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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, 27 June 13
US COAL EXPORTS BEATS CHINESE COAL IMPORTS AS THE MOST INFLUENTIAL COAL TRADE - BIMCO
The influence of American coal exports on seaborne transportation has grown significantly over the past decade. In 2002, the US exported 20.1 millio ...
Thursday, 27 June 13
HANDY : USD 12000 FOR SPOT COAL INDO/CHINA AND AROUND USD 13000 INDO/ECI - FEARNLEYS
Handy
Atlantic rates hold well. Continent to Far East is worth more than USD 14k daily whilst USG to Far East pay 23/24k a day. On the route from B ...
Thursday, 27 June 13
DRY BULK CARRIERS DOMINATE NEWBUILDING ORDERS AS SHIP OWNERS ARE ENCOURAGED BY LATEST FREIGHT RATE RALLY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Newbuilding orders for dry bulk carriers were already high, compared to last year, prior to the latest rally of the Baltic Dry Index (BDI), which ha ...
Tuesday, 25 June 13
CAPESIZE MARKET TO REMAIN BULLISH SAYS ANALYST - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has been experiencing its long-awaited rally, with the Baltic Dry Index, the industry's benchmark rising to healthier levels fo ...
Tuesday, 25 June 13
NEWCASTLE PORT SHIPPED OUT MORE COAL W-O-W
COALspot.com - Newcastle port in Australia has loaded 3,101,378 tons of coal for the week ended 0700 hours 24 June 2013, Newcastle Port Corp. ...
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- Parliament of New Zealand
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- Indian Oil Corporation Limited
- IEA Clean Coal Centre - UK
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- Kumho Petrochemical, South Korea
- Bayan Resources Tbk. - Indonesia
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- Ministry of Transport, Egypt
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- Borneo Indobara - Indonesia
- Interocean Group of Companies - India
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- Indian Energy Exchange, India
- Siam City Cement - Thailand
- Deloitte Consulting - India
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- Anglo American - United Kingdom
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- Indonesian Coal Mining Association
- Price Waterhouse Coopers - Russia
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- Xindia Steels Limited - India
- PowerSource Philippines DevCo
- Bhatia International Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Sidhee Cement - India
- Renaissance Capital - South Africa
- Coastal Gujarat Power Limited - India
- Coalindo Energy - Indonesia
- GVK Power & Infra Limited - India
- Cigading International Bulk Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- McConnell Dowell - Australia
- Indo Tambangraya Megah - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Eastern Energy - Thailand
- The Treasury - Australian Government
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- Parry Sugars Refinery, India
- PNOC Exploration Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Electricity Authority, New Zealand
- Orica Mining Services - Indonesia
- Wilmar Investment Holdings
- Power Finance Corporation Ltd., India
- Maheswari Brothers Coal Limited - India
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- India Bulls Power Limited - India
- Bhushan Steel Limited - India
- Barasentosa Lestari - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Meralco Power Generation, Philippines
- Economic Council, Georgia
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- The State Trading Corporation of India Ltd
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- Mintek Dendrill Indonesia
- Petron Corporation, Philippines
- Aditya Birla Group - India
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- Karaikal Port Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Bukit Makmur.PT - Indonesia
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- Georgia Ports Authority, United States
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- The University of Queensland
- Singapore Mercantile Exchange
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- Essar Steel Hazira Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Pendopo Energi Batubara - Indonesia
- Tamil Nadu electricity Board
- Coal and Oil Company - UAE
- Sojitz Corporation - Japan
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- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Latin American Coal - Colombia
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- Bukit Asam (Persero) Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Minerals Council of Australia
- Aboitiz Power Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Trasteel International SA, Italy
- Vedanta Resources Plc - India
- Australian Commodity Traders Exchange
- Simpson Spence & Young - Indonesia
- Energy Link Ltd, New Zealand
- Global Green Power PLC Corporation, Philippines
- Bangladesh Power Developement Board
- Iligan Light & Power Inc, Philippines
- Formosa Plastics Group - Taiwan
- Ind-Barath Power Infra Limited - India
- Riau Bara Harum - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement PLC, Thailand
- Oldendorff Carriers - Singapore
- Tata Chemicals Ltd - India
- Larsen & Toubro Limited - India
- Metalloyd Limited - United Kingdom
- Eastern Coal Council - USA
- Commonwealth Bank - Australia
- SMC Global Power, Philippines
- Mercuria Energy - Indonesia
- SMG Consultants - Indonesia
- South Luzon Thermal Energy Corporation
- Mjunction Services Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Savvy Resources Ltd - HongKong
- VISA Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Sinarmas Energy and Mining - Indonesia
- Standard Chartered Bank - UAE
- Maharashtra Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Ambuja Cements Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Thai Mozambique Logistica
- Marubeni Corporation - India
- Ministry of Mines - Canada
- Intertek Mineral Services - Indonesia
- Grasim Industreis Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Agrawal Coal Company - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CNBM International Corporation - China
- Antam Resourcindo - Indonesia
- London Commodity Brokers - England
- Madhucon Powers Ltd - India
- Global Coal Blending Company Limited - Australia
- Makarim & Taira - Indonesia
- Kobexindo Tractors - Indoneisa
- New Zealand Coal & Carbon
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- Directorate General of MIneral and Coal - Indonesia
- Attock Cement Pakistan Limited
- Altura Mining Limited, Indonesia
- Toyota Tsusho Corporation, Japan
- Leighton Contractors Pty Ltd - Australia
- Wood Mackenzie - Singapore
- Malabar Cements Ltd - India
- PTC India Limited - India
- Directorate Of Revenue Intelligence - India
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- Star Paper Mills Limited - India
- Baramulti Group, Indonesia
- Jindal Steel & Power Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Finance - Indonesia
- Kohat Cement Company Ltd. - Pakistan
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- Central Java Power - Indonesia
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- MS Steel International - UAE
- Australian Coal Association
- Chettinad Cement Corporation Ltd - India
- Salva Resources Pvt Ltd - India
- Heidelberg Cement - Germany
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