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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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Sunday, 08 September 13
BALTIC INDEX UP ON HIGHER CAPESIZE, PANAMAX RATES
COALspot.com : The freight market continued saw one of the biggest rally last week with Cape Size taking the lead followed by Panamax.
The BDI wa ...
Friday, 06 September 13
DRY BULK MARKET REACHES NEW YEAR-HIGHS ON THE BACK OF INCREASED CAPESIZE DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has been on the rise once again, but this time around any new increase of freight rates translates into new year-highs, thus bri ...
Friday, 06 September 13
US PRODUCED APPROXIMATELY 90.80 MMST OF COAL IN AUGUST
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.90 million short tons (mmst) of ...
Thursday, 05 September 13
INDONESIAN COAL EXPORTS UP BY 6.72 PERCENT IN JULY
COALspot.com: Indonesia, the world's largest multi grade coal exporter shipped 35.268* million tons of coal in July 2013. Indonesian coal exp ...
Thursday, 05 September 13
HANDY: NICKEL ORE WAS PUSHING THE FAR EAST MARKET - FEARNLEYS
Handy
Nickel Ore was pushing the Feast market, several ships were fixed from low teens to $14k. Indo/India was still supported by bauxite, while th ...
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- GN Power Mariveles Coal Plant, Philippines
- Indian Oil Corporation Limited
- The Treasury - Australian Government
- Krishnapatnam Port Company Ltd. - India
- Singapore Mercantile Exchange
- Central Java Power - Indonesia
- OPG Power Generation Pvt Ltd - India
- Heidelberg Cement - Germany
- Edison Trading Spa - Italy
- Siam City Cement PLC, Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Star Paper Mills Limited - India
- Kumho Petrochemical, South Korea
- Maheswari Brothers Coal Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Timah Investasi Mineral - Indoneisa
- Marubeni Corporation - India
- Karaikal Port Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Videocon Industries ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Riau Bara Harum - Indonesia
- Tamil Nadu electricity Board
- Uttam Galva Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Energy Development Corp, Philippines
- Indogreen Group - Indonesia
- ASAPP Information Group - India
- Borneo Indobara - Indonesia
- LBH Netherlands Bv - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Deloitte Consulting - India
- International Coal Ventures Pvt Ltd - India
- Tata Chemicals Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Sical Logistics Limited - India
- Attock Cement Pakistan Limited
- Vizag Seaport Private Limited - India
- Cigading International Bulk Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Australian Coal Association
- Planning Commission, India
- Intertek Mineral Services - Indonesia
- Grasim Industreis Ltd - India
- McConnell Dowell - Australia
- Bhushan Steel Limited - India
- Port Waratah Coal Services - Australia
- Barasentosa Lestari - Indonesia
- Chamber of Mines of South Africa
- Bhatia International Limited - India
- Central Electricity Authority - India
- Orica Australia Pty. Ltd.
- Sree Jayajothi Cements Limited - India
- Leighton Contractors Pty Ltd - Australia
- Georgia Ports Authority, United States
- Carbofer General Trading SA - India
- Billiton Holdings Pty Ltd - Australia
- PNOC Exploration Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Wilmar Investment Holdings
- White Energy Company Limited
- Price Waterhouse Coopers - Russia
- Oldendorff Carriers - Singapore
- Iligan Light & Power Inc, Philippines
- Renaissance Capital - South Africa
- Cement Manufacturers Association - India
- Posco Energy - South Korea
- Antam Resourcindo - Indonesia
- IHS Mccloskey Coal Group - USA
- European Bulk Services B.V. - Netherlands
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GMR Energy Limited - India
- South Luzon Thermal Energy Corporation
- Petron Corporation, Philippines
- Sakthi Sugars Limited - India
- Dalmia Cement Bharat India
- Energy Link Ltd, New Zealand
- TeaM Sual Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Bukit Baiduri Energy - Indonesia
- Ministry of Transport, Egypt
- Kalimantan Lumbung Energi - Indonesia
- Bangladesh Power Developement Board
- CNBM International Corporation - China
- Ambuja Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- Ministry of Mines - Canada
