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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, 18 September 13
DRY BULK MARKET CONTINUED TO ADVANCE - INTERMODAL
Chartering (Wet: Stable- / Dry: Firm+ )
The Dry Bulk market continued to advance at a very fast pace, with the BDI closing off the week north ...
Tuesday, 17 September 13
BUMA PRODUCED 3.57 PERCENT MORE COAL IN AUGUST
COALspot.com: BUMA has removed totaled 25.20 million bcm of overburden to produce 2.90 million tons coal in August 2013. BUMI produced 3.07 percent ...
Tuesday, 17 September 13
NEWCASTLE PORT SHIPPED ABOUT 27 PERCENT MORE COAL WEEK ON WEEK
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port up 27.26 per cent week on week to 3.01 million mt for ...
Tuesday, 17 September 13
TAIPOWER INVITES BIDS FOR SUPPLY OF SUB-BITUMINOUS COAL
COALspot.com - Taiwan Power Company intends to procure 1.050 million tons of sub-bituminous coal for Taipower thermal power plant through open tende ...
Tuesday, 17 September 13
ORPHEUS SECURES SIGNIFICANT INFRASTRUCTURE DEAL THROUGH ACQUISITION OF SOUTH KALIMANTAN PORT CAPACITY
COALspot.com : Orpheus Energy Limited (ASX: OEG) of Australia has today announced that, it has executed a binding agreement with the proprietor of S ...
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- India Bulls Power Limited - India
- Electricity Generating Authority of Thailand
- Agrawal Coal Company - India
- Karaikal Port Pvt Ltd - India
- Mercuria Energy - Indonesia
- The University of Queensland
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kobexindo Tractors - Indoneisa
- SMG Consultants - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- GVK Power & Infra Limited - India
- Formosa Plastics Group - Taiwan
- The Treasury - Australian Government
- TNB Fuel Sdn Bhd - Malaysia
- GMR Energy Limited - India
- Orica Australia Pty. Ltd.
- Indian Oil Corporation Limited
- Siam City Cement - Thailand
- Directorate General of MIneral and Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Sical Logistics Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Maheswari Brothers Coal Limited - India
- Thiess Contractors Indonesia
- Georgia Ports Authority, United States
- Straits Asia Resources Limited - Singapore
- Semirara Mining Corp, Philippines
- Goldman Sachs - Singapore
- Price Waterhouse Coopers - Russia
- Barasentosa Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- ASAPP Information Group - India
- Siam City Cement PLC, Thailand
- Chamber of Mines of South Africa
- Bhatia International Limited - India
- Sarangani Energy Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Ambuja Cements Ltd - India
- Ministry of Finance - Indonesia
- Manunggal Multi Energi - Indonesia
- Therma Luzon, Inc, Philippines
- Meralco Power Generation, Philippines
- Bangladesh Power Developement Board
- Miang Besar Coal Terminal - Indonesia
- Wilmar Investment Holdings
- Mercator Lines Limited - India
- LBH Netherlands Bv - Netherlands
- SMC Global Power, Philippines
- Carbofer General Trading SA - India
- Jindal Steel & Power Ltd - India
- Planning Commission, India
- Cement Manufacturers Association - India
- Aboitiz Power Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Essar Steel Hazira Ltd - India
- Savvy Resources Ltd - HongKong
- Port Waratah Coal Services - Australia
- Simpson Spence & Young - Indonesia
- Africa Commodities Group - South Africa
- Bukit Makmur.PT - Indonesia
- Global Business Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Jorong Barutama Greston.PT - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Grasim Industreis Ltd - India
- Indogreen Group - Indonesia
- VISA Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Indika Energy - Indonesia
- Power Finance Corporation Ltd., India
- Sojitz Corporation - Japan
- AsiaOL BioFuels Corp., Philippines
- Coal and Oil Company - UAE
- Asmin Koalindo Tuhup - Indonesia
- Pendopo Energi Batubara - Indonesia
- Riau Bara Harum - Indonesia
- Energy Link Ltd, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Tata Chemicals Ltd - India
- GAC Shipping (India) Pvt Ltd
- Makarim & Taira - Indonesia
- Tamil Nadu electricity Board
- Bhoruka Overseas - Indonesia
- Merrill Lynch Commodities Europe
- Star Paper Mills Limited - India
- Chettinad Cement Corporation Ltd - India
- Economic Council, Georgia
- Maharashtra Electricity Regulatory Commission - India
