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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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Thursday, 05 September 13
DRY BULK MARKET ON A HIGH ROLL, MAINLY THANKS TO CAPESIZE APPETITE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Capesize owners have been rejoycing on the back of renewed optimism for the further rise in the dry bulk market's freight rates, especially when on ...
Wednesday, 04 September 13
RBCT SHIPPED 16.18 PERCENT MORE COAL IN JULY
COALspot.com - Richards Bay Coal Terminal (RBCT) is the single largest coal export terminal South African as well as in the world has shipped 6,162, ...
Wednesday, 04 September 13
SUPRAS AND HANDIES : INDONESIAN COAL CARGOES ARE SUPPORTING HEALTHY ACTIVITY LEVELS - INTERMODAL
The Dry Bulk market has pooled back a bit this week after firming for two weeks in a row. The BDI is s holding above 1,100 points and despite the sm ...
Tuesday, 03 September 13
AUSTRALIA'S NEWCASTLE PORT SHIPPED 22.93 PER CENT MORE COAL W-O-W
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port up 22.93 per cent week on week to 3.39 million mt for ...
Sunday, 01 September 13
COAL SWAP SHOWS MIXED TREND
COALspot.com – Sub-Bit Indonesia coal swaps (FOB ) for average Q4 2013 delivery 1.25 percent up month on month. The swap was moved posit ...
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- Electricity Generating Authority of Thailand
- Straits Asia Resources Limited - Singapore
- Minerals Council of Australia
- San Jose City I Power Corp, Philippines
- McConnell Dowell - Australia
- Sical Logistics Limited - India
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- PetroVietnam Power Coal Import and Supply Company
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- LBH Netherlands Bv - Netherlands
- TNB Fuel Sdn Bhd - Malaysia
- Merrill Lynch Commodities Europe
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- Coal and Oil Company - UAE
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- Wilmar Investment Holdings
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- Anglo American - United Kingdom
- Banpu Public Company Limited - Thailand
- IHS Mccloskey Coal Group - USA
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- Antam Resourcindo - Indonesia
- Bhushan Steel Limited - India
- Therma Luzon, Inc, Philippines
- OPG Power Generation Pvt Ltd - India
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- Karaikal Port Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Bhatia International Limited - India
- Sojitz Corporation - Japan
- Rio Tinto Coal - Australia
- Ind-Barath Power Infra Limited - India
- AsiaOL BioFuels Corp., Philippines
- SN Aboitiz Power Inc, Philippines
- Mercuria Energy - Indonesia
- Ambuja Cements Ltd - India
- Siam City Cement PLC, Thailand
- Marubeni Corporation - India
- Georgia Ports Authority, United States
- Ministry of Finance - Indonesia
- Bukit Baiduri Energy - Indonesia
- London Commodity Brokers - England
- Price Waterhouse Coopers - Russia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chettinad Cement Corporation Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Central Java Power - Indonesia
- The State Trading Corporation of India Ltd
- Central Electricity Authority - India
- Savvy Resources Ltd - HongKong
- Independent Power Producers Association of India
- Star Paper Mills Limited - India
- Energy Link Ltd, New Zealand
- New Zealand Coal & Carbon
- Kalimantan Lumbung Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- Global Business Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- MS Steel International - UAE
- Binh Thuan Hamico - Vietnam
- Parry Sugars Refinery, India
- GMR Energy Limited - India
- Toyota Tsusho Corporation, Japan
- Manunggal Multi Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Makmur.PT - Indonesia
- Energy Development Corp, Philippines
- Carbofer General Trading SA - India
- Salva Resources Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Krishnapatnam Port Company Ltd. - India
- Posco Energy - South Korea
- Kohat Cement Company Ltd. - Pakistan
- SMG Consultants - Indonesia
- Edison Trading Spa - Italy
- Agrawal Coal Company - India
- Romanian Commodities Exchange
- CNBM International Corporation - China
- Electricity Authority, New Zealand
- Ministry of Transport, Egypt
- Orica Mining Services - Indonesia
- Dalmia Cement Bharat India
- Alfred C Toepfer International GmbH - Germany
- Karbindo Abesyapradhi - Indoneisa
- Siam City Cement - Thailand
- Thai Mozambique Logistica
- PowerSource Philippines DevCo
- Uttam Galva Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- Altura Mining Limited, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate Of Revenue Intelligence - India
- Neyveli Lignite Corporation Ltd, - India
- Bangladesh Power Developement Board
- SMC Global Power, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Sindya Power Generating Company Private Ltd
- VISA Power Limited - India
- Indonesian Coal Mining Association
- Baramulti Group, Indonesia
- Orica Australia Pty. Ltd.
