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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, 11 September 13
ASIA - PACIFIC THERMAL COAL MARKET TO REMAIN OVERSUPPLIED IN NEXT 12 MONTHS - FITCH RATINGS
COALspot.com: Fitch Ratings says the Asia-Pacific thermal coal market will remain oversupplied in the next 12 months because strong production has b ...
Tuesday, 10 September 13
COAL EXPORTS AT AUSTRALIA'S NEWCASTLE PORT SLIP 30.31% ON WEEK TO 2.36 MMT
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port down 30.31 per cent week on week to 2.36 million mt f ...
Tuesday, 10 September 13
WORLDWIDE COAL CONSUMPTION RISES SHARPLY - RA DR. ERICH SCHMITZ
By: RA Dr. Erich Schmitz, Verein der Kohlenimporteure (Germany Coal Importers Association)
World hard coal market in the first half of 2013: worl ...
Monday, 09 September 13
REBOUND IN NEWBUILDING ORDERS HASN'T HURT DRY BULK MARKET PROSPECTS, BUT SHIP OWNERS SHOULD STILL BE CAUTIOUS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Since the start of 2013 and up until the end of August, one thing has really caught the headlines in the dry bulk market, except of course, the frei ...
Sunday, 08 September 13
Q3 2014 THERMAL COAL SWAPS : STEADY DIRECTION
COALspot.com – Sub-Bit Indonesia coal swap (FOB ) for average Q4 2013 delivery up 1.88 percent month on month. The swap was moved ...
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- Chettinad Cement Corporation Ltd - India
- Gujarat Sidhee Cement - India
- Intertek Mineral Services - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Romanian Commodities Exchange
- Vizag Seaport Private Limited - India
- MS Steel International - UAE
- Global Coal Blending Company Limited - Australia
- Alfred C Toepfer International GmbH - Germany
- Jaiprakash Power Ventures ltd
- Coal and Oil Company - UAE
- GN Power Mariveles Coal Plant, Philippines
- Metalloyd Limited - United Kingdom
- Kobexindo Tractors - Indoneisa
- CNBM International Corporation - China
- Bahari Cakrawala Sebuku - Indonesia
- Malabar Cements Ltd - India
- South Luzon Thermal Energy Corporation
- Agrawal Coal Company - India
- Uttam Galva Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Baramulti Group, Indonesia
- Thai Mozambique Logistica
- Mercuria Energy - Indonesia
- Dalmia Cement Bharat India
- Eastern Coal Council - USA
- Siam City Cement PLC, Thailand
- Pendopo Energi Batubara - Indonesia
- PowerSource Philippines DevCo
- Rio Tinto Coal - Australia
- Sakthi Sugars Limited - India
- Independent Power Producers Association of India
- Wood Mackenzie - Singapore
- Heidelberg Cement - Germany
- PTC India Limited - India
- Miang Besar Coal Terminal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Timah Investasi Mineral - Indoneisa
- Indonesian Coal Mining Association
- VISA Power Limited - India
- Indo Tambangraya Megah - Indonesia
- Kartika Selabumi Mining - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Coastal Gujarat Power Limited - India
- GVK Power & Infra Limited - India
- Altura Mining Limited, Indonesia
- Goldman Sachs - Singapore
- Madhucon Powers Ltd - India
- Star Paper Mills Limited - India
- Carbofer General Trading SA - India
- Indika Energy - Indonesia
- Edison Trading Spa - Italy
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Grasim Industreis Ltd - India
- The University of Queensland
- Rashtriya Ispat Nigam Limited - India
- Karbindo Abesyapradhi - Indoneisa
- GMR Energy Limited - India
- Indogreen Group - Indonesia
- Videocon Industries ltd - India
- Formosa Plastics Group - Taiwan
- Thiess Contractors Indonesia
- Cement Manufacturers Association - India
- Aboitiz Power Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Binh Thuan Hamico - Vietnam
- Energy Development Corp, Philippines
- Parry Sugars Refinery, India
- McConnell Dowell - Australia
- Savvy Resources Ltd - HongKong
- Larsen & Toubro Limited - India
- Planning Commission, India
- Interocean Group of Companies - India
- Kaltim Prima Coal - Indonesia
- Meenaskhi Energy Private Limited - India
- Sical Logistics Limited - India
- Bhushan Steel Limited - India
- Renaissance Capital - South Africa
- Makarim & Taira - Indonesia
- Samtan Co., Ltd - South Korea
- Standard Chartered Bank - UAE
- Krishnapatnam Port Company Ltd. - India
