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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, 01 August 13
CAPESIZE: THE FLOW OF CARGOES REMAINS RELATIVELY STABLE, AND THE PACIFIC IS LOOKING PROMISING - FEARNLEYS AS
Handy
The Pacific market is still facing low activity, so no wonder that the tonnage list is getting longer. It´s still Ramadan and only a fe ...
Wednesday, 31 July 13
COAL GASIFICATION
IBC’s Coal Gasification conference explores the opportunities for coal gasification investment and development in Asia.
With depleting dome ...
Wednesday, 31 July 13
SUPRAMAX : THE PACIFIC BASIN WAS MOVING ON A POSITIVE PATH - EVA TZIMA
COALspot.com: Cape - Despite holding their ground fairly well early on in the week, Capes in the Atlantic basin gave in to the mounting pressure fro ...
Tuesday, 30 July 13
HARD COAL ON THE WAY TO BECOMING THE WORLD'S MOST IMPORTANT ENERGY SOURCE - VDKI
Press Release : Hard coal continued to be the world’s fastest-growing fossil primary energy source in 2012. It covered about 28% of the world ...
Tuesday, 30 July 13
WIJAYA TRI UTAMA PURCHASES MICROCOAL TECHNOLOGIES' CLEAN COAL UPGRADING FACILITY
- First MCI commercial scale application of proprietary microwave technology to upgrade coal thermal output and reduce pollutants
- MicroCoal to re ...
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- Globalindo Alam Lestari - Indonesia
- South Luzon Thermal Energy Corporation
- Global Green Power PLC Corporation, Philippines
- Romanian Commodities Exchange
- Essar Steel Hazira Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Timah Investasi Mineral - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Dalmia Cement Bharat India
- Alfred C Toepfer International GmbH - Germany
- White Energy Company Limited
- Price Waterhouse Coopers - Russia
- Sojitz Corporation - Japan
- Goldman Sachs - Singapore
- Asmin Koalindo Tuhup - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Therma Luzon, Inc, Philippines
- IHS Mccloskey Coal Group - USA
- Orica Mining Services - Indonesia
- Sindya Power Generating Company Private Ltd
- Oldendorff Carriers - Singapore
- Central Electricity Authority - India
- Maharashtra Electricity Regulatory Commission - India
- CNBM International Corporation - China
- The University of Queensland
- Indonesian Coal Mining Association
- Aditya Birla Group - India
- IEA Clean Coal Centre - UK
- SMC Global Power, Philippines
- Sical Logistics Limited - India
- Samtan Co., Ltd - South Korea
- London Commodity Brokers - England
- GVK Power & Infra Limited - India
- Bukit Makmur.PT - Indonesia
- Ministry of Transport, Egypt
- Straits Asia Resources Limited - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Ind-Barath Power Infra Limited - India
- Meralco Power Generation, Philippines
- ASAPP Information Group - India
- SMG Consultants - Indonesia
- Kumho Petrochemical, South Korea
- Kaltim Prima Coal - Indonesia
- Independent Power Producers Association of India
- Heidelberg Cement - Germany
- Kideco Jaya Agung - Indonesia
- Malabar Cements Ltd - India
- Mintek Dendrill Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cement Manufacturers Association - India
- Ministry of Mines - Canada
- Bukit Asam (Persero) Tbk - Indonesia
- ICICI Bank Limited - India
- Electricity Generating Authority of Thailand
- Kapuas Tunggal Persada - Indonesia
- Anglo American - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- The State Trading Corporation of India Ltd
- Petron Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- LBH Netherlands Bv - Netherlands
- Cigading International Bulk Terminal - Indonesia
- Simpson Spence & Young - Indonesia
- Formosa Plastics Group - Taiwan
- PowerSource Philippines DevCo
- Coal and Oil Company - UAE
- Lanco Infratech Ltd - India
- Energy Link Ltd, New Zealand
- The Treasury - Australian Government
- Savvy Resources Ltd - HongKong
- Maheswari Brothers Coal Limited - India
- Siam City Cement PLC, Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Chamber of Mines of South Africa
- Tamil Nadu electricity Board
- Africa Commodities Group - South Africa
- Gujarat Electricity Regulatory Commission - India
- Wood Mackenzie - Singapore
- Jaiprakash Power Ventures ltd