- MS Steel International - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- CIMB Investment Bank - Malaysia
- Bhoruka Overseas - Indonesia
- Commonwealth Bank - Australia
- Baramulti Group, Indonesia
- Jindal Steel & Power Ltd - India
- Indo Tambangraya Megah - Indonesia
- Makarim & Taira - Indonesia
- Lanco Infratech Ltd - India
- IEA Clean Coal Centre - UK
- Romanian Commodities Exchange
- Miang Besar Coal Terminal - Indonesia
- Minerals Council of Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Asmin Koalindo Tuhup - Indonesia
- Bulk Trading Sa - Switzerland
- Bahari Cakrawala Sebuku - Indonesia
- Kartika Selabumi Mining - Indonesia
- Larsen & Toubro Limited - India
- Savvy Resources Ltd - HongKong
- Straits Asia Resources Limited - Singapore
- Eastern Energy - Thailand
- Essar Steel Hazira Ltd - India
- Indika Energy - Indonesia
- Thai Mozambique Logistica
- Sindya Power Generating Company Private Ltd
- Meenaskhi Energy Private Limited - India
- VISA Power Limited - India
- The State Trading Corporation of India Ltd
- Independent Power Producers Association of India
- Thiess Contractors Indonesia
- Banpu Public Company Limited - Thailand
- Aboitiz Power Corporation - Philippines
- Karbindo Abesyapradhi - Indoneisa
- Chettinad Cement Corporation Ltd - India
- Anglo American - United Kingdom
- Salva Resources Pvt Ltd - India
- Mercator Lines Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Madhucon Powers Ltd - India
- Bayan Resources Tbk. - Indonesia
- Ceylon Electricity Board - Sri Lanka
- AsiaOL BioFuels Corp., Philippines
- Kaltim Prima Coal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Australian Commodity Traders Exchange
- Bharathi Cement Corporation - India
- Sarangani Energy Corporation, Philippines
- SMC Global Power, Philippines
- Xindia Steels Limited - India
- Electricity Generating Authority of Thailand
- Bukit Makmur.PT - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Simpson Spence & Young - Indonesia
- Formosa Plastics Group - Taiwan
- Gujarat Mineral Development Corp Ltd - India
- Gujarat Sidhee Cement - India
- Electricity Authority, New Zealand
- Parliament of New Zealand
- Holcim Trading Pte Ltd - Singapore
- Rio Tinto Coal - Australia
- PowerSource Philippines DevCo
- Vedanta Resources Plc - India
- Samtan Co., Ltd - South Korea
- Kobexindo Tractors - Indoneisa
- Mjunction Services Limited - India
- Ministry of Finance - Indonesia
- The University of Queensland
- Medco Energi Mining Internasional
- Mercuria Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Indian Energy Exchange, India
- Economic Council, Georgia
- San Jose City I Power Corp, Philippines
- New Zealand Coal & Carbon
- Siam City Cement - Thailand
- SMG Consultants - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Asam (Persero) Tbk - Indonesia
- Metalloyd Limited - United Kingdom
- Semirara Mining Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Agrawal Coal Company - India
- Therma Luzon, Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Eastern Coal Council - USA
- PTC India Limited - India
- Goldman Sachs - Singapore
- Coalindo Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- GAC Shipping (India) Pvt Ltd
- Kideco Jaya Agung - Indonesia
- Global Business Power Corporation, Philippines
- Sojitz Corporation - Japan
- Altura Mining Limited, Indonesia
- Indonesian Coal Mining Association
- Latin American Coal - Colombia
- India Bulls Power Limited - India
- Malabar Cements Ltd - India
- Aditya Birla Group - India
- Directorate Of Revenue Intelligence - India
- Parry Sugars Refinery, India
- Jaiprakash Power Ventures ltd
- Mintek Dendrill Indonesia
- Africa Commodities Group - South Africa
- TNB Fuel Sdn Bhd - Malaysia
- Globalindo Alam Lestari - Indonesia
- Wood Mackenzie - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Power Finance Corporation Ltd., India
- Interocean Group of Companies - India
- Standard Chartered Bank - UAE
- ICICI Bank Limited - India
- Coal and Oil Company - UAE
- Merrill Lynch Commodities Europe
- Toyota Tsusho Corporation, Japan
- Binh Thuan Hamico - Vietnam
- Ind-Barath Power Infra Limited - India
- London Commodity Brokers - England
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Trasteel International SA, Italy
- GVK Power & Infra Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Kapuas Tunggal Persada - Indonesia
- Meralco Power Generation, Philippines
- Orica Mining Services - Indonesia
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