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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, 22 July 13
INDO COAL SWAP FOR AUGUST 13 DELIVERY GAINED ON WEEK BUT LOST ON DAY AND MONTH
COALspot.com – Sub-Bit Indonesia coal swaps (FOB ) for average August 2013 delivery slightly up on week but fell on day and month on Fri ...
Friday, 19 July 13
U.S.COAL PRODUCTION TOTALED APPROXIMATELY 19.60 MMST WEEK ENDED JULY 13
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 19.60 million short tons (mmst) of ...
Friday, 19 July 13
TNPL IS LOOKING FOR 300 K MT OF 6000 GAD COAL FOR FIVE MONTH
COALspot.com - Tamil Nadu Newsprint & Papers Ltd. , an Indian paper maker, is seeking 300,000 metric tons ± 5% (In 5 shipments about 60,0 ...
Thursday, 18 July 13
3RD ANNUAL FLOATING TERMINALS, INDONESIA
Commercial applications for offshore transshipment facilities
Floating Terminal solutions are increasingly being deployed by miners, independent ...
Thursday, 18 July 13
THE CAPE MARKET APPEARS TO BE HOLDING FIRM - FEARNLEYS AS
Handy
In the Pacific, market maintained similar levels during the week. There is several Indo coal orders in the market, ships passing Singapore fi ...
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- CIMB Investment Bank - Malaysia
- Sindya Power Generating Company Private Ltd
- Sree Jayajothi Cements Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Formosa Plastics Group - Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Agrawal Coal Company - India
- Leighton Contractors Pty Ltd - Australia
- McConnell Dowell - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- GN Power Mariveles Coal Plant, Philippines
- Cigading International Bulk Terminal - Indonesia
- Dalmia Cement Bharat India
- Australian Commodity Traders Exchange
- Gujarat Electricity Regulatory Commission - India
- New Zealand Coal & Carbon
- Holcim Trading Pte Ltd - Singapore
- Medco Energi Mining Internasional
- Gujarat Mineral Development Corp Ltd - India
- Simpson Spence & Young - Indonesia
- Petron Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Sinarmas Energy and Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- Maharashtra Electricity Regulatory Commission - India
- Mercator Lines Limited - India
- Energy Link Ltd, New Zealand
- The State Trading Corporation of India Ltd
- Baramulti Group, Indonesia
- India Bulls Power Limited - India
- Mjunction Services Limited - India
- Alfred C Toepfer International GmbH - Germany
- Independent Power Producers Association of India
- Makarim & Taira - Indonesia
- The University of Queensland
- Neyveli Lignite Corporation Ltd, - India
- Rashtriya Ispat Nigam Limited - India
- Marubeni Corporation - India
- CNBM International Corporation - China
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PNOC Exploration Corporation - Philippines
- Indian Energy Exchange, India
- Kartika Selabumi Mining - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bharathi Cement Corporation - India
- Cement Manufacturers Association - India
- Wood Mackenzie - Singapore
- Eastern Energy - Thailand
- Essar Steel Hazira Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Parliament of New Zealand
- Indo Tambangraya Megah - Indonesia
- Posco Energy - South Korea
- Indogreen Group - Indonesia
- Eastern Coal Council - USA
- Price Waterhouse Coopers - Russia
- Central Electricity Authority - India
- Central Java Power - Indonesia
- Thai Mozambique Logistica
- Antam Resourcindo - Indonesia
- Trasteel International SA, Italy
- Georgia Ports Authority, United States
- Indian Oil Corporation Limited
- Madhucon Powers Ltd - India
- Renaissance Capital - South Africa
- Petrochimia International Co. Ltd.- Taiwan
- Thiess Contractors Indonesia
- Mintek Dendrill Indonesia
- International Coal Ventures Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- San Jose City I Power Corp, Philippines
- Edison Trading Spa - Italy
- Jindal Steel & Power Ltd - India
- Meenaskhi Energy Private Limited - India
- Ambuja Cements Ltd - India
- Jaiprakash Power Ventures ltd
- Metalloyd Limited - United Kingdom
- PowerSource Philippines DevCo
- VISA Power Limited - India
- Lanco Infratech Ltd - India
- SMC Global Power, Philippines
- Manunggal Multi Energi - Indonesia
- Coal and Oil Company - UAE
- Planning Commission, India
- Mercuria Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Global Business Power Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Xindia Steels Limited - India
