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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, 01 September 13
INDONESIA TO INDIA SPOT FREIGHT STAYS FIRM THIS WEEK - VISTAAR
COALspot.com: The freight market continued to be firm with even though the BDI and Cape index dropped by about 3 pct week on week.
The BDI was do ...
Friday, 30 August 13
US COAL PRODUCTION FELL 0.48 PERCENT WEEK ON WEEK - EIA
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.70 million short tons (mmst) of ...
Thursday, 29 August 13
HANDY: THE PACIFIC MARKET STARTED HEALTHY THIS WEEK - FEARNRESEARCH
Handy
The Pacific market started healthy this week. We have seen many bauxite, iron ore and few coal fixtures. Ships passing Singapore were able to ...
Thursday, 29 August 13
NO RATING IMPACT ON INDONESIAN ENERGY COMPANIES FROM RUPIAH DEPRECIATION - FITCH RATINGS
Fitch Ratings says the credit profiles of rated Indonesian energy and utilities companies, including thermal coal producers, will largely remain una ...
Wednesday, 28 August 13
THE BDI HAS MOVED TO LEVELS CONSIDERABLY STRONGER THAN THE BEGINNING OF THE YEAR - INTERMODAL
By George Bassakos
SnP Broker - Intermodal
We have already reached the end of August and whilst students are preparing themselves for another sc ...
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- Sakthi Sugars Limited - India
- Semirara Mining Corp, Philippines
- Wilmar Investment Holdings
- Formosa Plastics Group - Taiwan
- Star Paper Mills Limited - India
- Marubeni Corporation - India
- LBH Netherlands Bv - Netherlands
- CIMB Investment Bank - Malaysia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Karaikal Port Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- PNOC Exploration Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- Romanian Commodities Exchange
- Parliament of New Zealand
- Central Electricity Authority - India
- Commonwealth Bank - Australia
- Makarim & Taira - Indonesia
- Oldendorff Carriers - Singapore
- Coalindo Energy - Indonesia
- Antam Resourcindo - Indonesia
- Xindia Steels Limited - India
- Bharathi Cement Corporation - India
- Meralco Power Generation, Philippines
- Malabar Cements Ltd - India
- Sindya Power Generating Company Private Ltd
- Siam City Cement - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Maheswari Brothers Coal Limited - India
- Trasteel International SA, Italy
- Timah Investasi Mineral - Indoneisa
- Price Waterhouse Coopers - Russia
- Interocean Group of Companies - India
- Manunggal Multi Energi - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- CNBM International Corporation - China
- Deloitte Consulting - India
- Standard Chartered Bank - UAE
- Orica Mining Services - Indonesia
- The University of Queensland
- Mintek Dendrill Indonesia
- Parry Sugars Refinery, India
- Sree Jayajothi Cements Limited - India
- South Luzon Thermal Energy Corporation
- Vizag Seaport Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Bayan Resources Tbk. - Indonesia
- Bangladesh Power Developement Board
- Metalloyd Limited - United Kingdom
- Agrawal Coal Company - India
- Cigading International Bulk Terminal - Indonesia
- Wood Mackenzie - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Mercuria Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- GMR Energy Limited - India
- MS Steel International - UAE
- Coastal Gujarat Power Limited - India
- Eastern Coal Council - USA
- PetroVietnam Power Coal Import and Supply Company
- Alfred C Toepfer International GmbH - Germany
- Vijayanagar Sugar Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Kapuas Tunggal Persada - Indonesia
- European Bulk Services B.V. - Netherlands
- Medco Energi Mining Internasional
- Aditya Birla Group - India
- Grasim Industreis Ltd - India
- Dalmia Cement Bharat India
- Leighton Contractors Pty Ltd - Australia
- Bhoruka Overseas - Indonesia
- Holcim Trading Pte Ltd - Singapore
- PTC India Limited - India
- Ind-Barath Power Infra Limited - India
- Central Java Power - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Renaissance Capital - South Africa
- Binh Thuan Hamico - Vietnam
- Sarangani Energy Corporation, Philippines
- ICICI Bank Limited - India
- Energy Link Ltd, New Zealand
- Australian Commodity Traders Exchange
- Indian Energy Exchange, India
- Barasentosa Lestari - Indonesia
- Sical Logistics Limited - India
- Power Finance Corporation Ltd., India
- Karbindo Abesyapradhi - Indoneisa
