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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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Tuesday, 11 June 13
COAL: NO SIGN OF RECOVERY - GABRIELLA
COALspot.com: We attended the 19th Annual Coaltrans Asia Conference, where we found most of the speakers were not very optimistic on the outlook for ...
Tuesday, 11 June 13
NEWCASTLE PORT SHIPPED MORE COAL WEEK ENDED 11 JUNE 2013
COALspot.com - Newcastle port in Australia has loaded 3,104,509 tons of coal for the week ended 0700 hours 11 June 2013, Newcastle Port Corp. ...
Tuesday, 11 June 13
OUTLOOK FOR CAPESIZES LOOKS GRIM, DESPITE FALLING IRON ORE PRICES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Things aren't looking all that rosy for the dry bulk market, despite a stronger volume of iron ore imports during the months of March and April, as ...
Sunday, 09 June 13
CFR SOUTH CHINA COAL SWAP IS UNDER PRESSURE
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for average July 2013 delivery have lost 0.03 percent week on week but gained 0.07 pe ...
Sunday, 09 June 13
IRON ORE DEMAND: WEAK; COAL MOVEMENT: STEADY TO INDIA AND CHINA - CAPT. REDDY
COALspot.com - The freight market was fairly steady with BDI up by 0.37 per cent closed at 812 points this week.
The Cape index was also ended in ...
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- Aditya Birla Group - India
- Miang Besar Coal Terminal - Indonesia
- Port Waratah Coal Services - Australia
- San Jose City I Power Corp, Philippines
- Baramulti Group, Indonesia
- SMG Consultants - Indonesia
- Coalindo Energy - Indonesia
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- McConnell Dowell - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Central Java Power - Indonesia
- Siam City Cement PLC, Thailand
- Gujarat Sidhee Cement - India
- Kobexindo Tractors - Indoneisa
- Uttam Galva Steels Limited - India
- Ministry of Finance - Indonesia
- Meenaskhi Energy Private Limited - India
- Toyota Tsusho Corporation, Japan
- Semirara Mining and Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- GVK Power & Infra Limited - India
- New Zealand Coal & Carbon
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- Trasteel International SA, Italy
- Semirara Mining Corp, Philippines
- Karaikal Port Pvt Ltd - India
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- Tamil Nadu electricity Board
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- Heidelberg Cement - Germany
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- Dalmia Cement Bharat India
- Indian Energy Exchange, India
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- Ministry of Transport, Egypt
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- Global Green Power PLC Corporation, Philippines
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- Wood Mackenzie - Singapore
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- Power Finance Corporation Ltd., India
- Ambuja Cements Ltd - India
- Energy Development Corp, Philippines
- Carbofer General Trading SA - India
- Singapore Mercantile Exchange
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- Mercator Lines Limited - India
- Ceylon Electricity Board - Sri Lanka
- Posco Energy - South Korea
- Price Waterhouse Coopers - Russia
- IEA Clean Coal Centre - UK
- South Luzon Thermal Energy Corporation
- Interocean Group of Companies - India
- Central Electricity Authority - India
- Africa Commodities Group - South Africa
- Romanian Commodities Exchange
- Banpu Public Company Limited - Thailand
- Kumho Petrochemical, South Korea
- CNBM International Corporation - China
- Asmin Koalindo Tuhup - Indonesia
- Malabar Cements Ltd - India
- The University of Queensland
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Xindia Steels Limited - India
- Eastern Coal Council - USA
- Ministry of Mines - Canada
- Directorate Of Revenue Intelligence - India
- Planning Commission, India
- Bahari Cakrawala Sebuku - Indonesia
- The Treasury - Australian Government
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Economic Council, Georgia
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- GN Power Mariveles Coal Plant, Philippines
- Krishnapatnam Port Company Ltd. - India
- Therma Luzon, Inc, Philippines
- Thai Mozambique Logistica
- Maharashtra Electricity Regulatory Commission - India
- Bukit Makmur.PT - Indonesia
- Timah Investasi Mineral - Indoneisa
- White Energy Company Limited
- Indian Oil Corporation Limited
- Globalindo Alam Lestari - Indonesia
- International Coal Ventures Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Bangladesh Power Developement Board
- CIMB Investment Bank - Malaysia
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- Coal and Oil Company - UAE
- LBH Netherlands Bv - Netherlands
- Antam Resourcindo - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Merrill Lynch Commodities Europe
- Rio Tinto Coal - Australia
- Barasentosa Lestari - Indonesia
- Edison Trading Spa - Italy
- IHS Mccloskey Coal Group - USA
- Attock Cement Pakistan Limited
- Eastern Energy - Thailand
- MS Steel International - UAE
- Formosa Plastics Group - Taiwan
- Star Paper Mills Limited - India
- Kepco SPC Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Commonwealth Bank - Australia
- Manunggal Multi Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Cigading International Bulk Terminal - Indonesia
- Electricity Authority, New Zealand
- Australian Commodity Traders Exchange
- Minerals Council of Australia
- OPG Power Generation Pvt Ltd - India
- Indika Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- The State Trading Corporation of India Ltd
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- Petron Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Indo Tambangraya Megah - Indonesia
- Bharathi Cement Corporation - India
- Directorate General of MIneral and Coal - Indonesia
- Anglo American - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- Kalimantan Lumbung Energi - Indonesia
- PTC India Limited - India
- Standard Chartered Bank - UAE
- Cement Manufacturers Association - India
- Chamber of Mines of South Africa
- Salva Resources Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Madhucon Powers Ltd - India
- Kideco Jaya Agung - Indonesia
- Jindal Steel & Power Ltd - India
- Intertek Mineral Services - Indonesia
- Tata Chemicals Ltd - India
- Simpson Spence & Young - Indonesia
- Meralco Power Generation, Philippines
- Bulk Trading Sa - Switzerland
- Bhatia International Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Indonesian Coal Mining Association
- Indogreen Group - Indonesia
- TeaM Sual Corporation - Philippines
- Lanco Infratech Ltd - India
- Essar Steel Hazira Ltd - India
- Metalloyd Limited - United Kingdom
- Siam City Cement - Thailand
- Straits Asia Resources Limited - Singapore
- Bhoruka Overseas - Indonesia
- Bhushan Steel Limited - India
- Goldman Sachs - Singapore
- Savvy Resources Ltd - HongKong
- Vedanta Resources Plc - India
- Orica Mining Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Borneo Indobara - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Pipit Mutiara Jaya. PT, Indonesia
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- Alfred C Toepfer International GmbH - Germany
- India Bulls Power Limited - India
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- Videocon Industries ltd - India
- Thiess Contractors Indonesia
- Agrawal Coal Company - India
- Mintek Dendrill Indonesia
- Parry Sugars Refinery, India
- Independent Power Producers Association of India
- Mjunction Services Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ind-Barath Power Infra Limited - India
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- Mercuria Energy - Indonesia
- Orica Australia Pty. Ltd.
- TNB Fuel Sdn Bhd - Malaysia
- Altura Mining Limited, Indonesia
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