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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$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Friday, 05 July 13
THE DRY BULK MARKET IS GOING FROM STRENGTH TO STRENGTH - INTERMODAL
The Capesize sector has been one that has gone through a wild rollercoaster of emotions this past decade, ranging from the exuberance witnessed duri ...
Thursday, 04 July 13
CHALLENGER SIGNS FORMAL EXCLUSIVE MINING AND MARKETING AGREEMENT FOR ABBR PROJECT IN CENTRAL KALIMANTAN
COALspot.com - Challenger Deep Resources Corp., through its subsidiary PT Bestindo Energy has signed the formal exclusive Mining and Marketing agree ...
Thursday, 04 July 13
ASX LISTED QBL TO ACQUIRE INTERESTS IN MOZAMBIQUE COAL EXPLORATION LICENSES
- QBL to acquire interests in two Mozambique exploration licences prospective for coal
- Licenses located in the highly prospective Zambezi basin, ...
Thursday, 04 July 13
HANDY : INDO/CHINA, CHARTERERS RATING AROUND US$ 10,000 - FEARNLEYS AS
Handy
The Feast market firmed slightly up as mid-July cargos entered the market, but charterers seems not in hurry to cover them and looking for ch ...
Wednesday, 03 July 13
NEWCASTLE COAL EXPORTS DIP 24.79 PER CENT WOW
COALspot.com - Newcastle Coal exports fell 24.79% to 2.33 million tons WoW.
Newcastle port in Australia has loaded 2,332,513 tons of coal for the ...
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- Maheswari Brothers Coal Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Global Coal Blending Company Limited - Australia
- Jorong Barutama Greston.PT - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kepco SPC Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Finance - Indonesia
- SN Aboitiz Power Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Independent Power Producers Association of India
- Makarim & Taira - Indonesia
- Chamber of Mines of South Africa
- Leighton Contractors Pty Ltd - Australia
- Iligan Light & Power Inc, Philippines
- Jaiprakash Power Ventures ltd
- Metalloyd Limited - United Kingdom
- Vizag Seaport Private Limited - India
- CIMB Investment Bank - Malaysia
- Electricity Generating Authority of Thailand
- ICICI Bank Limited - India
- Trasteel International SA, Italy
- Miang Besar Coal Terminal - Indonesia
- Energy Development Corp, Philippines
- Ambuja Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- Ministry of Transport, Egypt
- Uttam Galva Steels Limited - India
- Power Finance Corporation Ltd., India
- Price Waterhouse Coopers - Russia
- Kaltim Prima Coal - Indonesia
- Marubeni Corporation - India
- CNBM International Corporation - China
- GVK Power & Infra Limited - India
- Medco Energi Mining Internasional
- Meralco Power Generation, Philippines
- McConnell Dowell - Australia
- Sindya Power Generating Company Private Ltd
- Bukit Makmur.PT - Indonesia
- Grasim Industreis Ltd - India
- LBH Netherlands Bv - Netherlands
- Simpson Spence & Young - Indonesia
- Ministry of Mines - Canada
- SMG Consultants - Indonesia
- IEA Clean Coal Centre - UK
- Kideco Jaya Agung - Indonesia
- Georgia Ports Authority, United States
- Petron Corporation, Philippines
- Merrill Lynch Commodities Europe
- Salva Resources Pvt Ltd - India
- Bhushan Steel Limited - India
- Karaikal Port Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- PNOC Exploration Corporation - Philippines
- Indian Oil Corporation Limited
- Malabar Cements Ltd - India
- Eastern Energy - Thailand
- Kalimantan Lumbung Energi - Indonesia
- Thai Mozambique Logistica
- Madhucon Powers Ltd - India
- Bukit Baiduri Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- Samtan Co., Ltd - South Korea
- GMR Energy Limited - India
- Rio Tinto Coal - Australia
- Siam City Cement PLC, Thailand
- Bangladesh Power Developement Board
- Wood Mackenzie - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sical Logistics Limited - India
- Lanco Infratech Ltd - India
- Bulk Trading Sa - Switzerland
- Altura Mining Limited, Indonesia
- Central Electricity Authority - India
- Gujarat Sidhee Cement - India
- Attock Cement Pakistan Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bayan Resources Tbk. - Indonesia
- Posco Energy - South Korea
- Billiton Holdings Pty Ltd - Australia
- Meenaskhi Energy Private Limited - India
- Indo Tambangraya Megah - Indonesia
- South Luzon Thermal Energy Corporation
- Rashtriya Ispat Nigam Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Cement Manufacturers Association - India
