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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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Saturday, 10 August 13
MOODY'S: OUTLOOK FOR US COAL INDUSTRY CHANGES TO STABLE FROM NEGATIVE
Moody's Investors Service has changed its outlook for the US coal industry to stable from negative, the rating agency says in a new report, "U ...
Saturday, 10 August 13
DEMOLITION ACTIVITY TO BE CRUCIAL AGAIN IN PROVIDING SUPPORT TO THE DRY BULK MARKET - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
We appear to have forgotten demolition activity this year, with the Baltic Dry Index gaining traction in the latter part of the second half and emer ...
Friday, 09 August 13
US PRODUCED 4.00 PERCENT LESS COAL ON WEEK
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.00 million short tons (mmst) of ...
Thursday, 08 August 13
HANDY : NO POSITIVE SENTIMENT FOR THE FAR EAST MARKET - FEARNRESEARCH
Handy
No positive sentiment for the Far East market. There are a number of ships coming open in SE Asia this week and owners rating mid/high USD 8k ...
Thursday, 08 August 13
MALAYSIA HOSTS THIRD ANNUAL ASIAN SUB-BITUMINOUS COAL USERS' GROUP CONFERENCE
Press Release : The third Annual Asian Sub-Bituminous Coal Users’ Group (ASBCUG) conference convenes Sept. 30-Oct. 3 at the Eastern & Orie ...
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- Parry Sugars Refinery, India
- Samtan Co., Ltd - South Korea
- Kumho Petrochemical, South Korea
- Bukit Baiduri Energy - Indonesia
- Indonesian Coal Mining Association
- Edison Trading Spa - Italy
- India Bulls Power Limited - India
- Trasteel International SA, Italy
- Central Java Power - Indonesia
- Standard Chartered Bank - UAE
- Essar Steel Hazira Ltd - India
- Kideco Jaya Agung - Indonesia
- Eastern Energy - Thailand
- Minerals Council of Australia
- Makarim & Taira - Indonesia
- Madhucon Powers Ltd - India
- Medco Energi Mining Internasional
- GVK Power & Infra Limited - India
- Dalmia Cement Bharat India
- Intertek Mineral Services - Indonesia
- Meralco Power Generation, Philippines
- Vedanta Resources Plc - India
- Altura Mining Limited, Indonesia
- Riau Bara Harum - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Indian Oil Corporation Limited
- MS Steel International - UAE
- Wood Mackenzie - Singapore
- Globalindo Alam Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- Ministry of Finance - Indonesia
- Mjunction Services Limited - India
- Coastal Gujarat Power Limited - India
- New Zealand Coal & Carbon
- Romanian Commodities Exchange
- Gujarat Sidhee Cement - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- ASAPP Information Group - India
- Iligan Light & Power Inc, Philippines
- Port Waratah Coal Services - Australia
- Metalloyd Limited - United Kingdom
- Central Electricity Authority - India
- Singapore Mercantile Exchange
- Maharashtra Electricity Regulatory Commission - India
- Commonwealth Bank - Australia
- Banpu Public Company Limited - Thailand
- Sarangani Energy Corporation, Philippines
- Renaissance Capital - South Africa
- Price Waterhouse Coopers - Russia
- Coal and Oil Company - UAE
- TeaM Sual Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Marubeni Corporation - India
- GN Power Mariveles Coal Plant, Philippines
- Savvy Resources Ltd - HongKong
- Aditya Birla Group - India
- Cement Manufacturers Association - India
- Indika Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Bhoruka Overseas - Indonesia
- Vizag Seaport Private Limited - India
- Uttam Galva Steels Limited - India
- Jindal Steel & Power Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Georgia Ports Authority, United States
- Planning Commission, India
- Global Green Power PLC Corporation, Philippines
- Australian Commodity Traders Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Transport, Egypt
- Semirara Mining Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- GAC Shipping (India) Pvt Ltd
- Baramulti Group, Indonesia
- Petron Corporation, Philippines
- London Commodity Brokers - England
- OPG Power Generation Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Sindya Power Generating Company Private Ltd
- Pendopo Energi Batubara - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- SMG Consultants - Indonesia
- Goldman Sachs - Singapore
- Coalindo Energy - Indonesia
- White Energy Company Limited
- Bangladesh Power Developement Board
- Heidelberg Cement - Germany
- Eastern Coal Council - USA
