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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, 04 June 13
WOOD MACKENZIE SAYS THE CHINA'S THERMAL COAL DEMAND WILL REACH NEARLY 7BTPA BY 2030
COALspot.com - The Illusion of Peak Coal' says that despite efforts to limit coal consumption and seek alternative fuel options, China's strong ap ...
Saturday, 01 June 13
COAL PRICES STRUGGLE TO FIRM UP
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for average July 2013 delivery have gained 0.18 percent week on week and 0.03 percent ...
Saturday, 01 June 13
THE FREIGHT MARKET FOR S7 AND S8 SECTORS ARE EXPECTED TO BE SOFT - VISTAAR
COALspot.com – The freights are remains weak week ended 31 May 2013, as BDI fell 2.05 pct and closed at 809 points on 31 May 2013.
The Cape ...
Friday, 31 May 13
US PRODUCED 18.5 MILLION SHORT TONS OF COAL W/E 25 MAY 2013
COALspot.com – United states the world’s second largest coal producer produced totalled approximately 18.50 million short tons (mmst) of ...
Thursday, 30 May 13
HANDY: RBCT ROUND WAS AROUND USD 9K + 300 BB - FEARNRESEARCH
Handy
THE Atlantic market remained flat. The USG-Feast was at USD 19k and Black Sea-Feast was at USD 12k. The Pacific market remained quiet with no ...
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- Orica Mining Services - Indonesia
- PTC India Limited - India
- CIMB Investment Bank - Malaysia
- Posco Energy - South Korea
- PetroVietnam Power Coal Import and Supply Company
- Semirara Mining Corp, Philippines
- Eastern Coal Council - USA
- Jorong Barutama Greston.PT - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Salva Resources Pvt Ltd - India
- ICICI Bank Limited - India
- Siam City Cement PLC, Thailand
- Globalindo Alam Lestari - Indonesia
- Africa Commodities Group - South Africa
- Indian Oil Corporation Limited
- Kepco SPC Power Corporation, Philippines
- Energy Development Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- IHS Mccloskey Coal Group - USA
- Orica Australia Pty. Ltd.
- GN Power Mariveles Coal Plant, Philippines
- Savvy Resources Ltd - HongKong
- Trasteel International SA, Italy
- ASAPP Information Group - India
- Price Waterhouse Coopers - Russia
- Kobexindo Tractors - Indoneisa
- Commonwealth Bank - Australia
- GMR Energy Limited - India
- Makarim & Taira - Indonesia
- Altura Mining Limited, Indonesia
- Simpson Spence & Young - Indonesia
- Singapore Mercantile Exchange
- Minerals Council of Australia
- Semirara Mining and Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Ambuja Cements Ltd - India
- Mercuria Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- London Commodity Brokers - England
- Ministry of Transport, Egypt
- Wilmar Investment Holdings
- Mintek Dendrill Indonesia
- OPG Power Generation Pvt Ltd - India
- Mercator Lines Limited - India
- Sinarmas Energy and Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Xindia Steels Limited - India
- Holcim Trading Pte Ltd - Singapore
- Malabar Cements Ltd - India
- Merrill Lynch Commodities Europe
- Bhoruka Overseas - Indonesia
- Cement Manufacturers Association - India
- Central Electricity Authority - India
- Global Business Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Straits Asia Resources Limited - Singapore
- Global Coal Blending Company Limited - Australia
- Asmin Koalindo Tuhup - Indonesia
- The University of Queensland
- Billiton Holdings Pty Ltd - Australia
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- Lanco Infratech Ltd - India
- Medco Energi Mining Internasional
- Carbofer General Trading SA - India
- Baramulti Group, Indonesia
- European Bulk Services B.V. - Netherlands
- Aboitiz Power Corporation - Philippines
- Indonesian Coal Mining Association
- Vedanta Resources Plc - India
- Bukit Baiduri Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coalindo Energy - Indonesia
- Planning Commission, India
- Tamil Nadu electricity Board
- Cigading International Bulk Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Petron Corporation, Philippines
- Grasim Industreis Ltd - India
- Meenaskhi Energy Private Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Georgia Ports Authority, United States
- Rashtriya Ispat Nigam Limited - India
- Alfred C Toepfer International GmbH - Germany
- Coal and Oil Company - UAE
- Renaissance Capital - South Africa
- Sindya Power Generating Company Private Ltd
- McConnell Dowell - Australia