- Altura Mining Limited, Indonesia
- Ministry of Transport, Egypt
- Vedanta Resources Plc - India
- Parry Sugars Refinery, India
- TeaM Sual Corporation - Philippines
- Grasim Industreis Ltd - India
- Latin American Coal - Colombia
- Ceylon Electricity Board - Sri Lanka
- IEA Clean Coal Centre - UK
- Aditya Birla Group - India
- Therma Luzon, Inc, Philippines
- Coastal Gujarat Power Limited - India
- GAC Shipping (India) Pvt Ltd
- IHS Mccloskey Coal Group - USA
- Wilmar Investment Holdings
- ICICI Bank Limited - India
- Bulk Trading Sa - Switzerland
- Globalindo Alam Lestari - Indonesia
- Bangladesh Power Developement Board
- Port Waratah Coal Services - Australia
- Merrill Lynch Commodities Europe
- Sical Logistics Limited - India
- Tamil Nadu electricity Board
- Interocean Group of Companies - India
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Orica Mining Services - Indonesia
- PTC India Limited - India
- Energy Development Corp, Philippines
- Vizag Seaport Private Limited - India
- Barasentosa Lestari - Indonesia
- Sojitz Corporation - Japan
- Deloitte Consulting - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indika Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Meralco Power Generation, Philippines
- Bukit Makmur.PT - Indonesia
- GVK Power & Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Samtan Co., Ltd - South Korea
- Romanian Commodities Exchange
- Malabar Cements Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Toyota Tsusho Corporation, Japan
- Kepco SPC Power Corporation, Philippines
- ASAPP Information Group - India
- Sakthi Sugars Limited - India
- Iligan Light & Power Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Maheswari Brothers Coal Limited - India
- Standard Chartered Bank - UAE
- Directorate Of Revenue Intelligence - India
- Singapore Mercantile Exchange
- Rio Tinto Coal - Australia
- Power Finance Corporation Ltd., India
- Kaltim Prima Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Electricity Authority, New Zealand
- Ind-Barath Power Infra Limited - India
- Videocon Industries ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kalimantan Lumbung Energi - Indonesia
- Chettinad Cement Corporation Ltd - India
- Star Paper Mills Limited - India
- Heidelberg Cement - Germany
- Goldman Sachs - Singapore
- Semirara Mining and Power Corporation, Philippines
- London Commodity Brokers - England
- Anglo American - United Kingdom
- Karaikal Port Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- SMG Consultants - Indonesia
- Salva Resources Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Bhushan Steel Limited - India
- Borneo Indobara - Indonesia
- Coalindo Energy - Indonesia
- Semirara Mining Corp, Philippines
- Oldendorff Carriers - Singapore
- Orica Australia Pty. Ltd.
- Carbofer General Trading SA - India
- White Energy Company Limited
- Pipit Mutiara Jaya. PT, Indonesia
- Global Coal Blending Company Limited - Australia
- Minerals Council of Australia
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- The Treasury - Australian Government
- Sarangani Energy Corporation, Philippines
- Australian Coal Association
- Economic Council, Georgia
- Commonwealth Bank - Australia
- Ministry of Mines - Canada
- Billiton Holdings Pty Ltd - Australia
- OPG Power Generation Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Larsen & Toubro Limited - India
- Uttam Galva Steels Limited - India
- Chamber of Mines of South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- Kobexindo Tractors - Indoneisa
- Kideco Jaya Agung - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Bhoruka Overseas - Indonesia
- Bhatia International Limited - India
- MS Steel International - UAE
- Asmin Koalindo Tuhup - Indonesia
- Africa Commodities Group - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Pendopo Energi Batubara - Indonesia
- Riau Bara Harum - Indonesia
- Ministry of Finance - Indonesia
- GMR Energy Limited - India
- Siam City Cement PLC, Thailand
- Attock Cement Pakistan Limited
- Kumho Petrochemical, South Korea
- European Bulk Services B.V. - Netherlands
- Banpu Public Company Limited - Thailand
- Krishnapatnam Port Company Ltd. - India
- Tata Chemicals Ltd - India
- Indonesian Coal Mining Association
- Global Green Power PLC Corporation, Philippines
- Gujarat Sidhee Cement - India
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