- Leighton Contractors Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- IHS Mccloskey Coal Group - USA
- Jorong Barutama Greston.PT - Indonesia
- Directorate Of Revenue Intelligence - India
- Karbindo Abesyapradhi - Indoneisa
- Indian Energy Exchange, India
- Salva Resources Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Bukit Makmur.PT - Indonesia
- Parliament of New Zealand
- Antam Resourcindo - Indonesia
- Karaikal Port Pvt Ltd - India
- Electricity Authority, New Zealand
- Sinarmas Energy and Mining - Indonesia
- Larsen & Toubro Limited - India
- Deloitte Consulting - India
- Borneo Indobara - Indonesia
- Barasentosa Lestari - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- The State Trading Corporation of India Ltd
- Mercuria Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- PTC India Limited - India
- Xindia Steels Limited - India
- Billiton Holdings Pty Ltd - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Attock Cement Pakistan Limited
- Grasim Industreis Ltd - India
- Mercator Lines Limited - India
- Kobexindo Tractors - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Bulk Trading Sa - Switzerland
- LBH Netherlands Bv - Netherlands
- Videocon Industries ltd - India
- Agrawal Coal Company - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Lanco Infratech Ltd - India
- Independent Power Producers Association of India
- SMC Global Power, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Directorate General of MIneral and Coal - Indonesia
- VISA Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Thai Mozambique Logistica
- Kaltim Prima Coal - Indonesia
- Binh Thuan Hamico - Vietnam
- Energy Development Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Africa Commodities Group - South Africa
- Aboitiz Power Corporation - Philippines
- Interocean Group of Companies - India
- Simpson Spence & Young - Indonesia
- Anglo American - United Kingdom
- Carbofer General Trading SA - India
- Posco Energy - South Korea
- Economic Council, Georgia
- GMR Energy Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Siam City Cement PLC, Thailand
- Alfred C Toepfer International GmbH - Germany
- Formosa Plastics Group - Taiwan
- Siam City Cement - Thailand
- Manunggal Multi Energi - Indonesia
- Latin American Coal - Colombia
- Krishnapatnam Port Company Ltd. - India
- IEA Clean Coal Centre - UK
- McConnell Dowell - Australia
- South Luzon Thermal Energy Corporation
- Gujarat Electricity Regulatory Commission - India
- Star Paper Mills Limited - India
- The Treasury - Australian Government
- Malabar Cements Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Kartika Selabumi Mining - Indonesia
- CIMB Investment Bank - Malaysia
- Tamil Nadu electricity Board
- Ceylon Electricity Board - Sri Lanka
- Asmin Koalindo Tuhup - Indonesia
- Mintek Dendrill Indonesia
- Global Business Power Corporation, Philippines
- Bhatia International Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Orica Mining Services - Indonesia
- Therma Luzon, Inc, Philippines
- Sakthi Sugars Limited - India
- Chamber of Mines of South Africa
- Sojitz Corporation - Japan
- Maheswari Brothers Coal Limited - India
- Bhushan Steel Limited - India
- San Jose City I Power Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- PNOC Exploration Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- CNBM International Corporation - China
- Kepco SPC Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Bayan Resources Tbk. - Indonesia
- Global Coal Blending Company Limited - Australia
- Indogreen Group - Indonesia
- Rio Tinto Coal - Australia
- Thiess Contractors Indonesia
- Oldendorff Carriers - Singapore
- Indo Tambangraya Megah - Indonesia
- Tata Chemicals Ltd - India
- Merrill Lynch Commodities Europe
- Ambuja Cements Ltd - India
- Bharathi Cement Corporation - India
- PowerSource Philippines DevCo
- Ministry of Mines - Canada
- Timah Investasi Mineral - Indoneisa
- Australian Coal Association
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cigading International Bulk Terminal - Indonesia
- The University of Queensland
- Wilmar Investment Holdings
- ICICI Bank Limited - India
- Sical Logistics Limited - India
- Chettinad Cement Corporation Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Holcim Trading Pte Ltd - Singapore
- Miang Besar Coal Terminal - Indonesia
- Orica Australia Pty. Ltd.
- Semirara Mining and Power Corporation, Philippines
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