- Indian Energy Exchange, India
- India Bulls Power Limited - India
- Singapore Mercantile Exchange
- Samtan Co., Ltd - South Korea
- Eastern Energy - Thailand
- The Treasury - Australian Government
- Billiton Holdings Pty Ltd - Australia
- Indian Oil Corporation Limited
- PNOC Exploration Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- ASAPP Information Group - India
- Sarangani Energy Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Barasentosa Lestari - Indonesia
- Coastal Gujarat Power Limited - India
- Wood Mackenzie - Singapore
- Globalindo Alam Lestari - Indonesia
- Grasim Industreis Ltd - India
- Kartika Selabumi Mining - Indonesia
- Economic Council, Georgia
- Rashtriya Ispat Nigam Limited - India
- European Bulk Services B.V. - Netherlands
- Bayan Resources Tbk. - Indonesia
- Madhucon Powers Ltd - India
- Mercator Lines Limited - India
- Parliament of New Zealand
- Kepco SPC Power Corporation, Philippines
- Lanco Infratech Ltd - India
- Vedanta Resources Plc - India
- Semirara Mining and Power Corporation, Philippines
- Medco Energi Mining Internasional
- Sakthi Sugars Limited - India
- Power Finance Corporation Ltd., India
- Meralco Power Generation, Philippines
- Commonwealth Bank - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Interocean Group of Companies - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aditya Birla Group - India
- Trasteel International SA, Italy
- Miang Besar Coal Terminal - Indonesia
- Kideco Jaya Agung - Indonesia
- Thiess Contractors Indonesia
- Tamil Nadu electricity Board
- Ministry of Mines - Canada
- Iligan Light & Power Inc, Philippines
- Xindia Steels Limited - India
- PTC India Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Standard Chartered Bank - UAE
- Formosa Plastics Group - Taiwan
- Mjunction Services Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Goldman Sachs - Singapore
- Eastern Coal Council - USA
- Port Waratah Coal Services - Australia
- International Coal Ventures Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Kapuas Tunggal Persada - Indonesia
- Aboitiz Power Corporation - Philippines
- Indogreen Group - Indonesia
- GAC Shipping (India) Pvt Ltd
- Jorong Barutama Greston.PT - Indonesia
- Bulk Trading Sa - Switzerland
- Mintek Dendrill Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Planning Commission, India
- Indika Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Deloitte Consulting - India
- Petrochimia International Co. Ltd.- Taiwan
- White Energy Company Limited
- Cement Manufacturers Association - India
- Timah Investasi Mineral - Indoneisa
- Bharathi Cement Corporation - India
- Kobexindo Tractors - Indoneisa
- Australian Commodity Traders Exchange
- Semirara Mining Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- Makarim & Taira - Indonesia
- Simpson Spence & Young - Indonesia
- Malabar Cements Ltd - India
- Videocon Industries ltd - India
- Africa Commodities Group - South Africa
- Kaltim Prima Coal - Indonesia
- Heidelberg Cement - Germany
- Chamber of Mines of South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Vizag Seaport Private Limited - India
- Tata Chemicals Ltd - India
- IEA Clean Coal Centre - UK
- GVK Power & Infra Limited - India
- The University of Queensland
- Petron Corporation, Philippines
- Coalindo Energy - Indonesia
- Attock Cement Pakistan Limited
- Australian Coal Association
- Gujarat Sidhee Cement - India
- Metalloyd Limited - United Kingdom
- Sree Jayajothi Cements Limited - India
- Ceylon Electricity Board - Sri Lanka
- Asmin Koalindo Tuhup - Indonesia
- Larsen & Toubro Limited - India
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