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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, 07 August 13
HANDIES : FINDING IT DIFFICULT TO SUSTAIN THEIR PREVIOUS LEVELS - KONSTANTINOS KONTOMICHIS
Broker's insight
by Konstantinos Kontomichis,
SnP Broker
Entering the most predictable month of the year, as expected the seasonal effects ha ...
Tuesday, 06 August 13
UNLEASHING SHALE GAS POTENTIAL AS A GLOBAL ENERGY GAME CHANGER
In its 4th year running, the Annual Shale Gas Conference will bring leaders from North American shale gas operators, key Asian regulators, multi ...
Tuesday, 06 August 13
GBCE APPOINTS BENJAMIN WILEY AS NEW MANAGING DIRECTOR
COALspot.com : GB Clean Energy Ltd. (GBCE) announced today that Mr. Benjamin Wiley has been appointed as Managing Director.
Mr. Wiley has ...
Tuesday, 06 August 13
AUSTRALIAN NEWCASTLE PORT'S COAL EXPORTS FALL 23.16 PERCENT ON WEEK TO 2.26 MMT
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port fell 15.8 percent week on week to 2.26 million mt for ...
Monday, 05 August 13
PAPERLESS TRADING (ELECTRONIC BILLS OF LADING) - FREQUENTLY ASKED QUESTIONS ("FAQS") - UK P&I CLUB
A number of Members have contacted the Club with queries regarding the use of electronic bills of lading and any potential consequences for P&I ...
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- Orica Australia Pty. Ltd.
- Eastern Coal Council - USA
- Cement Manufacturers Association - India
- Power Finance Corporation Ltd., India
- Wilmar Investment Holdings
- Larsen & Toubro Limited - India
- Riau Bara Harum - Indonesia
- Ambuja Cements Ltd - India
- San Jose City I Power Corp, Philippines
- Pendopo Energi Batubara - Indonesia
- Indian Energy Exchange, India
- Bukit Asam (Persero) Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Planning Commission, India
- Straits Asia Resources Limited - Singapore
- PTC India Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- Intertek Mineral Services - Indonesia
- Marubeni Corporation - India
- Rashtriya Ispat Nigam Limited - India
- Chettinad Cement Corporation Ltd - India
- Energy Link Ltd, New Zealand
- Kepco SPC Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Mines - Canada
- Price Waterhouse Coopers - Russia
- Africa Commodities Group - South Africa
- Gujarat Sidhee Cement - India
- Trasteel International SA, Italy
- Semirara Mining Corp, Philippines
- Uttam Galva Steels Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Dalmia Cement Bharat India
- Bhushan Steel Limited - India
- Therma Luzon, Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Port Waratah Coal Services - Australia
- Mintek Dendrill Indonesia
- Manunggal Multi Energi - Indonesia
- ICICI Bank Limited - India
- Medco Energi Mining Internasional
- TeaM Sual Corporation - Philippines
- Oldendorff Carriers - Singapore
- Semirara Mining and Power Corporation, Philippines
- Mercuria Energy - Indonesia
- Bangladesh Power Developement Board
- Pipit Mutiara Jaya. PT, Indonesia
- Globalindo Alam Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Madhucon Powers Ltd - India
- Thai Mozambique Logistica
- The University of Queensland
- Tata Chemicals Ltd - India
- Indonesian Coal Mining Association
- Kideco Jaya Agung - Indonesia
- Interocean Group of Companies - India
- Antam Resourcindo - Indonesia
- Formosa Plastics Group - Taiwan
- South Luzon Thermal Energy Corporation
- IHS Mccloskey Coal Group - USA
- Parliament of New Zealand
- Samtan Co., Ltd - South Korea
- Sakthi Sugars Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Indogreen Group - Indonesia
- Sojitz Corporation - Japan
- McConnell Dowell - Australia
- Sarangani Energy Corporation, Philippines
- Parry Sugars Refinery, India
- Altura Mining Limited, Indonesia
- PowerSource Philippines DevCo
- Asmin Koalindo Tuhup - Indonesia
- Toyota Tsusho Corporation, Japan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Independent Power Producers Association of India
- CNBM International Corporation - China
- Central Java Power - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Siam City Cement PLC, Thailand
- Directorate Of Revenue Intelligence - India
- VISA Power Limited - India
- Latin American Coal - Colombia
- ASAPP Information Group - India
- Agrawal Coal Company - India
- Carbofer General Trading SA - India
- London Commodity Brokers - England
- Krishnapatnam Port Company Ltd. - India
- Borneo Indobara - Indonesia