- LBH Netherlands Bv - Netherlands
- Larsen & Toubro Limited - India
- Barasentosa Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
- Coastal Gujarat Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GVK Power & Infra Limited - India
- Independent Power Producers Association of India
- The State Trading Corporation of India Ltd
- Tata Chemicals Ltd - India
- Banpu Public Company Limited - Thailand
- Standard Chartered Bank - UAE
- Vizag Seaport Private Limited - India
- GAC Shipping (India) Pvt Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Interocean Group of Companies - India
- Sree Jayajothi Cements Limited - India
- Ministry of Mines - Canada
- Latin American Coal - Colombia
- White Energy Company Limited
- Metalloyd Limited - United Kingdom
- Sojitz Corporation - Japan
- Siam City Cement - Thailand
- Rio Tinto Coal - Australia
- Therma Luzon, Inc, Philippines
- Bangladesh Power Developement Board
- The Treasury - Australian Government
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Sakthi Sugars Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Indian Energy Exchange, India
- MS Steel International - UAE
- Meralco Power Generation, Philippines
- Chettinad Cement Corporation Ltd - India
- International Coal Ventures Pvt Ltd - India
- VISA Power Limited - India
- Oldendorff Carriers - Singapore
- SN Aboitiz Power Inc, Philippines
- Bulk Trading Sa - Switzerland
- Indika Energy - Indonesia
- Essar Steel Hazira Ltd - India
- PNOC Exploration Corporation - Philippines
- Electricity Authority, New Zealand
- Economic Council, Georgia
- Jindal Steel & Power Ltd - India
- Dalmia Cement Bharat India
- Edison Trading Spa - Italy
- Miang Besar Coal Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Thai Mozambique Logistica
- Antam Resourcindo - Indonesia
- Wood Mackenzie - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Marubeni Corporation - India
- Gujarat Sidhee Cement - India
- AsiaOL BioFuels Corp., Philippines
- Eastern Energy - Thailand
- Global Green Power PLC Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Parry Sugars Refinery, India
- Binh Thuan Hamico - Vietnam
- Gujarat Electricity Regulatory Commission - India
- Ministry of Finance - Indonesia
- Kideco Jaya Agung - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- San Jose City I Power Corp, Philippines
- Formosa Plastics Group - Taiwan
- Pipit Mutiara Jaya. PT, Indonesia
- Maheswari Brothers Coal Limited - India
- South Luzon Thermal Energy Corporation
- Kalimantan Lumbung Energi - Indonesia
- Directorate Of Revenue Intelligence - India
- Directorate General of MIneral and Coal - Indonesia
- Bhushan Steel Limited - India
- SMG Consultants - Indonesia
- Aditya Birla Group - India
- Timah Investasi Mineral - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Manunggal Multi Energi - Indonesia
- Parliament of New Zealand
- Jaiprakash Power Ventures ltd
- Samtan Co., Ltd - South Korea
- Bayan Resources Tbk. - Indonesia
- Mjunction Services Limited - India
- Kumho Petrochemical, South Korea
- Kapuas Tunggal Persada - Indonesia
- Borneo Indobara - Indonesia
- Port Waratah Coal Services - Australia
- Bhatia International Limited - India
- Kaltim Prima Coal - Indonesia
- Australian Commodity Traders Exchange
- Iligan Light & Power Inc, Philippines
- Deloitte Consulting - India
- Agrawal Coal Company - India
- Energy Link Ltd, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- New Zealand Coal & Carbon
- Kartika Selabumi Mining - Indonesia
- Romanian Commodities Exchange
- Central Java Power - Indonesia
- Thiess Contractors Indonesia
- Chamber of Mines of South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PowerSource Philippines DevCo
- Power Finance Corporation Ltd., India
- Indogreen Group - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- SMC Global Power, Philippines
- Intertek Mineral Services - Indonesia
- Anglo American - United Kingdom
- IEA Clean Coal Centre - UK
- Attock Cement Pakistan Limited
- Madhucon Powers Ltd - India
- Goldman Sachs - Singapore
- CNBM International Corporation - China
- Toyota Tsusho Corporation, Japan
- Videocon Industries ltd - India
- Bharathi Cement Corporation - India
- Sical Logistics Limited - India
- Star Paper Mills Limited - India
- Uttam Galva Steels Limited - India
- Australian Coal Association
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