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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, 07 June 13
MEDITERRANEAN COAL MARKETS
Press Release: 3rd International Conference Mediterranean Coal Markets will be held on 16-17th of September 2013, Istanbul, Turkey, Ceylan Intercont ...
Friday, 07 June 13
US'S COAL PRODUCTION INCREASED BY 0.54 PER CENT THE WEEK ENDED JUNE 1
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 18.60 million short tons (mmst) of ...
Thursday, 06 June 13
WE ARE SEEING SOME FRESH INDO COAL TO CHINA AND INDIA - FEARNRESEARCH
Handy
In the Atlantic, the Gulf remains firm for the next week with a few orders in the market. The Supramaxes are seeing around low 20k for fronth ...
Wednesday, 05 June 13
DON'T AVOID PAYING COAL ROYALTY TO THE GOVERNMENT - INDONESIAN ENERGY MINISTER
COALspot.com – “Every country has the right to make policies to protect their national interests”, Energy and Mineral Resources Mi ...
Tuesday, 04 June 13
NEWCASTLE PORT SHIPPED 2.56 MILLION TONS OF COAL IN A WEEK
COALspot.com - Newcastle port in Australia has loaded 2,563,596 tons of coal for week ended 0700 hours 3 June 2013, Newcastle Port Corp. said ...
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- SN Aboitiz Power Inc, Philippines
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- Economic Council, Georgia
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- Eastern Coal Council - USA
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- The University of Queensland
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- Karaikal Port Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SMC Global Power, Philippines
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- Commonwealth Bank - Australia
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- Wilmar Investment Holdings
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- Tamil Nadu electricity Board
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- Directorate General of MIneral and Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Central Java Power - Indonesia
- Electricity Generating Authority of Thailand
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- ICICI Bank Limited - India
- Xindia Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Renaissance Capital - South Africa
- Directorate Of Revenue Intelligence - India
- Malabar Cements Ltd - India
- GMR Energy Limited - India
- White Energy Company Limited
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- Metalloyd Limited - United Kingdom
- Marubeni Corporation - India
- Ambuja Cements Ltd - India
- IEA Clean Coal Centre - UK
- Deloitte Consulting - India
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- Merrill Lynch Commodities Europe
- Minerals Council of Australia
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- Petron Corporation, Philippines
- Indian Energy Exchange, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- European Bulk Services B.V. - Netherlands
- Bharathi Cement Corporation - India
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- Miang Besar Coal Terminal - Indonesia
- MS Steel International - UAE
- GN Power Mariveles Coal Plant, Philippines
- Maheswari Brothers Coal Limited - India
- Kideco Jaya Agung - Indonesia
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- Australian Commodity Traders Exchange
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- Formosa Plastics Group - Taiwan
- San Jose City I Power Corp, Philippines
- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- Sical Logistics Limited - India
- Parliament of New Zealand
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- Gujarat Electricity Regulatory Commission - India
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- Sojitz Corporation - Japan
- Mercuria Energy - Indonesia
- Meralco Power Generation, Philippines
- Standard Chartered Bank - UAE
- Kumho Petrochemical, South Korea
- Bangladesh Power Developement Board
- Kohat Cement Company Ltd. - Pakistan
- Oldendorff Carriers - Singapore
- Bhushan Steel Limited - India
- Chettinad Cement Corporation Ltd - India
- Coalindo Energy - Indonesia
- Indian Oil Corporation Limited
- Krishnapatnam Port Company Ltd. - India
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- Coal and Oil Company - UAE
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- Truba Alam Manunggal Engineering.Tbk - Indonesia
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- South Luzon Thermal Energy Corporation
- Ministry of Finance - Indonesia
- Mintek Dendrill Indonesia
- Jindal Steel & Power Ltd - India
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- AsiaOL BioFuels Corp., Philippines
- OPG Power Generation Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Iligan Light & Power Inc, Philippines
- Salva Resources Pvt Ltd - India
- Lanco Infratech Ltd - India
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- Ministry of Transport, Egypt
- SMG Consultants - Indonesia
- Africa Commodities Group - South Africa
- Globalindo Alam Lestari - Indonesia
- London Commodity Brokers - England
- Medco Energi Mining Internasional
- ASAPP Information Group - India
- Bukit Makmur.PT - Indonesia
- Mercator Lines Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Altura Mining Limited, Indonesia
- Makarim & Taira - Indonesia
- VISA Power Limited - India
- Madhucon Powers Ltd - India
- Bayan Resources Tbk. - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mjunction Services Limited - India
- CNBM International Corporation - China
- Holcim Trading Pte Ltd - Singapore
- Jaiprakash Power Ventures ltd
- Straits Asia Resources Limited - Singapore
- Kobexindo Tractors - Indoneisa
- Port Waratah Coal Services - Australia
- Kartika Selabumi Mining - Indonesia
- Australian Coal Association
- Alfred C Toepfer International GmbH - Germany
- Vedanta Resources Plc - India
- Bukit Baiduri Energy - Indonesia
- Independent Power Producers Association of India
- Planning Commission, India
- Georgia Ports Authority, United States
- Barasentosa Lestari - Indonesia
- The State Trading Corporation of India Ltd
- Attock Cement Pakistan Limited
- Carbofer General Trading SA - India
- Global Green Power PLC Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Global Coal Blending Company Limited - Australia
- Baramulti Group, Indonesia
- Wood Mackenzie - Singapore
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- Posco Energy - South Korea
- Sindya Power Generating Company Private Ltd
- Toyota Tsusho Corporation, Japan
- Parry Sugars Refinery, India
- Anglo American - United Kingdom
- Thiess Contractors Indonesia
- McConnell Dowell - Australia
- Ind-Barath Power Infra Limited - India
- Global Business Power Corporation, Philippines
- Agrawal Coal Company - India
- Timah Investasi Mineral - Indoneisa
- Gujarat Sidhee Cement - India
- Bahari Cakrawala Sebuku - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Essar Steel Hazira Ltd - India
- Uttam Galva Steels Limited - India
- Chamber of Mines of South Africa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Pendopo Energi Batubara - Indonesia
- PNOC Exploration Corporation - Philippines
- New Zealand Coal & Carbon
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- Trasteel International SA, Italy
- Petrochimia International Co. Ltd.- Taiwan
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- PetroVietnam Power Coal Import and Supply Company
- LBH Netherlands Bv - Netherlands
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- Central Electricity Authority - India
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- Romanian Commodities Exchange
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- The Treasury - Australian Government
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