BHP rethinks Australia coal plans on strong prices

  • Market: Coal
  • 16/06/22

Australian resources firm BHP will close its 20mn t/yr Mount Arthur coal mine in New South Wales in 2030 instead of selling its New South Wales Energy Coal (NSWEC) business, to capitalise on strong coal prices.

BHP will seek consent to continue mining at Mount Arthur beyond the current 2026 cut-off and will cease mining by the end of June 2030, rather than sell the Australian coal division.

In August 2020, BHP gave itself two years to divest its NSWEC, Cerrejon thermal coal mine stake in Columbia and its 80pc stake in the BHP Mitsui Coal (BMC) low-grade Australian coking coal joint venture. It has sold its stake in Cerrejon to joint venture partner Glencore, and its BMC stake to Australian mining firm Stanmore, but it has struggled to get the right price for NSWEC.

BHP reported a turnaround in profit for the division based on record-breaking prices during July-December 2021. NSWEC made earnings before tax and interest of $404mn in July-December compared with a loss of $208mn in the same period of 2020. This is likely to be eclipsed by second-half earnings, with prices for the high-grade coal produced by BHP hitting new records throughout the period.

NSWEC produced 9.8mn t of thermal coal in July 2021 to March 2022. This leaves it with a target of 3.2mn-5.2mn t for April-June to meet its guidance of 13mn-15mn t for the year to 30 June.

Despite the strong prices, BHP has not reversed any of the $1.7bn that it wrote down from NSWEC's value in August 2021. This impairment took the value of the NSWEC business negative to around the cost of rehabilitating the mine site, with the firm setting aside $700mn to rehabilitate the mine site, allowing it to improve its environmental credentials.

BHP has focused on increasing the quality of its thermal coal sales to take advantage of high premiums for lower ash content. This has cut production and pushed up costs, but has still been offset by higher price realisation.

Argus last assessed high-grade 6,000 kcal/kg NAR thermal coal at $390.58/t fob Newcastle on 10 June, down from a peak of $425.31/t on 20 May, but up from $123/t a year earlier. It assessed lower-grade 5,500 kcal/kg NAR coal at $185.63/t fob Newcastle on 10 June, down from a peak of $287.15/t on 11 March but up from $72/t a year earlier.

The heat-adjusted premium on higher-grade 6,000 kcal/kg NAR coal was at $188.07/t on 10 June, down from $222.96/t on 20 May, but higher than the $36.17/t on 28 October 2021, and from as low as $1.65/t in 2019, before China's ban on Australian coal took full effect.

Australian thermal coal prices $/t

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28/03/24

'Weeks, months' to reopen Baltimore waterway: professor

'Weeks, months' to reopen Baltimore waterway: professor

Houston, 28 March (Argus) — It could take weeks or even months to clear debris and reopen the waterway under the collapsed Francis Scott Key Bridge in Baltimore, Maryland, according to a engineering professor at the nearby Johns Hopkins University. As of Wednesday, there was no official timetable for the reopening of the Port of Baltimore after a major highway bridge over the Patapsco River was hit in the early hours of 26 March by a container ship and collapsed, with the debris and ship blocking the waterway. "I'd be shocked if it's weeks, but I don't think it'll take even a year" to clear the waterway, structural engineer and Johns Hopkins professor Benjamin Schafer said Wednesday. He expects the rebuild of the bridge to take significantly longer. "I've lived through quite a few civil infrastructure projects and they're rarely less than 10 years. So I think that's what we're looking at," Schafer said. He noted that it took five years to build the original Francis Scott Key Bridge and seven years to repair the Sunshine Skyway Bridge in Tampa Bay, Florida, after a similar collapse in 1980. Still, "this is definitely not a national supply chain crisis," John Hopkins operations management professor Tinglong Dai said Wednesday. "The effect will be mostly local, mostly minimal and mostly temporary." The bridge collapse and port closure is also unlikely to trigger a global supply chain crisis, he said. The Port of Baltimore is an important but "niche" port specializing in automobile imports and exports, Dai added. "The supply chain has evolved...I have already seen a lot of rerouting happening." Automakers started adjusting their supply routes away from the top port for US vehicle imports the day of the collapse, including General Motors, Ford and Mercedes-Benz. Baltimore is also a major port for coal exports, which may start to shift to terminals to the south in Hampton Roads, Virginia. Freight rates for ships that carry coal could see increases in global markets Other commodities like asphalt and caustic soda that move through the port will see challenges, while organic agriculture imports may see less problems due to seasonal flows. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Hampton Roads may have space for Baltimore coal exports


