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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$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Thursday, 18 July 13
DRY BULK MARKETS RETAINS RECENT GAINS, MOVES SIDEWAYS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has kept on moving sideways this week, as evidenced by the latest trends of the industry's benchmark, the Baltic Dry Index (BDI ...
Wednesday, 17 July 13
NEWCASTLE COAL EXPORTS FELL 3.85% ON WEEK
COALspot.com: Newcastle port in Australia has loaded 2,860,149 tons of coal for the week ended 0700 hours 15 July 2013, Newcastle Port Corp. s ...
Wednesday, 17 July 13
TORN BETWEEN A CREDIT CRUNCH AND SUSTAINABLE GROWTH - GEORGE DERMATIS
COALspot.com: In 2012 China expanded at a rate of 7.8%, its worst annual performance in 13 years, raising criticism over the newly appointed governm ...
Monday, 15 July 13
INDONESIAN GOVERNMENT HAS REVISED DOWN ITS JULY BENCH-MARK COAL PRICE TO US$ 81.69 PER MT
COALspot. com - Indonesian Coal Price Reference dropped 3.75 % and hitting a 2013 low. The Indonesian government has revised down its owned coal ben ...
Monday, 15 July 13
INDO COAL SWAPS ARE STRUGGLING FOR RIGHT DIRECTION
COALspot.com – Indo coal swaps are struggling to find the right direction. Sub-Bit Indonesia coal swaps (FOB ) for average August 2013 d ...
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- McConnell Dowell - Australia
- Simpson Spence & Young - Indonesia
- Straits Asia Resources Limited - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Mintek Dendrill Indonesia
- GN Power Mariveles Coal Plant, Philippines
- ASAPP Information Group - India
- Ministry of Mines - Canada
- Latin American Coal - Colombia
- Formosa Plastics Group - Taiwan
- PTC India Limited - India
- Electricity Generating Authority of Thailand
- Africa Commodities Group - South Africa
- Grasim Industreis Ltd - India
- Tamil Nadu electricity Board
- Independent Power Producers Association of India
- Eastern Coal Council - USA
- White Energy Company Limited
- GAC Shipping (India) Pvt Ltd
- Therma Luzon, Inc, Philippines
- SN Aboitiz Power Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- PowerSource Philippines DevCo
- Oldendorff Carriers - Singapore
- SMG Consultants - Indonesia
- Bharathi Cement Corporation - India
- Gujarat Electricity Regulatory Commission - India
- Thiess Contractors Indonesia
- Global Coal Blending Company Limited - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Binh Thuan Hamico - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- Heidelberg Cement - Germany
- Energy Development Corp, Philippines
- Madhucon Powers Ltd - India
- The Treasury - Australian Government
- Renaissance Capital - South Africa
- Manunggal Multi Energi - Indonesia
- Economic Council, Georgia
- Meenaskhi Energy Private Limited - India
- IEA Clean Coal Centre - UK
- Bulk Trading Sa - Switzerland
- CIMB Investment Bank - Malaysia
- Sarangani Energy Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- London Commodity Brokers - England
- Borneo Indobara - Indonesia
- TeaM Sual Corporation - Philippines
- Australian Commodity Traders Exchange
- Bangladesh Power Developement Board
- Baramulti Group, Indonesia
- India Bulls Power Limited - India
- Edison Trading Spa - Italy
- Uttam Galva Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- Indika Energy - Indonesia
- Meralco Power Generation, Philippines
- Orica Mining Services - Indonesia
- Kumho Petrochemical, South Korea
- Miang Besar Coal Terminal - Indonesia
- Aditya Birla Group - India
- Eastern Energy - Thailand
- Marubeni Corporation - India
- Bhoruka Overseas - Indonesia
- Indonesian Coal Mining Association
- Siam City Cement PLC, Thailand
- Semirara Mining and Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Thai Mozambique Logistica
- GMR Energy Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Kohat Cement Company Ltd. - Pakistan
- Salva Resources Pvt Ltd - India
- Parliament of New Zealand
- LBH Netherlands Bv - Netherlands
- The State Trading Corporation of India Ltd
- Mercuria Energy - Indonesia
- Altura Mining Limited, Indonesia
- Orica Australia Pty. Ltd.