- Australian Commodity Traders Exchange
- Orica Mining Services - Indonesia
- Edison Trading Spa - Italy
- European Bulk Services B.V. - Netherlands
- Metalloyd Limited - United Kingdom
- Aboitiz Power Corporation - Philippines
- Romanian Commodities Exchange
- SMC Global Power, Philippines
- Sical Logistics Limited - India
- Attock Cement Pakistan Limited
- Siam City Cement - Thailand
- White Energy Company Limited
- Kohat Cement Company Ltd. - Pakistan
- Xindia Steels Limited - India
- Meralco Power Generation, Philippines
- Standard Chartered Bank - UAE
- Coal and Oil Company - UAE
- IEA Clean Coal Centre - UK
- Bhatia International Limited - India
- Sinarmas Energy and Mining - Indonesia
- Georgia Ports Authority, United States
- Grasim Industreis Ltd - India
- Sindya Power Generating Company Private Ltd
- LBH Netherlands Bv - Netherlands
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Essar Steel Hazira Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Bharathi Cement Corporation - India
- Ministry of Transport, Egypt
- Kobexindo Tractors - Indoneisa
- Jindal Steel & Power Ltd - India
- Goldman Sachs - Singapore
- Makarim & Taira - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Baramulti Group, Indonesia
- Indian Oil Corporation Limited
- Cigading International Bulk Terminal - Indonesia
- New Zealand Coal & Carbon
- Tamil Nadu electricity Board
- Indika Energy - Indonesia
- Electricity Authority, New Zealand
- Heidelberg Cement - Germany
- Coalindo Energy - Indonesia
- The State Trading Corporation of India Ltd
- Malabar Cements Ltd - India
- Bulk Trading Sa - Switzerland
- Energy Development Corp, Philippines
- Ministry of Finance - Indonesia
- Wood Mackenzie - Singapore
- Rio Tinto Coal - Australia
- Savvy Resources Ltd - HongKong
- Minerals Council of Australia
- Aditya Birla Group - India
- Central Electricity Authority - India
- SMG Consultants - Indonesia
- Electricity Generating Authority of Thailand
- Billiton Holdings Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Binh Thuan Hamico - Vietnam
- Barasentosa Lestari - Indonesia
- Posco Energy - South Korea
- Star Paper Mills Limited - India
- Bukit Makmur.PT - Indonesia
- Mercator Lines Limited - India
- Merrill Lynch Commodities Europe
- Ind-Barath Power Infra Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Global Business Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Thiess Contractors Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Videocon Industries ltd - India
- Coastal Gujarat Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Renaissance Capital - South Africa
- Global Coal Blending Company Limited - Australia
- Singapore Mercantile Exchange
- SN Aboitiz Power Inc, Philippines
- Vizag Seaport Private Limited - India
- Ceylon Electricity Board - Sri Lanka
- Iligan Light & Power Inc, Philippines
- Vedanta Resources Plc - India
- Lanco Infratech Ltd - India
- Maheswari Brothers Coal Limited - India
- GAC Shipping (India) Pvt Ltd
- Leighton Contractors Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Deloitte Consulting - India
- Kartika Selabumi Mining - Indonesia
- Karaikal Port Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Timah Investasi Mineral - Indoneisa
- Chamber of Mines of South Africa
- Banpu Public Company Limited - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Petron Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Meenaskhi Energy Private Limited - India
- Holcim Trading Pte Ltd - Singapore
- GMR Energy Limited - India
- PNOC Exploration Corporation - Philippines
- MS Steel International - UAE
- Indo Tambangraya Megah - Indonesia
- Eastern Energy - Thailand
- The Treasury - Australian Government
- India Bulls Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Kumho Petrochemical, South Korea
- Gujarat Electricity Regulatory Commission - India
- International Coal Ventures Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Commonwealth Bank - Australia
- Anglo American - United Kingdom
- Mjunction Services Limited - India
- Bhoruka Overseas - Indonesia
- CIMB Investment Bank - Malaysia
- Gujarat Mineral Development Corp Ltd - India
- Bukit Baiduri Energy - Indonesia
- GVK Power & Infra Limited - India
- Australian Coal Association
- Salva Resources Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- TNB Fuel Sdn Bhd - Malaysia
- Economic Council, Georgia
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