- Toyota Tsusho Corporation, Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Aditya Birla Group - India
- Kobexindo Tractors - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Bukit Asam (Persero) Tbk - Indonesia
- Star Paper Mills Limited - India
- Bhatia International Limited - India
- Port Waratah Coal Services - Australia
- The State Trading Corporation of India Ltd
- Africa Commodities Group - South Africa
- Oldendorff Carriers - Singapore
- Manunggal Multi Energi - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Anglo American - United Kingdom
- Krishnapatnam Port Company Ltd. - India
- Sakthi Sugars Limited - India
- Coalindo Energy - Indonesia
- Singapore Mercantile Exchange
- Siam City Cement - Thailand
- Mercator Lines Limited - India
- TeaM Sual Corporation - Philippines
- Ceylon Electricity Board - Sri Lanka
- GAC Shipping (India) Pvt Ltd
- Bhoruka Overseas - Indonesia
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Sojitz Corporation - Japan
- Bharathi Cement Corporation - India
- Tata Chemicals Ltd - India
- Parliament of New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Neyveli Lignite Corporation Ltd, - India
- Kumho Petrochemical, South Korea
- Riau Bara Harum - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- OPG Power Generation Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Pendopo Energi Batubara - Indonesia
- Borneo Indobara - Indonesia
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- Energy Link Ltd, New Zealand
- VISA Power Limited - India
- Orica Australia Pty. Ltd.
- PTC India Limited - India
- New Zealand Coal & Carbon
- Videocon Industries ltd - India
- Thiess Contractors Indonesia
- White Energy Company Limited
- London Commodity Brokers - England
- Sree Jayajothi Cements Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Heidelberg Cement - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Java Power - Indonesia
- Straits Asia Resources Limited - Singapore
- Banpu Public Company Limited - Thailand
- Barasentosa Lestari - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Intertek Mineral Services - Indonesia
- Formosa Plastics Group - Taiwan
- Petrochimia International Co. Ltd.- Taiwan
- Indogreen Group - Indonesia
- International Coal Ventures Pvt Ltd - India
- Parry Sugars Refinery, India
- Australian Commodity Traders Exchange
- Carbofer General Trading SA - India
- TNB Fuel Sdn Bhd - Malaysia
- The Treasury - Australian Government
- Goldman Sachs - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Mercuria Energy - Indonesia
- Global Business Power Corporation, Philippines
- Edison Trading Spa - Italy
- Essar Steel Hazira Ltd - India
- Xindia Steels Limited - India
- Dalmia Cement Bharat India
- Cigading International Bulk Terminal - Indonesia
- Jindal Steel & Power Ltd - India
- Mjunction Services Limited - India
- Coastal Gujarat Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- MS Steel International - UAE
- Standard Chartered Bank - UAE
- Orica Mining Services - Indonesia
- The University of Queensland
- PowerSource Philippines DevCo
- Kartika Selabumi Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- Economic Council, Georgia
- Alfred C Toepfer International GmbH - Germany
- Savvy Resources Ltd - HongKong
- Directorate Of Revenue Intelligence - India
- Tamil Nadu electricity Board
- Vedanta Resources Plc - India
- San Jose City I Power Corp, Philippines
- Deloitte Consulting - India
- Renaissance Capital - South Africa
- Commonwealth Bank - Australia
- IHS Mccloskey Coal Group - USA
- Planning Commission, India
- SMC Global Power, Philippines
- Indonesian Coal Mining Association
- Semirara Mining and Power Corporation, Philippines
- Agrawal Coal Company - India
- Wilmar Investment Holdings
- Romanian Commodities Exchange
- India Bulls Power Limited - India
- Chettinad Cement Corporation Ltd - India
- Latin American Coal - Colombia
- Eastern Coal Council - USA
- Vijayanagar Sugar Pvt Ltd - India
- Australian Coal Association
- Timah Investasi Mineral - Indoneisa
- ASAPP Information Group - India
- Binh Thuan Hamico - Vietnam
- Semirara Mining Corp, Philippines
- Global Green Power PLC Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Coal and Oil Company - UAE
- Electricity Authority, New Zealand
- Baramulti Group, Indonesia
- Interocean Group of Companies - India
- Mintek Dendrill Indonesia
- Holcim Trading Pte Ltd - Singapore
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