Yancoal diversifies coal customer base away from China

Chinese-Australian coal firm Yancoal is diversifying its coal customer base to India, Pakistan and South America, as Beijing's ban on Australian coal imports keeps it out of this key market and it looks to maintain strong sales into 2021.

Yancoal produced 38.3mn t of coal and shipped 37.9mn t in 2020. Its shipments were down by 13pc on the year in October-December, as exports were disrupted by the closure of one of two shiploaders at the Newcastle Coal Infrastructure (NCIG) terminal in New South Wales (NSW). Yancoal has assured stakeholders that it has sufficient port allocation for its export volumes in 2021, despite the ongoing problems at NCIG. It did not give 2021 production guidance in its latest quarterly report released yesterday.

The decline in shipments in October-December, which is usually a period of destocking for Yancoal as it feeds demand in the northern hemisphere winter, is unrelated to Beijing's ban on imports of Australian coal, according to Yancoal. The firm has been able to diversify its customer base and sales mix, and plans to continue to target the most "optimal market available", Yancoal chief executive David Moult said. Regional trade settings and the influence of weather are likely to contribute to price uncertainty in the first half of 2021, he said.

Yancoal occupies an interesting position in the diplomatic spat between Beijing and Canberra, which led Chinese authorities to stop imports of Australian coal in the middle of last year. Yancoal is majority owned by Chinese energy firm Yanzhou Coal and is Australia's largest exporter of thermal coal, most of which previously went to China.

All of Yancoal's mines decreased production during October-December compared with July-September and the year-earlier period, other than the small Stratford Duralie mine.

Coal sales shifted slightly in preference of lower-grade coking coal and pulverised coal injection (PCI) grade coal from a strong emphasis on thermal coal earlier in 2020, with increases in metallurgical coal prices towards the end of October-December.

Yancoal reported an average combined thermal and metallurgical coal price of A$72/t in October-December, up from A$70/t during July-September but down from A$93/t in October-December 2019. Yancoal's average realised price in 2020 was A$82/t compared with $111/t across 2019.

Argus last assessed high-grade Australian thermal coal at $88.14/t fob Newcastle for NAR 6,000 kcal/kg on 15 January, up from $59.02/t on 13 November and a low of $46.18/t on 4 September. It assessed lower-grade coal at $54.64/t fob Newcastle for NAR 5,500 kcal/kg on 15 January, up from $37.63/t on 13 November and $35.04/t on 4 September.

Argus assessed the PCI low-volatile price at $92.65/t fob Australia yesterday, having been around $65-75/t from May to mid-December.

By Jo Clarke