- Jindal Steel & Power Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meenaskhi Energy Private Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Intertek Mineral Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Indogreen Group - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Electricity Authority, New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Posco Energy - South Korea
- Singapore Mercantile Exchange
- Coastal Gujarat Power Limited - India
- GMR Energy Limited - India
- Australian Coal Association
- Baramulti Group, Indonesia
- Pendopo Energi Batubara - Indonesia
- Sakthi Sugars Limited - India
- Mjunction Services Limited - India
- GAC Shipping (India) Pvt Ltd
- Siam City Cement - Thailand
- Directorate Of Revenue Intelligence - India
- AsiaOL BioFuels Corp., Philippines
- Kohat Cement Company Ltd. - Pakistan
- Parliament of New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- Iligan Light & Power Inc, Philippines
- Bulk Trading Sa - Switzerland
- Indika Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Global Coal Blending Company Limited - Australia
- Mercuria Energy - Indonesia
- Tata Chemicals Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Port Waratah Coal Services - Australia
- PNOC Exploration Corporation - Philippines
- Agrawal Coal Company - India
- Central Java Power - Indonesia
- Ambuja Cements Ltd - India
- Wilmar Investment Holdings
- Bhoruka Overseas - Indonesia
- Thiess Contractors Indonesia
- Aboitiz Power Corporation - Philippines
- Grasim Industreis Ltd - India
- Altura Mining Limited, Indonesia
- Latin American Coal - Colombia
- Rashtriya Ispat Nigam Limited - India
- Indian Oil Corporation Limited
- Planning Commission, India
- MS Steel International - UAE
- Leighton Contractors Pty Ltd - Australia
- Indo Tambangraya Megah - Indonesia
- Georgia Ports Authority, United States
- Power Finance Corporation Ltd., India
- Xindia Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- Coalindo Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Bhatia International Limited - India
- Chettinad Cement Corporation Ltd - India
- Interocean Group of Companies - India
- International Coal Ventures Pvt Ltd - India
- Eastern Energy - Thailand
- Larsen & Toubro Limited - India
- Medco Energi Mining Internasional
- VISA Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Edison Trading Spa - Italy
- CIMB Investment Bank - Malaysia
- Banpu Public Company Limited - Thailand
- Rio Tinto Coal - Australia
- Manunggal Multi Energi - Indonesia
- Marubeni Corporation - India
- Krishnapatnam Port Company Ltd. - India
- Deloitte Consulting - India
- Star Paper Mills Limited - India
- India Bulls Power Limited - India
- Karaikal Port Pvt Ltd - India
- New Zealand Coal & Carbon
- Commonwealth Bank - Australia
- Madhucon Powers Ltd - India
- San Jose City I Power Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Finance - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- SN Aboitiz Power Inc, Philippines
- Trasteel International SA, Italy
- Standard Chartered Bank - UAE
- Toyota Tsusho Corporation, Japan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kobexindo Tractors - Indoneisa
- Karbindo Abesyapradhi - Indoneisa
- Vizag Seaport Private Limited - India
- Economic Council, Georgia
- PTC India Limited - India
- Attock Cement Pakistan Limited
- Orica Australia Pty. Ltd.
- Thai Mozambique Logistica
- OPG Power Generation Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Metalloyd Limited - United Kingdom
- Borneo Indobara - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Uttam Galva Steels Limited - India
- Bukit Baiduri Energy - Indonesia
- Makarim & Taira - Indonesia
- Australian Commodity Traders Exchange
- Videocon Industries ltd - India
- Barasentosa Lestari - Indonesia
- Riau Bara Harum - Indonesia
- Bhushan Steel Limited - India
- Indian Energy Exchange, India
- Vedanta Resources Plc - India
- Binh Thuan Hamico - Vietnam
- Eastern Coal Council - USA
- European Bulk Services B.V. - Netherlands
- Renaissance Capital - South Africa
- Sree Jayajothi Cements Limited - India
- Merrill Lynch Commodities Europe
- Mercator Lines Limited - India
- Bharathi Cement Corporation - India
- McConnell Dowell - Australia
- Miang Besar Coal Terminal - Indonesia
- Semirara Mining Corp, Philippines
- TeaM Sual Corporation - Philippines
- Energy Development Corp, Philippines
- Minerals Council of Australia
- Parry Sugars Refinery, India
- Bangladesh Power Developement Board
- Carbofer General Trading SA - India
- Billiton Holdings Pty Ltd - Australia
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