- Ministry of Finance - Indonesia
- Lanco Infratech Ltd - India
- Kobexindo Tractors - Indoneisa
- Goldman Sachs - Singapore
- Price Waterhouse Coopers - Russia
- Georgia Ports Authority, United States
- Central Java Power - Indonesia
- Kepco SPC Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Coalindo Energy - Indonesia
- Singapore Mercantile Exchange
- Karbindo Abesyapradhi - Indoneisa
- Agrawal Coal Company - India
- Makarim & Taira - Indonesia
- Cement Manufacturers Association - India
- Videocon Industries ltd - India
- International Coal Ventures Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Vedanta Resources Plc - India
- Rashtriya Ispat Nigam Limited - India
- Aboitiz Power Corporation - Philippines
- Sojitz Corporation - Japan
- Timah Investasi Mineral - Indoneisa
- Deloitte Consulting - India
- Ministry of Transport, Egypt
- Malabar Cements Ltd - India
- Medco Energi Mining Internasional
- Global Business Power Corporation, Philippines
- Larsen & Toubro Limited - India
- Bayan Resources Tbk. - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Karaikal Port Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Parry Sugars Refinery, India
- Energy Link Ltd, New Zealand
- Kartika Selabumi Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Sinarmas Energy and Mining - Indonesia
- ICICI Bank Limited - India
- Coastal Gujarat Power Limited - India
- Sree Jayajothi Cements Limited - India
- Posco Energy - South Korea
- Electricity Authority, New Zealand
- Pendopo Energi Batubara - Indonesia
- Coal and Oil Company - UAE
- GVK Power & Infra Limited - India
- Wilmar Investment Holdings
- New Zealand Coal & Carbon
- Toyota Tsusho Corporation, Japan
- AsiaOL BioFuels Corp., Philippines
- Kideco Jaya Agung - Indonesia
- Star Paper Mills Limited - India
- Planning Commission, India
- Minerals Council of Australia
- Asmin Koalindo Tuhup - Indonesia
- Commonwealth Bank - Australia
- Sindya Power Generating Company Private Ltd
- Riau Bara Harum - Indonesia
- Siam City Cement - Thailand
- Interocean Group of Companies - India
- Ind-Barath Power Infra Limited - India
- IHS Mccloskey Coal Group - USA
- Rio Tinto Coal - Australia
- Savvy Resources Ltd - HongKong
- San Jose City I Power Corp, Philippines
- Vizag Seaport Private Limited - India
- Billiton Holdings Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- Sakthi Sugars Limited - India
- SMC Global Power, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Chamber of Mines of South Africa
- Samtan Co., Ltd - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Central Electricity Authority - India
- Petron Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- OPG Power Generation Pvt Ltd - India
- Dalmia Cement Bharat India
- European Bulk Services B.V. - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- Anglo American - United Kingdom
- Neyveli Lignite Corporation Ltd, - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Krishnapatnam Port Company Ltd. - India
- PetroVietnam Power Coal Import and Supply Company
- Metalloyd Limited - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- Romanian Commodities Exchange
- Iligan Light & Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- VISA Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Indogreen Group - Indonesia
- PNOC Exploration Corporation - Philippines
- Gujarat Sidhee Cement - India
- CNBM International Corporation - China
- Trasteel International SA, Italy
- Globalindo Alam Lestari - Indonesia
- Attock Cement Pakistan Limited
- MS Steel International - UAE
- Bhushan Steel Limited - India
- Banpu Public Company Limited - Thailand
- Mjunction Services Limited - India
- Indian Energy Exchange, India
- Indian Oil Corporation Limited
- Wood Mackenzie - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- South Luzon Thermal Energy Corporation
- Jaiprakash Power Ventures ltd
- Maheswari Brothers Coal Limited - India
- Power Finance Corporation Ltd., India
- Merrill Lynch Commodities Europe
- Ambuja Cements Ltd - India
- Indo Tambangraya Megah - Indonesia
- Intertek Mineral Services - Indonesia
- Carbofer General Trading SA - India
- Bhatia International Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Essar Steel Hazira Ltd - India
- Xindia Steels Limited - India
- Port Waratah Coal Services - Australia
- Semirara Mining Corp, Philippines
- Mercator Lines Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Australian Coal Association
- Sical Logistics Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Antam Resourcindo - Indonesia
- The University of Queensland
- Barasentosa Lestari - Indonesia
- Standard Chartered Bank - UAE
- Kaltim Prima Coal - Indonesia
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