27/03/24
News
27/03/24

Hampton Roads may have space for Baltimore coal exports

Houston, 27 March (Argus) — Terminals in Hampton Roads, Virginia, may have some available capacity to take rerouted coal shipments from Baltimore, Maryland, despite increasing exports from a year earlier for the seventh consecutive month in February. Coal loadings at Hampton Roads reached an estimated 3.31mn short tons (st) (3mn metric tonnes) last month, rising 7.8pc from February 2023, according to the Virginia Maritime Association. Still, historic Hampton Roads export data going back to 1993 showed that combined shipments from the three terminals in the region peaked at 5.48mn st in April 2012, which is nearly 66pc higher than last month's exports. This suggests that Hampton Roads terminals may have capacity to load additional coal volumes that were originally booked to ship out of terminals upstream from the Francis Scott Key Bridge in Baltimore, which collapsed on Tuesday morning, closing the Port of Baltimore for an indefinite period of time. The two Baltimore coal terminals cut off by the bridge collapse, Consol Energy's Consol Marine Terminal and CSX's Curtis Bay Coal Piers, have a combined export capacity of about 34mn st. Railroad Norfolk Southern (NS), which operates the Lamberts Point terminal at Hampton Roads, said today it is working with impacted international customers and port partners to "provide alternate routing solutions." "Ports on the east coast are resilient and have the capacity to serve the flow of freight," NS said. Lamberts Point terminal handled 1.19mn st of coal in February, a 20pc jump from February 2023. Despite this increase, that is still down from the 2.18mn st exported from the terminal in April 2012. Dominion Terminal Associates (DTA) exported 1.24mn st of coal in February from the Hampton Roads area, which is down 30pc from April 2012, while exports from the nearby Pier IX terminal were down 53pc to 727,023st last month. DTA's co-owners, Alpha Metallurgical Resources and Arch Resources, and Pier IX's owner Kinder Morgan all did not respond for immediate comment. By Anna Harmon Hampton Roads coal exports in 2012 st Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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RMKO, Atlas to develop Sumatra coal crushing plant


27/03/24
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27/03/24

RMKO, Atlas to develop Sumatra coal crushing plant

Manila, 27 March (Argus) — Indonesian coal mining contractor RMKO has partnered with domestic producer Atlas Resources to develop a coal crushing plant and other supporting mining infrastructure in south Sumatra. The crushing plant and other facilities are targeted for completion by the second half of this year, said RMKO, which is a subsidiary of coal logistics firm RMK. The plant will be built at Atlas' Mutara hub, which consists of five separate concessions in the Musi Rawas and Musi Banyuasin regency in south Sumatra and has coal reserves totalling 85mn t. Atlas has already acquired a road construction permit that will connect Mutara to the Sriwijaya Bara logistics jetty 137km away. The coal crushing plant is expected to boost coal transportation from mines to clients outside the region, the company said. RMKO will construct and operate the coal crushing plant that will have a capacity of 650 t/hr. Other services will include stockpile management, loading services and plant maintenance. The 36bn rupiah ($2.28mn) plant will be funded by RMK with Atlas paying back the investment through coal production equivalent to 200,000 t/month for five years, as well as the cost of operations and maintenance services, RMKO said. By Antonio delos Reyes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Baltimore bridge collapse forces freight changes


