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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, 13 June 13
HANDY: SHORT PERIOD WERE FIXED AT AROUND USD 9000 LEVEL
Handy
Despite falling rates for bigger sizes, the Supras in Atlantic are seeing some improvements with fresh biz. US Gulf positions fetching tick a ...
Thursday, 13 June 13
BIMCO EXPECTS SUBDUED CAPESIZE EARNINGS FOR THE COMING WEEKS - HELLENIC SHIPPING NEWS
Bulk is not only about China even though it is a key driver. In this section, we have taken a closer look at the European seaborne coal markets, whi ...
Thursday, 13 June 13
RIO TINTO AGREES SALE OF EAGLE PROJECT FOR AN ESTIMATED US$325 MILLION IN CASH
COALspot.com - Rio Tinto has reached a binding agreement to sell its Eagle project to Lundin Mining Corporation for an estimated US$325 million in c ...
Thursday, 13 June 13
HARD COAL IMPORTS RISE SHARPLY IN GERMANY IN Q1 2013 - COAL IMPORTERS ASSOCIATION
Coal-fired Power Plants in Germany: Pillars of the Grid and the Energy Turnaround; Hard Coal Consumption and Hard Coal Imports Rise Sharply in Germa ...
Wednesday, 12 June 13
INDONESIAN COAL PRICE REFERENCE SLIDES TO 2013 LOW
COALspot.com - Indonesian Coal Price Reference continues to take its lumps this month, dropping about 0.54 % and hitting a 2013 low. The Indonesian ...
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- Videocon Industries ltd - India
- Simpson Spence & Young - Indonesia
- Georgia Ports Authority, United States
- Straits Asia Resources Limited - Singapore
- Rio Tinto Coal - Australia
- Electricity Authority, New Zealand
- Bangladesh Power Developement Board
- Kobexindo Tractors - Indoneisa
- Barasentosa Lestari - Indonesia
- Standard Chartered Bank - UAE
- Baramulti Group, Indonesia
- Heidelberg Cement - Germany
- New Zealand Coal & Carbon
- Africa Commodities Group - South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Riau Bara Harum - Indonesia
- Chettinad Cement Corporation Ltd - India
- Singapore Mercantile Exchange
- Formosa Plastics Group - Taiwan
- Mintek Dendrill Indonesia
- Sarangani Energy Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Renaissance Capital - South Africa
- The State Trading Corporation of India Ltd
- Medco Energi Mining Internasional
- SMC Global Power, Philippines
- Bhushan Steel Limited - India
- San Jose City I Power Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Transport, Egypt
- Kartika Selabumi Mining - Indonesia
- Attock Cement Pakistan Limited
- IHS Mccloskey Coal Group - USA
- MS Steel International - UAE
- Indo Tambangraya Megah - Indonesia
- Edison Trading Spa - Italy
- Interocean Group of Companies - India
- Bharathi Cement Corporation - India
- GAC Shipping (India) Pvt Ltd
- Orica Australia Pty. Ltd.
- Sakthi Sugars Limited - India
- Miang Besar Coal Terminal - Indonesia
- Siam City Cement - Thailand
- Indian Oil Corporation Limited
- Globalindo Alam Lestari - Indonesia
- Meralco Power Generation, Philippines
- Sree Jayajothi Cements Limited - India
- Latin American Coal - Colombia
- Karbindo Abesyapradhi - Indoneisa
- Sindya Power Generating Company Private Ltd
- Essar Steel Hazira Ltd - India
- Bulk Trading Sa - Switzerland
- Ind-Barath Power Infra Limited - India
- PTC India Limited - India
- PowerSource Philippines DevCo
- OPG Power Generation Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Eastern Energy - Thailand
- Coal and Oil Company - UAE
- Mjunction Services Limited - India
- Global Business Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- Marubeni Corporation - India
- Trasteel International SA, Italy
- Sojitz Corporation - Japan
- Meenaskhi Energy Private Limited - India
- Power Finance Corporation Ltd., India
- PetroVietnam Power Coal Import and Supply Company
- Kalimantan Lumbung Energi - Indonesia
- IEA Clean Coal Centre - UK
- Cement Manufacturers Association - India
- Tata Chemicals Ltd - India
- Planning Commission, India
- Siam City Cement PLC, Thailand
- Madhucon Powers Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Kaltim Prima Coal - Indonesia
- Petron Corporation, Philippines
- ASAPP Information Group - India
- Central Electricity Authority - India
- Semirara Mining and Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Energy Link Ltd, New Zealand
- Dalmia Cement Bharat India
- Jaiprakash Power Ventures ltd
- Aboitiz Power Corporation - Philippines