- Anglo American - United Kingdom
- Heidelberg Cement - Germany
- Trasteel International SA, Italy
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Energy Exchange, India
- PetroVietnam Power Coal Import and Supply Company
- Borneo Indobara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- Timah Investasi Mineral - Indoneisa
- Sindya Power Generating Company Private Ltd
- Independent Power Producers Association of India
- Semirara Mining and Power Corporation, Philippines
- Deloitte Consulting - India
- Bukit Baiduri Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Thai Mozambique Logistica
- European Bulk Services B.V. - Netherlands
- Directorate Of Revenue Intelligence - India
- Global Green Power PLC Corporation, Philippines
- McConnell Dowell - Australia
- Oldendorff Carriers - Singapore
- CNBM International Corporation - China
- Ind-Barath Power Infra Limited - India
- Rashtriya Ispat Nigam Limited - India
- Marubeni Corporation - India
- Baramulti Group, Indonesia
- Kaltim Prima Coal - Indonesia
- Xindia Steels Limited - India
- Antam Resourcindo - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- London Commodity Brokers - England
- Dalmia Cement Bharat India
- IEA Clean Coal Centre - UK
- Energy Development Corp, Philippines
- Renaissance Capital - South Africa
- Ministry of Mines - Canada
- Salva Resources Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Parliament of New Zealand
- Romanian Commodities Exchange
- International Coal Ventures Pvt Ltd - India
- Medco Energi Mining Internasional
- White Energy Company Limited
- Toyota Tsusho Corporation, Japan
- Bhushan Steel Limited - India
- Bayan Resources Tbk. - Indonesia
- San Jose City I Power Corp, Philippines
- Malabar Cements Ltd - India
- Banpu Public Company Limited - Thailand
- Intertek Mineral Services - Indonesia
- Standard Chartered Bank - UAE
- Electricity Authority, New Zealand
- Uttam Galva Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- CIMB Investment Bank - Malaysia
- Interocean Group of Companies - India
- Indo Tambangraya Megah - Indonesia
- The State Trading Corporation of India Ltd
- Krishnapatnam Port Company Ltd. - India
- Metalloyd Limited - United Kingdom
- PNOC Exploration Corporation - Philippines
- Indonesian Coal Mining Association
- Posco Energy - South Korea
- Australian Commodity Traders Exchange
- OPG Power Generation Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- ICICI Bank Limited - India
- Sakthi Sugars Limited - India
- Bulk Trading Sa - Switzerland
- New Zealand Coal & Carbon
- Holcim Trading Pte Ltd - Singapore
- Kideco Jaya Agung - Indonesia
- Central Electricity Authority - India
- Mintek Dendrill Indonesia
- PowerSource Philippines DevCo
- Bahari Cakrawala Sebuku - Indonesia
- Kepco SPC Power Corporation, Philippines
- Latin American Coal - Colombia
- Parry Sugars Refinery, India
- Coalindo Energy - Indonesia
- Aditya Birla Group - India
- Ministry of Transport, Egypt
- Cigading International Bulk Terminal - Indonesia
- Vedanta Resources Plc - India
- Bharathi Cement Corporation - India
- Lanco Infratech Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- South Luzon Thermal Energy Corporation
- Australian Coal Association
- Vizag Seaport Private Limited - India
- Kohat Cement Company Ltd. - Pakistan
- MS Steel International - UAE
- Mjunction Services Limited - India
- Samtan Co., Ltd - South Korea
- Minerals Council of Australia
- Edison Trading Spa - Italy
- Orica Mining Services - Indonesia
- Altura Mining Limited, Indonesia
- Madhucon Powers Ltd - India
- IHS Mccloskey Coal Group - USA
- Larsen & Toubro Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Wood Mackenzie - Singapore
- Gujarat Sidhee Cement - India
- Sree Jayajothi Cements Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- PTC India Limited - India
- Coastal Gujarat Power Limited - India
- Singapore Mercantile Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Rio Tinto Coal - Australia
- Videocon Industries ltd - India
- Commonwealth Bank - Australia
- Eastern Energy - Thailand
- Globalindo Alam Lestari - Indonesia
- Eastern Coal Council - USA
- Attock Cement Pakistan Limited
- Neyveli Lignite Corporation Ltd, - India
- Petron Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Central Java Power - Indonesia
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