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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$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Monday, 05 August 13
INDO GOVERNMENT'S DECLARED HBA IN AUGUST '13 FALL TO LOWEST LEVEL SINCE JANUARY '10
COALspot. com - HBA fell to US$ 76.70 this month, the lowest since January 2010. Indonesian Coal Price Reference fell 6.11% and hitting a 2013 ...
Sunday, 04 August 13
COAL SWAP MARKET HAS LOST DIRECTION; STRUGGLING TO CATCH UP
COALspot.com – Sub-Bit Indonesia coal swaps (FOB ) for average October 2013 delivery slightly down on day, week and month on Friday, 2 A ...
Sunday, 04 August 13
INDONESIA TO INDIA SUPRAMAX FREIGHT SOFT DUE TO HOLIDAYS IN INDONESIA - VISTAAR
COALspot.com : The freight market was fairly steady this week with the BDI recovering towards north since second half of the week with the support o ...
Friday, 02 August 13
DRY BULK MARKET STABILIZES ON RENEWED MARKET ACTIVITY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has kept its positive footing this week, although it's still a far cry to deem the market situation as a growing one, especiall ...
Friday, 02 August 13
ASIA ACCOUNTS FOR 27.95 PERCENT OF US COAL EXPORTS IN Q1, 2013
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.80 million short tons (mmst) of ...
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- Salva Resources Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Gujarat Sidhee Cement - India
- Planning Commission, India
- Bukit Baiduri Energy - Indonesia
- Energy Development Corp, Philippines
- Riau Bara Harum - Indonesia
- Globalindo Alam Lestari - Indonesia
- South Luzon Thermal Energy Corporation
- Medco Energi Mining Internasional
- Petrochimia International Co. Ltd.- Taiwan
- Tata Chemicals Ltd - India
- Essar Steel Hazira Ltd - India
- Antam Resourcindo - Indonesia
- The University of Queensland
- Georgia Ports Authority, United States
- Indian Energy Exchange, India
- Kartika Selabumi Mining - Indonesia
- SMG Consultants - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- International Coal Ventures Pvt Ltd - India
- Tamil Nadu electricity Board
- Ministry of Mines - Canada
- Australian Coal Association
- Economic Council, Georgia
- Central Electricity Authority - India
- Toyota Tsusho Corporation, Japan
- Ceylon Electricity Board - Sri Lanka
- Kapuas Tunggal Persada - Indonesia
- Oldendorff Carriers - Singapore
- Sakthi Sugars Limited - India
- PNOC Exploration Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Energy Link Ltd, New Zealand
- Posco Energy - South Korea
- Iligan Light & Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Jaiprakash Power Ventures ltd
- Borneo Indobara - Indonesia
- Bhushan Steel Limited - India
- Central Java Power - Indonesia
- Maheswari Brothers Coal Limited - India
- Bharathi Cement Corporation - India
- Edison Trading Spa - Italy
- Commonwealth Bank - Australia
- Larsen & Toubro Limited - India
- London Commodity Brokers - England
- Indogreen Group - Indonesia
- Indian Oil Corporation Limited
- Chettinad Cement Corporation Ltd - India
- CNBM International Corporation - China
- Makarim & Taira - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Carbofer General Trading SA - India
- Alfred C Toepfer International GmbH - Germany
- Parliament of New Zealand
- Meralco Power Generation, Philippines
- Price Waterhouse Coopers - Russia
- Australian Commodity Traders Exchange
- Ambuja Cements Ltd - India
- Bulk Trading Sa - Switzerland
- Simpson Spence & Young - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Star Paper Mills Limited - India
- Xindia Steels Limited - India
- Kaltim Prima Coal - Indonesia
- LBH Netherlands Bv - Netherlands
- Altura Mining Limited, Indonesia
- Kobexindo Tractors - Indoneisa
- Power Finance Corporation Ltd., India
- Directorate General of MIneral and Coal - Indonesia
- Coalindo Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Timah Investasi Mineral - Indoneisa
- Mercator Lines Limited - India
- Holcim Trading Pte Ltd - Singapore
- Coal and Oil Company - UAE
- Parry Sugars Refinery, India
- Rashtriya Ispat Nigam Limited - India
- IHS Mccloskey Coal Group - USA
- Minerals Council of Australia
- Semirara Mining Corp, Philippines
- Banpu Public Company Limited - Thailand
- Indonesian Coal Mining Association
- Sarangani Energy Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Singapore Mercantile Exchange
- Orica Australia Pty. Ltd.