- Merrill Lynch Commodities Europe
- Coalindo Energy - Indonesia
- Eastern Coal Council - USA
- Therma Luzon, Inc, Philippines
- Wood Mackenzie - Singapore
- Jindal Steel & Power Ltd - India
- Tamil Nadu electricity Board
- Indonesian Coal Mining Association
- The University of Queensland
- Gujarat Mineral Development Corp Ltd - India
- Port Waratah Coal Services - Australia
- Bukit Baiduri Energy - Indonesia
- Semirara Mining Corp, Philippines
- Minerals Council of Australia
- Star Paper Mills Limited - India
- Electricity Generating Authority of Thailand
- AsiaOL BioFuels Corp., Philippines
- Gujarat Sidhee Cement - India
- Indogreen Group - Indonesia
- SMG Consultants - Indonesia
- Metalloyd Limited - United Kingdom
- Posco Energy - South Korea
- Cigading International Bulk Terminal - Indonesia
- PNOC Exploration Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Thai Mozambique Logistica
- GN Power Mariveles Coal Plant, Philippines
- Economic Council, Georgia
- Rashtriya Ispat Nigam Limited - India
- London Commodity Brokers - England
- Bahari Cakrawala Sebuku - Indonesia
- White Energy Company Limited
- GMR Energy Limited - India
- Ministry of Finance - Indonesia
- International Coal Ventures Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Sical Logistics Limited - India
- Kumho Petrochemical, South Korea
- Mercuria Energy - Indonesia
- McConnell Dowell - Australia
- Deloitte Consulting - India
- Agrawal Coal Company - India
- CNBM International Corporation - China
- Altura Mining Limited, Indonesia
- Ambuja Cements Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Orica Mining Services - Indonesia
- Thiess Contractors Indonesia
- Indian Energy Exchange, India
- Ceylon Electricity Board - Sri Lanka
- Sinarmas Energy and Mining - Indonesia
- Australian Coal Association
- Timah Investasi Mineral - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Antam Resourcindo - Indonesia
- Vizag Seaport Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Binh Thuan Hamico - Vietnam
- Goldman Sachs - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Bukit Makmur.PT - Indonesia
- TeaM Sual Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Ministry of Mines - Canada
- Iligan Light & Power Inc, Philippines
- Oldendorff Carriers - Singapore
- The Treasury - Australian Government
- Salva Resources Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Toyota Tsusho Corporation, Japan
- Manunggal Multi Energi - Indonesia
- Intertek Mineral Services - Indonesia
- VISA Power Limited - India
- Samtan Co., Ltd - South Korea
- Kapuas Tunggal Persada - Indonesia
- South Luzon Thermal Energy Corporation
- Wilmar Investment Holdings
- Bhoruka Overseas - Indonesia
- GVK Power & Infra Limited - India
- Vedanta Resources Plc - India
- European Bulk Services B.V. - Netherlands
- SN Aboitiz Power Inc, Philippines
- India Bulls Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Bayan Resources Tbk. - Indonesia
- Malabar Cements Ltd - India
- Mercator Lines Limited - India
- Independent Power Producers Association of India
- Coastal Gujarat Power Limited - India
- Chamber of Mines of South Africa
- Savvy Resources Ltd - HongKong
- Directorate General of MIneral and Coal - Indonesia
- Larsen & Toubro Limited - India
- Central Java Power - Indonesia
- Xindia Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- Bhatia International Limited - India
- Indika Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Grasim Industreis Ltd - India
- Pendopo Energi Batubara - Indonesia
- Makarim & Taira - Indonesia
- Maheswari Brothers Coal Limited - India
- Borneo Indobara - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Commonwealth Bank - Australia
- Aditya Birla Group - India
- Uttam Galva Steels Limited - India
- ICICI Bank Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Coal Blending Company Limited - Australia
- Romanian Commodities Exchange
- Energy Development Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Parliament of New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Parry Sugars Refinery, India
- Lanco Infratech Ltd - India
- Carbofer General Trading SA - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Anglo American - United Kingdom
- Petrochimia International Co. Ltd.- Taiwan
- Australian Commodity Traders Exchange
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