Growing stocks push Australian coal firms to closures

Australian coal mining firms plan to extend Christmas and new year closures as the supply overhang grows with vessels waiting outside of Chinese ports, at Australian ports and stocks build at mines.

Australian mining firms are planning to close operations for more than two weeks over Christmas and new year for the first time since 2015-16 in response to weaker prices and growing stocks. Around 7mn t of coal is stranded on vessels offshore Chinese ports, after Beijing imposed a ban on Australian coal imports. Stocks are also growing at Australian ports, particularly at Newcastle in New South Wales (NSW) where a broken shiploader is slowing loadings, as well as at coal mine sites.

November coal shipments from Australia are down by a third on the same month last year, according to initial shipping data. Exports are down across all ports in NSW and Queensland, with mining firms running out of places to stockpile coal in Australia. This is prompting them to plan for extended Christmas closures.

The reopening of Chinese import quotas at the start of each calendar year has made Christmas a bad time for Australian mining firms to close operations, despite it coinciding with the main summer holiday in the southern hemisphere. Expectations of a new 2021 import quota may prompt some firms to bring forward closures ahead of Christmas. But there are growing expectations among Australian coal producers that Beijing will retain its ban into the new year as diplomatic relations with Canberra continue to be tense.

Some shipments of Australian coal have been waiting offshore China since June, with the queue growing over the past couple of months. Around 5mn t is coking coal and the remaining 2mn t is thermal coal.

Australian cargoes make up around 86pc of the coking coal tonnage waiting to enter the key Chinese ports of Jingtang and Caofeidian. The remaining 14pc from Russia, the US and Indonesia has been waiting less time on average, with most arriving this month and given preference for unloading.

Argus yesterday assessed the premium hard low-volatile coking coal price at $103.20/t fob Australia, up from a recent low of $98.74/t on 18 November and $75/t in early December 2015. Pulverised coal injection grade and semi-soft coking coal prices have been around $70/t fob Australia since late April, while they were around $65/t in December 2015 when mining firms confirmed plans to close for 2-3 weeks that Christmas.

Argus assessed the high-grade thermal coal price at $59.38/t fob Newcastle for NAR 6,000 kcal/kg on 20 November, up from a low of $46.18/t on 8 September and from around $53/t in early December 2015.

By Jo Clarke