Australian coal mines plan extended Christmas closures

Australian coal mining firms are planning to extend Christmas and New Year closures this year for the first time in five years as weak demand persists, and low prices keep many coal mines operating in losses.

The mining firms are preparing workers to take 2-3 weeks off over Christmas and New Year this year, according to union sources. This will come on top of the 2-3 week closures that Switzerland-based trading and mining firm Glencore and its joint venture partner Chinese firm Yancoal are undertaking at some mines to coincide with the school holidays.

Miners last closed operations for 2-3 weeks over Christmas when coal prices were at similarly low levels in 2015-16. Closures this time are more likely to impact thermal coal and low grade coking and PCI grade coal mines, with higher hard coking coal prices raising the profitability of higher grade mines in the Bowen Basin region of Queensland and the Illawarra region of New South Wales (NSW). Thermal coal and semi-soft coking coal mines in the Hunter Valley in NSW are particularly likely to be temporarily closed, as are PCI mines in Queensland.

Argus assessed the high-grade thermal coal price at $53.29/t fob Newcastle for NAR 6,000 kcal/kg on 29 September, up from a low of $46.18/t on 8 September. It assessed the lower-grade thermal coal price at $41.30/t for NAR 5,500 kcal/kg up from $35.04/t over the same comparison. High grade thermal coal prices were around $53/t for high grade and $38/t for low grade in early December 2015 when mining firms confirmed plans to close for 2-3 weeks that Christmas.

Argus last assessed the premium hard low-vol coking coal price at $135.75/t fob Australia yesterday, up from a recent low of $105/t on 11 August and $75/t in early December 2015. PCI 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.

Glencore, Yancoal and BHP, which all operate major coal mines in the Hunter Valley, declined to comment on Christmas closures, with nearly three months still to go before the holidays. In the years since the 2015-16 summer, Australian coal mines have generally just taken the major public holidays off at Christmas and New Year.

Australian exports dropped to a seven-month low in July, according to the Australian bureau of statistics, but rebounded in August, port and initial shipping data show. September exports are looking higher than the depressed figures in July, but not as good as August, according to shipping data compiled by Argus.

Yancoal has maintained its coal production guidance for 2020 despite its Hunter Valley operations coal mining joint venture with Glencore closing for two weeks from 25 September.

Many other major mining firms, including Anglo American and Peabody, have already moved to cut production to stem losses on low prices. BHP has also put all its thermal coal and its lower-grade coking coal assets up for sale.

By Jo Clarke