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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$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Wednesday, 02 October 13
HOW LONG WILL THIS LATEST CAPESIZE RALLY LAST? - TASOS PAPADOPOULOS
By Tasos Papadopoulos, SnP Broker, Intermodal
The surge in iron ore trade has translated into a massive boost in daily earnings for capes; with t ...
Tuesday, 01 October 13
DRY BULK MARKET POISED FOR RETREAT ON CHINA HOLIDAY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The start of a national weeklong in China as of Tuesday is expected to put a lid in the latest rally of the dry bulk freight market, as has always b ...
Monday, 30 September 13
NEWCASTLE'S COAL EXPORT VOLUME CONTINUES TO SLIP
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port fell 8.38 per cent week on week to 2.67 million mt fo ...
Monday, 30 September 13
PANAMAX CHARTER RATES TOUCHING US$ 18K FOR A TRIP TO NOPAC - CAPT. REDDY
COALspot.com : The freight market continued to remain firm, BDI and the Panamax index up week ended 27 September 2013.
The cape index was fell to ...
Sunday, 29 September 13
API 8 CFR SOUTH CHINA COAL Q3 2014 DELIVERY SWAP GAINED $1.19 M-O-M
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 ...
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- Larsen & Toubro Limited - India
- Parliament of New Zealand
- Bharathi Cement Corporation - India
- Minerals Council of Australia
- Uttam Galva Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Australian Commodity Traders Exchange
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- Planning Commission, India
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- Coal and Oil Company - UAE
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- Heidelberg Cement - Germany
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- Maheswari Brothers Coal Limited - India
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- Straits Asia Resources Limited - Singapore
- SN Aboitiz Power Inc, Philippines
- Tata Chemicals Ltd - India
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- Commonwealth Bank - Australia
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- Ministry of Finance - Indonesia
- Eastern Coal Council - USA
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- Trasteel International SA, Italy
- Kapuas Tunggal Persada - Indonesia
- Price Waterhouse Coopers - Russia
- Miang Besar Coal Terminal - Indonesia
- Aboitiz Power Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Banpu Public Company Limited - Thailand
- Meenaskhi Energy Private Limited - India
- Karaikal Port Pvt Ltd - India
- The University of Queensland
- Kohat Cement Company Ltd. - Pakistan
- Romanian Commodities Exchange
- Mjunction Services Limited - India
- Eastern Energy - Thailand
- The Treasury - Australian Government
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- Gujarat Mineral Development Corp Ltd - India
- Rio Tinto Coal - Australia
- Gujarat Electricity Regulatory Commission - India
- Manunggal Multi Energi - Indonesia
- San Jose City I Power Corp, Philippines
- Toyota Tsusho Corporation, Japan
- New Zealand Coal & Carbon
- Singapore Mercantile Exchange
- Rashtriya Ispat Nigam Limited - India
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- Interocean Group of Companies - India
- Ministry of Mines - Canada
- Madhucon Powers Ltd - India
- Attock Cement Pakistan Limited
- GVK Power & Infra Limited - India
- Electricity Authority, New Zealand
- Siam City Cement PLC, Thailand
- Makarim & Taira - Indonesia
- Essar Steel Hazira Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining and Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Coalindo Energy - Indonesia
- Standard Chartered Bank - UAE
- PTC India Limited - India
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- Xindia Steels Limited - India
- Cement Manufacturers Association - India
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- Carbofer General Trading SA - India
- Economic Council, Georgia
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- Bangladesh Power Developement Board
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- Billiton Holdings Pty Ltd - Australia
- VISA Power Limited - India
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- South Luzon Thermal Energy Corporation
- Vizag Seaport Private Limited - India
- Coastal Gujarat Power Limited - India
- Australian Coal Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Parry Sugars Refinery, India
- Jaiprakash Power Ventures ltd
- European Bulk Services B.V. - Netherlands
- Energy Development Corp, Philippines
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- Sojitz Corporation - Japan
- Orica Australia Pty. Ltd.
- Oldendorff Carriers - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Metalloyd Limited - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- Mercuria Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Independent Power Producers Association of India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Port Waratah Coal Services - Australia
- Directorate General of MIneral and Coal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kumho Petrochemical, South Korea
- PNOC Exploration Corporation - Philippines
- TeaM Sual Corporation - Philippines
- SMC Global Power, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Savvy Resources Ltd - HongKong
- Semirara Mining Corp, Philippines
- Indian Energy Exchange, India
- Vijayanagar Sugar Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Sree Jayajothi Cements Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Malabar Cements Ltd - India
- Jindal Steel & Power Ltd - India
- Thai Mozambique Logistica
- Leighton Contractors Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Dalmia Cement Bharat India
- LBH Netherlands Bv - Netherlands
- Sindya Power Generating Company Private Ltd
- McConnell Dowell - Australia
- Baramulti Group, Indonesia
- Riau Bara Harum - Indonesia
- Directorate Of Revenue Intelligence - India
- Pendopo Energi Batubara - Indonesia
- Africa Commodities Group - South Africa
- ICICI Bank Limited - India
- Chamber of Mines of South Africa
- Karbindo Abesyapradhi - Indoneisa
- Bayan Resources Tbk. - Indonesia
- IHS Mccloskey Coal Group - USA
- Anglo American - United Kingdom
- Mintek Dendrill Indonesia
- Altura Mining Limited, Indonesia
- Goldman Sachs - Singapore
- Marubeni Corporation - India
- Globalindo Alam Lestari - Indonesia
- Renaissance Capital - South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Bhatia International Limited - India
- AsiaOL BioFuels Corp., Philippines
- Tamil Nadu electricity Board
- Bukit Asam (Persero) Tbk - Indonesia
- Orica Mining Services - Indonesia
- Global Coal Blending Company Limited - Australia
- Indogreen Group - Indonesia
- SMG Consultants - Indonesia
- Ambuja Cements Ltd - India
- Samtan Co., Ltd - South Korea
- Sinarmas Energy and Mining - Indonesia
- MS Steel International - UAE
- OPG Power Generation Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Global Business Power Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Indonesian Coal Mining Association
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- Central Electricity Authority - India
- IEA Clean Coal Centre - UK
- Timah Investasi Mineral - Indoneisa
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- Ceylon Electricity Board - Sri Lanka
- Bhushan Steel Limited - India
- Intertek Mineral Services - Indonesia
- Edison Trading Spa - Italy
- Petron Corporation, Philippines
- White Energy Company Limited
- Deloitte Consulting - India
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