- Electricity Generating Authority of Thailand
- India Bulls Power Limited - India
- VISA Power Limited - India
- Latin American Coal - Colombia
- GVK Power & Infra Limited - India
- Coal and Oil Company - UAE
- Indika Energy - Indonesia
- Bhushan Steel Limited - India
- OPG Power Generation Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Salva Resources Pvt Ltd - India
- Baramulti Group, Indonesia
- Thai Mozambique Logistica
- Vedanta Resources Plc - India
- Port Waratah Coal Services - Australia
- San Jose City I Power Corp, Philippines
- London Commodity Brokers - England
- Semirara Mining and Power Corporation, Philippines
- Essar Steel Hazira Ltd - India
- SMG Consultants - Indonesia
- ASAPP Information Group - India
- Rashtriya Ispat Nigam Limited - India
- Anglo American - United Kingdom
- Petron Corporation, Philippines
- PowerSource Philippines DevCo
- Jaiprakash Power Ventures ltd
- Simpson Spence & Young - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Banpu Public Company Limited - Thailand
- Gujarat Mineral Development Corp Ltd - India
- Attock Cement Pakistan Limited
- Indonesian Coal Mining Association
- Lanco Infratech Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- The Treasury - Australian Government
- Rio Tinto Coal - Australia
- Kumho Petrochemical, South Korea
- Pendopo Energi Batubara - Indonesia
- AsiaOL BioFuels Corp., Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Global Business Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Independent Power Producers Association of India
- Straits Asia Resources Limited - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Borneo Indobara - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Savvy Resources Ltd - HongKong
- Ministry of Mines - Canada
- Electricity Authority, New Zealand
- Kideco Jaya Agung - Indonesia
- SMC Global Power, Philippines
- Indogreen Group - Indonesia
- Energy Development Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Planning Commission, India
- Australian Coal Association
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Heidelberg Cement - Germany
- Jindal Steel & Power Ltd - India
- Thiess Contractors Indonesia
- Indian Oil Corporation Limited
- GAC Shipping (India) Pvt Ltd
- Tata Chemicals Ltd - India
- Ambuja Cements Ltd - India
- IEA Clean Coal Centre - UK
- Bhatia International Limited - India
- Samtan Co., Ltd - South Korea
- New Zealand Coal & Carbon
- Maharashtra Electricity Regulatory Commission - India
- Madhucon Powers Ltd - India
- TeaM Sual Corporation - Philippines
- Economic Council, Georgia
- Merrill Lynch Commodities Europe
- Bukit Makmur.PT - Indonesia
- Directorate Of Revenue Intelligence - India
- Global Green Power PLC Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Bukit Baiduri Energy - Indonesia
- Ministry of Finance - Indonesia
- Therma Luzon, Inc, Philippines
- Tamil Nadu electricity Board
- Uttam Galva Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Singapore Mercantile Exchange
- Cement Manufacturers Association - India
- The State Trading Corporation of India Ltd
- Kaltim Prima Coal - Indonesia
- McConnell Dowell - Australia
- Africa Commodities Group - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mercator Lines Limited - India
- Ministry of Transport, Egypt
- Bulk Trading Sa - Switzerland
- Iligan Light & Power Inc, Philippines
- Edison Trading Spa - Italy
- White Energy Company Limited
- Intertek Mineral Services - Indonesia
- Gujarat Sidhee Cement - India
- Kartika Selabumi Mining - Indonesia
- Mjunction Services Limited - India
- SN Aboitiz Power Inc, Philippines
- Carbofer General Trading SA - India
- Orica Australia Pty. Ltd.
- Indo Tambangraya Megah - Indonesia
- Altura Mining Limited, Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Billiton Holdings Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- Riau Bara Harum - Indonesia
- Eastern Energy - Thailand
- Sojitz Corporation - Japan
- Posco Energy - South Korea
- Larsen & Toubro Limited - India
- Meenaskhi Energy Private Limited - India
- International Coal Ventures Pvt Ltd - India
- Videocon Industries ltd - India
- Global Coal Blending Company Limited - Australia
- Georgia Ports Authority, United States
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Minerals Council of Australia
- Goldman Sachs - Singapore
- Chamber of Mines of South Africa
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