UK-South African mining firm Anglo American has declared force majeure (FM) on Moranbah deliveries from the fourth quarter of 2024 after its Grosvenor coking coal mine closed on 29 June.
Anglo American has suspended production at its Grosvenor mine in the Bowen basin region of Australia's Queensland because of an underground methane gas ignition. The company was instructed by independent regulator Resources Safety and Health Queensland on 29 June to suspend all operations and activities underground.
"These events are beyond our reasonable control and will partly or wholly prevent, hinder, or delay our ability to meet our delivery obligations of the product under the contract from the fourth calendar quarter of 2024," the company said in a letter to customers seen by Argus. The closure is expected to last for several months, depending on ongoing evaluations, according to Anglo American.
At least four consumers across Asia with term contracted volumes of Moranbah North in the fourth quarter said they have received the FM notice in the late evening of 4 July.
Grosvenor was expected to produce 3.5mn t in 2024. Production guidance for Grosvenor was placed at 1.2mn t for the second half of 2024, a reflection of lower production because of a longwall move scheduled in the third quarter of 2024.
Supply concerns for the immediate term were alleviated when Anglo American informed several steel mills and trading firms on 3 July that it expects to meet its contracted obligations for the third quarter. Before that, the mine closure incident appeared to have initiated a string of higher trades in the paper market and prompted the sale of a 40,000t Goonyella cargo with 1-10 August laycan to a trading firm at $260/t fob Australia on 2 July.
"They were planning longwall moves at Moranbah and Grosevenor during this quarter so it does make sense that they would have planned reduced sales during the same, so meeting [third quarter] commitments and declaring FM on [fourth quarter] does check out," an Australian supplier said. Many expected the mining firm to issue an FM for the fourth quarter, with one source suggesting that "running down stockpiles can only continue for so long".
Consumers that received the FM notice said they were assessing the ongoing impact to their operations. It remains unclear whether the impact would be a delay or a cancellation to shipments, one consumer said. Two others said their exposure to term contracted volumes of Moranbah North with the mining firm was limited and they may seek alternative coals from markets such as Australia, Canada or Mozambique if required.
Market participants agreed that a reduction in supply would likely be reflected in market prices in the longer run. "This will take 3.5mn t/yr of premium mid-volatile coal out of the market, a meaningful volume that will structurally tighten the prime coal segment," an international supplier said. "The market feels like there's an overhang of prime coals especially from Canada recently, but we don't expect that to go on for too long. When that is used up, finding alternatives might be challenging," he added.
Argus assessed the premium hard low-volatile coking coal price at $255/t fob Australia on 4 July, down from a year-to-date high of $336.25/t on 12 January.