- Directorate General of MIneral and Coal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Karaikal Port Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Central Java Power - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Petron Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Bukit Makmur.PT - Indonesia
- Indian Oil Corporation Limited
- PNOC Exploration Corporation - Philippines
- Global Business Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Jindal Steel & Power Ltd - India
- Sree Jayajothi Cements Limited - India
- Economic Council, Georgia
- Posco Energy - South Korea
- Riau Bara Harum - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Link Ltd, New Zealand
- Sarangani Energy Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Banpu Public Company Limited - Thailand
- ICICI Bank Limited - India
- Power Finance Corporation Ltd., India
- TeaM Sual Corporation - Philippines
- Bangladesh Power Developement Board
- Wilmar Investment Holdings
- Bhatia International Limited - India
- The Treasury - Australian Government
- SMC Global Power, Philippines
- Bulk Trading Sa - Switzerland
- Maheswari Brothers Coal Limited - India
- Ministry of Finance - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- OPG Power Generation Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Georgia Ports Authority, United States
- Mercator Lines Limited - India
- Toyota Tsusho Corporation, Japan
- Medco Energi Mining Internasional
- Marubeni Corporation - India
- Indian Energy Exchange, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Africa Commodities Group - South Africa
- Meralco Power Generation, Philippines
- Commonwealth Bank - Australia
- Leighton Contractors Pty Ltd - Australia
- Central Electricity Authority - India
- Holcim Trading Pte Ltd - Singapore
- Ministry of Mines - Canada
- Latin American Coal - Colombia
- Xindia Steels Limited - India
- Price Waterhouse Coopers - Russia
- Ambuja Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Australian Commodity Traders Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Orica Mining Services - Indonesia
- Mintek Dendrill Indonesia
- IEA Clean Coal Centre - UK
- LBH Netherlands Bv - Netherlands
- Asmin Koalindo Tuhup - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Singapore Mercantile Exchange
- Eastern Energy - Thailand
- Vedanta Resources Plc - India
- Sindya Power Generating Company Private Ltd
- New Zealand Coal & Carbon
- Electricity Generating Authority of Thailand
- Kumho Petrochemical, South Korea
- The State Trading Corporation of India Ltd
- Iligan Light & Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Tata Chemicals Ltd - India
- Bukit Baiduri Energy - Indonesia
- Attock Cement Pakistan Limited
- GAC Shipping (India) Pvt Ltd
- Maharashtra Electricity Regulatory Commission - India
- Australian Coal Association
- International Coal Ventures Pvt Ltd - India
- Deloitte Consulting - India
- Directorate Of Revenue Intelligence - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Trasteel International SA, Italy
- Bharathi Cement Corporation - India
- Anglo American - United Kingdom
- Minerals Council of Australia
- Chamber of Mines of South Africa
- Mjunction Services Limited - India
- Kepco SPC Power Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Sojitz Corporation - Japan
- CIMB Investment Bank - Malaysia
- Orica Australia Pty. Ltd.
- Electricity Authority, New Zealand
- Kapuas Tunggal Persada - Indonesia
- Tamil Nadu electricity Board
- Ceylon Electricity Board - Sri Lanka
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- White Energy Company Limited
- Globalindo Alam Lestari - Indonesia
- Merrill Lynch Commodities Europe
- Semirara Mining and Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- India Bulls Power Limited - India
- Essar Steel Hazira Ltd - India
- Lanco Infratech Ltd - India
- IHS Mccloskey Coal Group - USA
- Oldendorff Carriers - Singapore
- Barasentosa Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Parliament of New Zealand
- SMG Consultants - Indonesia
- Borneo Indobara - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Antam Resourcindo - Indonesia
- Ministry of Transport, Egypt
- ASAPP Information Group - India
- Coalindo Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Semirara Mining Corp, Philippines
- San Jose City I Power Corp, Philippines
- Simpson Spence & Young - Indonesia
- Aditya Birla Group - India
- London Commodity Brokers - England
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