- SMC Global Power, Philippines
- Anglo American - United Kingdom
- Global Coal Blending Company Limited - Australia
- Maharashtra Electricity Regulatory Commission - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mjunction Services Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Bahari Cakrawala Sebuku - Indonesia
- Sical Logistics Limited - India
- Metalloyd Limited - United Kingdom
- Romanian Commodities Exchange
- Global Business Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Baramulti Group, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Orica Mining Services - Indonesia
- Eastern Coal Council - USA
- Wood Mackenzie - Singapore
- Samtan Co., Ltd - South Korea
- Rio Tinto Coal - Australia
- ASAPP Information Group - India
- Mercuria Energy - Indonesia
- Electricity Authority, New Zealand
- Ind-Barath Power Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- Petron Corporation, Philippines
- India Bulls Power Limited - India
- Port Waratah Coal Services - Australia
- Cement Manufacturers Association - India
- Dalmia Cement Bharat India
- Mintek Dendrill Indonesia
- Interocean Group of Companies - India
- Merrill Lynch Commodities Europe
- Malabar Cements Ltd - India
- Ministry of Finance - Indonesia
- ICICI Bank Limited - India
- Renaissance Capital - South Africa
- Global Green Power PLC Corporation, Philippines
- IEA Clean Coal Centre - UK
- Barasentosa Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- PTC India Limited - India
- Wilmar Investment Holdings
- Pipit Mutiara Jaya. PT, Indonesia
- Siam City Cement - Thailand
- PetroVietnam Power Coal Import and Supply Company
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sojitz Corporation - Japan
- Heidelberg Cement - Germany
- Bukit Asam (Persero) Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- Agrawal Coal Company - India
- Deloitte Consulting - India
- Sindya Power Generating Company Private Ltd
- PowerSource Philippines DevCo
- Siam City Cement PLC, Thailand
- Africa Commodities Group - South Africa
- Kepco SPC Power Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Marubeni Corporation - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Indika Energy - Indonesia
- Kumho Petrochemical, South Korea
- GVK Power & Infra Limited - India
- Eastern Energy - Thailand
- The Treasury - Australian Government
- The State Trading Corporation of India Ltd
- Neyveli Lignite Corporation Ltd, - India
- Intertek Mineral Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Vedanta Resources Plc - India
- Bangladesh Power Developement Board
- Madhucon Powers Ltd - India
- OPG Power Generation Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- White Energy Company Limited
- Gujarat Mineral Development Corp Ltd - India
- Therma Luzon, Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Trasteel International SA, Italy
- Leighton Contractors Pty Ltd - Australia
- Bayan Resources Tbk. - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Videocon Industries ltd - India
- MS Steel International - UAE
- Standard Chartered Bank - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Vizag Seaport Private Limited - India
- Thai Mozambique Logistica
- VISA Power Limited - India
- Chamber of Mines of South Africa
- Binh Thuan Hamico - Vietnam
- New Zealand Coal & Carbon
- Latin American Coal - Colombia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate Of Revenue Intelligence - India
- Aboitiz Power Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Kideco Jaya Agung - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- GMR Energy Limited - India
- Lanco Infratech Ltd - India
- Bhatia International Limited - India
- Aditya Birla Group - India
- Thiess Contractors Indonesia
- San Jose City I Power Corp, Philippines
- Ministry of Transport, Egypt
- TeaM Sual Corporation - Philippines
- Attock Cement Pakistan Limited
- Meenaskhi Energy Private Limited - India
- Jindal Steel & Power Ltd - India
- Grasim Industreis Ltd - India
- McConnell Dowell - Australia
- Independent Power Producers Association of India
- Jorong Barutama Greston.PT - Indonesia
- Uttam Galva Steels Limited - India
- Electricity Generating Authority of Thailand
- Bhoruka Overseas - Indonesia
- Sree Jayajothi Cements Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Goldman Sachs - Singapore
- Manunggal Multi Energi - Indonesia
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