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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, 23 September 13
AUSTRALIA'S NEWCASTLE PORT SHIPPED 3 PERCENT LESS COAL WEEK ON WEEK
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port fell 3 per cent week on week to 2.92 million mt for t ...
Sunday, 22 September 13
BDI STRENGTHENS FURTHER AS CAPESIZE FREIGHT RATES JUMP - CAPT. REDDY
COALspot.com: The freight market continued its upward trend and maintaining the moment with BDI and Cape index up by 16 pct week on week. The Capesi ...
Sunday, 22 September 13
API 8 CFR SOUTH CHINA COAL SWAPS ADVANCE
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 ...
Sunday, 22 September 13
SUB-BIT INDONESIA COAL SWAPS REMAIN UNDER PRESSURE
COALspot.com – Sub-Bit Indonesia coal swap (FOB ) for average Q4 2013 delivery down 2.09 percept month on month on Friday 20 September 2 ...
Friday, 20 September 13
SHIP OWNERS INVEST MORE THAN $9.2 BILLION ON NEW BUILDING VESSELS DURING AUGUST - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Despite the fact that August is traditionally a slow month in terms of ships investment activity, ship owners have grasped this year the opportunity ...
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- Sinarmas Energy and Mining - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indo Tambangraya Megah - Indonesia
- Merrill Lynch Commodities Europe
- Barasentosa Lestari - Indonesia
- Medco Energi Mining Internasional
- San Jose City I Power Corp, Philippines
- Malabar Cements Ltd - India
- Xindia Steels Limited - India
- Straits Asia Resources Limited - Singapore
- GVK Power & Infra Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Mintek Dendrill Indonesia
- MS Steel International - UAE
- Romanian Commodities Exchange
- Sical Logistics Limited - India
- Iligan Light & Power Inc, Philippines
- Attock Cement Pakistan Limited
- White Energy Company Limited
- TNB Fuel Sdn Bhd - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Pendopo Energi Batubara - Indonesia
- PNOC Exploration Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- IEA Clean Coal Centre - UK
- Kideco Jaya Agung - Indonesia
- Ministry of Transport, Egypt
- McConnell Dowell - Australia
- Bhatia International Limited - India
- The Treasury - Australian Government
- Formosa Plastics Group - Taiwan
- Sakthi Sugars Limited - India
- Power Finance Corporation Ltd., India
- ICICI Bank Limited - India
- Bukit Makmur.PT - Indonesia
- Simpson Spence & Young - Indonesia
- Parliament of New Zealand
- Star Paper Mills Limited - India
- Trasteel International SA, Italy
- Sindya Power Generating Company Private Ltd
- Bangladesh Power Developement Board
- Maheswari Brothers Coal Limited - India
- Jaiprakash Power Ventures ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wood Mackenzie - Singapore
- Singapore Mercantile Exchange
- Karaikal Port Pvt Ltd - India
- ASAPP Information Group - India
- Sojitz Corporation - Japan
- Manunggal Multi Energi - Indonesia
- Orica Mining Services - Indonesia
- SN Aboitiz Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- Semirara Mining and Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- Bhoruka Overseas - Indonesia
- SMC Global Power, Philippines
- Mjunction Services Limited - India
- London Commodity Brokers - England
- Karbindo Abesyapradhi - Indoneisa
- Economic Council, Georgia
- Pipit Mutiara Jaya. PT, Indonesia
- PowerSource Philippines DevCo
- Lanco Infratech Ltd - India
- Renaissance Capital - South Africa
- Agrawal Coal Company - India
- Sree Jayajothi Cements Limited - India
- Chettinad Cement Corporation Ltd - India
- Coastal Gujarat Power Limited - India
- Eastern Energy - Thailand
- Chamber of Mines of South Africa
- Indian Energy Exchange, India
- Bukit Asam (Persero) Tbk - Indonesia
- Edison Trading Spa - Italy
- The State Trading Corporation of India Ltd
- CIMB Investment Bank - Malaysia
- TeaM Sual Corporation - Philippines
- Australian Coal Association
- Global Green Power PLC Corporation, Philippines
- Larsen & Toubro Limited - India
- Eastern Coal Council - USA
- Savvy Resources Ltd - HongKong
- Meenaskhi Energy Private Limited - India
- South Luzon Thermal Energy Corporation
- Thai Mozambique Logistica
- Samtan Co., Ltd - South Korea
- Indogreen Group - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Anglo American - United Kingdom
