
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- Directorate General of MIneral and Coal - Indonesia
- Orica Mining Services - Indonesia
- Goldman Sachs - Singapore
- The State Trading Corporation of India Ltd
- Sojitz Corporation - Japan
- Therma Luzon, Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Manunggal Multi Energi - Indonesia
- Straits Asia Resources Limited - Singapore
- Attock Cement Pakistan Limited
- Anglo American - United Kingdom
- Trasteel International SA, Italy
- Maheswari Brothers Coal Limited - India
- Semirara Mining Corp, Philippines
- Sakthi Sugars Limited - India
- Kapuas Tunggal Persada - Indonesia
- Central Electricity Authority - India
- Aditya Birla Group - India
- Petron Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Bukit Asam (Persero) Tbk - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bharathi Cement Corporation - India
- Siam City Cement PLC, Thailand
- Holcim Trading Pte Ltd - Singapore
- Jindal Steel & Power Ltd - India
- Sree Jayajothi Cements Limited - India
- Bayan Resources Tbk. - Indonesia
- Agrawal Coal Company - India
- Videocon Industries ltd - India
- Global Coal Blending Company Limited - Australia
- Makarim & Taira - Indonesia
- Samtan Co., Ltd - South Korea
- Meenaskhi Energy Private Limited - India
- Vedanta Resources Plc - India
- Australian Coal Association
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- MS Steel International - UAE
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- The Treasury - Australian Government
- Indian Oil Corporation Limited
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- Maharashtra Electricity Regulatory Commission - India
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- Coal and Oil Company - UAE
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- Bangladesh Power Developement Board
- Eastern Coal Council - USA
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- Kohat Cement Company Ltd. - Pakistan
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- TeaM Sual Corporation - Philippines
- Georgia Ports Authority, United States
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- Bulk Trading Sa - Switzerland
- Electricity Authority, New Zealand
- CIMB Investment Bank - Malaysia
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- Romanian Commodities Exchange
- Grasim Industreis Ltd - India
- Globalindo Alam Lestari - Indonesia
- McConnell Dowell - Australia
- Meralco Power Generation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Global Green Power PLC Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- South Luzon Thermal Energy Corporation
- AsiaOL BioFuels Corp., Philippines
- Chamber of Mines of South Africa
- OPG Power Generation Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Electricity Generating Authority of Thailand
- Singapore Mercantile Exchange
- Mercuria Energy - Indonesia
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- Renaissance Capital - South Africa
- Salva Resources Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Energy Development Corp, Philippines
- Latin American Coal - Colombia
- Pipit Mutiara Jaya. PT, Indonesia
- Larsen & Toubro Limited - India
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- Eastern Energy - Thailand
- Chettinad Cement Corporation Ltd - India
- Kepco SPC Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- The University of Queensland
- Sarangani Energy Corporation, Philippines
- Ministry of Transport, Egypt
- Indika Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Uttam Galva Steels Limited - India
- Vizag Seaport Private Limited - India
- Bukit Makmur.PT - Indonesia
- Australian Commodity Traders Exchange
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- Aboitiz Power Corporation - Philippines
- Riau Bara Harum - Indonesia
- Energy Link Ltd, New Zealand
- Kobexindo Tractors - Indoneisa
- Binh Thuan Hamico - Vietnam
- Formosa Plastics Group - Taiwan
- Toyota Tsusho Corporation, Japan
- Port Waratah Coal Services - Australia
- Metalloyd Limited - United Kingdom
- Kaltim Prima Coal - Indonesia
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- India Bulls Power Limited - India
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