Corrects details of planned fee changes
Australian port owner NSW Ports will raise fees at Port Kembla in southern New South Wales (NSW) from 1 July, but the increase may be outweighed by a planned cut by the operator of the 25mn t/yr coal terminal as it tries to reduce cost pressures on the struggling Illawarra coking and thermal coal industries.
Port Kembla Coal Terminal (PKCT), which operates the coal-loading facilities, is looking to reduce its fees by 15-20pc or around $1/t from 1 July, which would more than offset the increase announced by NSW Ports. The reduction offered by PKCT should help the Illawarra's struggling coal mining industry and could attract additional tonnage back to the port.
Port Kembla shipped around 7.5mn t of coal in 2020, down from about 8.3mn t in 2019 but up from a low of 5.5mn t in 2017, according to initial shipping data collated by Argus. It has begun 2021 reasonably strongly, shipping around 2.5mn t over January-April, but remains far short of the 14.4mn t shipped over the whole of 2012.
PKCT is a common user facility and the only coal terminal on the east coast of Australia that does not operate a take or pay model, under which mining firms are locked into paying for a set volume of coal exports regardless of whether that volume can be delivered.
The port has had a depressed few years, with some mining firms such as Wollongong Coal closing local mines and others, such as Australian firm South32, facing technical difficulties at their mines. Some mining firms, such as Thai-owned Centennial Coal, have chosen to rail coal some 250km north to ship out of the larger, cheaper port of Newcastle rather than use PKCT. The prospect of lower fees from PKCT could see less coal diverted north and will feed into operating and investment decisions for the mines using the port.
The mining firms producing the high-grade coking coal shipped from Port Kembla are struggling to remain viable at the low prices seen since the outbreak of Covid-19 and Beijing's imposition of a ban on Australian coal imports. Coal from Port Kembla is not usually sent to China, but directed to India and east Asia markets. The decline in export prices has affected all destinations.
The biggest Illawarra coal mine operator South32 is continuing to ramp up production at its Appin coal mine, which should add to exports from PKCT but only if other producers manage to maintain exports. South32 made a loss of $41mn at its Illawarra operations in July-December, down from a profit of $50mn a year earlier.
Argus last assessed the price for premium hard coking coal at $137.80/t fob Australia, up from $107.15/t at the beginning of May. It has been between $100/t and $149/t for most of the past year, having been at over $200/t from mid-2018 to mid-2019.
Prices are stronger for the region's thermal coal producers, with Argus last assessing the high-grade NAR 6,000 kcal/kg thermal coal price at $101.25/t fob Newcastle on 21 May, up from $59.38/t six months ago.
PKCT is owned by a consortium of coal producers in the Illawarra region, including Centennial Coal, US firm Peabody Energy, UK-owned GFG Alliance, and South 32.