- Videocon Industries ltd - India
- Aditya Birla Group - India
- Jorong Barutama Greston.PT - Indonesia
- Banpu Public Company Limited - Thailand
- Riau Bara Harum - Indonesia
- Central Electricity Authority - India
- Rashtriya Ispat Nigam Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Aboitiz Power Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- Rio Tinto Coal - Australia
- Tata Chemicals Ltd - India
- New Zealand Coal & Carbon
- Carbofer General Trading SA - India
- Maharashtra Electricity Regulatory Commission - India
- Makarim & Taira - Indonesia
- India Bulls Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- OPG Power Generation Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- SMG Consultants - Indonesia
- Siam City Cement PLC, Thailand
- Jindal Steel & Power Ltd - India
- CNBM International Corporation - China
- PTC India Limited - India
- Billiton Holdings Pty Ltd - Australia
- Mercuria Energy - Indonesia
- Parry Sugars Refinery, India
- Bulk Trading Sa - Switzerland
- Deloitte Consulting - India
- The University of Queensland
- Global Coal Blending Company Limited - Australia
- Energy Development Corp, Philippines
- Standard Chartered Bank - UAE
- Cement Manufacturers Association - India
- Ministry of Finance - Indonesia
- Global Business Power Corporation, Philippines
- Thiess Contractors Indonesia
- Dalmia Cement Bharat India
- Neyveli Lignite Corporation Ltd, - India
- Kobexindo Tractors - Indoneisa
- Petrochimia International Co. Ltd.- Taiwan
- Oldendorff Carriers - Singapore
- Kapuas Tunggal Persada - Indonesia
- Antam Resourcindo - Indonesia
- GAC Shipping (India) Pvt Ltd
- Essar Steel Hazira Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Kepco SPC Power Corporation, Philippines
- GMR Energy Limited - India
- Alfred C Toepfer International GmbH - Germany
- Ministry of Mines - Canada
- International Coal Ventures Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Ambuja Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- Kartika Selabumi Mining - Indonesia
- Ind-Barath Power Infra Limited - India
- Independent Power Producers Association of India
- Sarangani Energy Corporation, Philippines
- Baramulti Group, Indonesia
- Latin American Coal - Colombia
- Therma Luzon, Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Siam City Cement - Thailand
- Bayan Resources Tbk. - Indonesia
- Meralco Power Generation, Philippines
- Minerals Council of Australia
- Commonwealth Bank - Australia
- Electricity Authority, New Zealand
- Indika Energy - Indonesia
- Goldman Sachs - Singapore
- Planning Commission, India
- Orica Australia Pty. Ltd.
- Bahari Cakrawala Sebuku - Indonesia
- Bharathi Cement Corporation - India
- Salva Resources Pvt Ltd - India
- Grasim Industreis Ltd - India
- Interocean Group of Companies - India
- Georgia Ports Authority, United States
- Australian Commodity Traders Exchange
- Directorate Of Revenue Intelligence - India
- Vedanta Resources Plc - India
- Central Java Power - Indonesia
- Tamil Nadu electricity Board
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Posco Energy - South Korea
- Coal and Oil Company - UAE
- PetroVietnam Power Coal Import and Supply Company
- Leighton Contractors Pty Ltd - Australia
- Uttam Galva Steels Limited - India
- Semirara Mining Corp, Philippines
- VISA Power Limited - India
- Marubeni Corporation - India
- Petron Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Toyota Tsusho Corporation, Japan
- Heidelberg Cement - Germany
- Port Waratah Coal Services - Australia
- Madhucon Powers Ltd - India
- Indonesian Coal Mining Association
- Wilmar Investment Holdings
- Africa Commodities Group - South Africa
- Indian Oil Corporation Limited
- Mercator Lines Limited - India
- Borneo Indobara - Indonesia
- Vizag Seaport Private Limited - India
- Kumho Petrochemical, South Korea
- Bhushan Steel Limited - India
- Kaltim Prima Coal - Indonesia
- Gujarat Sidhee Cement - India
- Directorate General of MIneral and Coal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Timah Investasi Mineral - Indoneisa
- Globalindo Alam Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Coalindo Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Energy Link Ltd, New Zealand
- LBH Netherlands Bv - Netherlands
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