26/03/24
News
26/03/24

Baltimore bridge collapse forces freight changes

Washington, 26 March (Argus) — Vessel traffic in and out of the Port of Baltimore, Maryland, has been suspended indefinitely in the wake of a container ship collision early today that brought down the Francis Scott Key Bridge, an accident that will force the rerouting of coal, car and light truck shipments. The prolonged closure of one of the largest ports on the US east coast could have a ripple effect on trade flows across much of the US, as shippers grapple for alternatives in the absence of a certain reopening timeline. Search and rescue efforts are still ongoing in the Patapsco River, after the 116,851dwt Dali headed to Colombo, Sri Lanka, slammed into a bridge support. The crew had lost control of the vessel. The Dali is owned by Grace Ocean and managed by Synergy Marine Group. The Maryland Port Administration said it does not know how long it will take for the shipping channel to be cleared and for traffic to resume. 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The two terminals loaded 2.4mn t of coal in February, up from 2.1mn t a year earlier, according to analytics firm Kpler, mostly exports to India and China. An India-based trader said that the suspension of coal exports will probably raise prices in India, as brick kilns enter the peak production season in the summer. Buyers could look to petroleum coke as a substitute, but the higher sulphur content may not be appealing to some users despite the higher calorific value. Prices for deliveries to northern Europe are also likely to rise given that the Netherlands, Germany and Belgium combined are the second-largest market for North Appalachian coal. April API 2 futures rose by $2/t to $113.30/t. The incident has added a "level of volatility [which] could have big implications," a European paper broker said. The lack of information has prompted some coal producers to hold off on activating force majeure clauses in their contracts. Curtis Bay is served only by CSX, while CSX and fellow eastern carrier Norfolk Southern serve Consol. CSX said it is in contact with existing coal customers and contingency plans are being implemented. The railroad at this point intends to keep Curtis Bay open but will continue to assess the circumstances moving forward. Norfolk Southern did not respond to questions. Some scheduled Baltimore coal exports may be redirected to the other three eastern US coal export terminals in Hampton Roads, Virginia, but such reroutings likely will entail increased costs. Not all coal mines will be able to shift terminals. Such decisions will depend on available capacity in Hampton Roads. Exports from the three terminals in January reached a five-year high , signaling somewhat limited capacity. Mine location and railroad access may also determine whether coal can be rerouted, an industry source said. But some producers do not have much of a choice about trying to send coal to Hampton Roads. They may need the cash so will be forced into a decision. The producers most vulnerable to delays may be Consol and Arch Resources. Arch's Leer coking coal mine may be in the best position because it co-owns Dominion Terminal Associates in Hampton Roads with Alpha Metallurgical Coal Resources. The sudden lack of export capacity could put a floor under US coal prices, which have mostly been falling since last year amid low domestic demand. The competition to replace Baltimore coal exports could prevent further cuts, another coal trading source said. Metals sources say the accident will have only isolated effects on the global ferrous scrap market, but many market participants are still assessing the situation. The port is the 10th largest ferrous scrap export port in the US, and over the last five years an average of 44,000 metric tonnes/month of ferrous scrap was exported from Baltimore, according to US Department of Commerce data. But the port closure is likely to affect other freight. Baltimore is the nation's top handler of automobile traffic. Motor vehicles and parts accounted for about 42pc of all Baltimore port imports and 27pc of all exports, according to state data. The Port of Baltimore handled 847,158 cars and light trucks in 2023. "It's too early to say what impact this incident will have on the auto business — but there will certainly be a disruption," said John Bozzella, chief executive of industry trade group Alliance for Automotive Innovation. Dry bulk freight rates likely unaffected Several sources told Argus Baltimore's closure is unlikely to have a major impact on dry freight rates despite short-term interruptions to coal transports. "We are in the shoulder months with less demand for thermal coal," a shipbroker said, suggesting mild global temperatures means the collapse "may not have too much of an impact" on freight markets overall. Vessel traffic in ports such as Charleston, South Carolina, and Savannah, Georgia, may increase on diversions from Baltimore. Kpler identified 17 vessels that will likely be impacted because they are either in the Port of Baltimore or were expected to load there in the coming days. By Abby Caplan, Gabriel Squitieri, Luis Gronda, Evan Millard and Brad MacAulay Port of Baltimore coal terminals Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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US bridge collapse may weigh on dry freight rates


26/03/24
News
26/03/24

US bridge collapse may weigh on dry freight rates

New York, 26 March (Argus) — The collapse of a major bridge in the Port of Baltimore, Maryland, will likely put downward pressure on dry bulk rates as ship traffic in and out of the port remains closed indefinitely. Market participants differ on the extent of any such market pressure, however. "We are in the shoulder months with less demand for thermal coal," a shipbroker said, suggesting mild global temperatures meant the collapse "may not have too much of an impact" on dry freight markets overall. Some coal suppliers will be able to load their cargoes at ports such as Hampton Roads, said two shipbrokers. This could partly mitigate any potential downward pressure on rates from suspended vessel traffic in Baltimore that would come from decreased cargo demand. But a third shipbroker doubted much US coal could be diverted to other east coast ports. Panamax rates would likely decline because "coal, unlike other commodities cannot easily pivot to alternate ports," she said. The loss of cargo could expand Panamax tonnage supply in the Atlantic, she said. "It is conceivable that Panamax intended for coal will now head south as long as they can present grain clean lengthening tonnage lists which will drive down rates." Meanwhile, vessel traffic in ports such as Charleston, South Carolina, and Savannah, Georgia, may increase on diversions across many shipping segments from Baltimore, according to market contacts. By Gabriel Squitieri and Luis Gronda Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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