Mining firms face following UK-South African mining firm Anglo American in cutting Australian coking coal sales, as tensions increase between Beijing and Canberra and prices remain depressed.
The vessel queue outside the BHP Mitsubishi Alliance-operated Hay Point in Queensland remains at a low of 12 for the second week in a row. It follows the port recording its lowest exports for more than seven years of just 2.64mn t in November. The port is now 8pc behind on shipments during January-November compared with 2019. The nearby port of Dalrymple Bay Coal Terminal, which exports lower grade coking coal from smaller producers, is 18pc behind.
The sharp fall in shipments from Hay Point in November, a generally weaker second half of the calendar year and low vessel queues implies that UK-Australian mining firm BHP may have to cut its metallurgical coal guidance from 40mn-44mn t/yr on an equity basis. Switzerland-based bank UBS last week cut its forecast to 40mn t/yr, based on BHP usually selling around 30pc of its Australian mined coal to China. Diplomatic tensions have increased this week, worsening the outlook for BHP's sales of metallurgical coal.
US energy firm Peabody is on track to produce this year less than 5mn short tonnes (st) of coking coal in Australia, down from 8.1mn st in 2019 and 10mn st in 2018. Its Australian seaborne metallurgical coal operations and its Middlemount joint venture with Yancoal were its only segments to post a loss before interest, tax, depreciation and amortisation during January-September.
These losses, combined with limited markets to sell its products, has prompted Peabody to close its Metropolitan mine in New South Wales for two months during January-February and the shutting of an excavator fleet at its Moorvale mine in November. It is possible that it could commit to further capacity cuts in the loss-making Australian operations early in 2021.
Mining firms are starting to make changes to mine plans based on the increased possibility that China will continue to ban, or severely restrict, Australian coking coal imports into 2021. This is based on high inventories in Australia and on vessels waiting to unload into China.
Firms are factoring in lower prices in the short term, with UBS cutting its average coking coal price outlook in 2021 to $135/t fob Australia from $145/t and for its 2020 forecast to $124/t from $135/t.
Argus yesterday assessed the premium hard coking coal price at $101/t fob Australia, down from $136/t in early October before China's informal ban on coal imports.
| Australian met coal capacity cuts 2020 | ||||
| Company | Mine | Capacity (mn t/yr) | Coal type | Notes |
| AMCI | Carborough Downs | 3.5 | coking | suspended board and pillar mining |
| Anglo American | Dawson | 4.0 | coking and thermal | cut one shovel and excavator |
| Anglo American | Capcoal | 6.0 | coking and thermal | scaled back operations to reflect lower demand |
| EMR/Adaro | Kestrel | 6.0 | coking | cut guidance to 6mn t/yr from 6.7mn t/yr |
| Peabody | Coppabella and Moorvale | 4.0 | PCI | cut contractors and three excavator-shovel units |
| Peabody | Metropolitan | 1.8 | coking | cutting workforce by a third |
| Peabody | Moorvale | 1.6 | PCI | shut one excavator fleet |
| Peabody | Metropolitan | 1.8 | coking | Jan-Feb closure |
| South32 | Illawarra | 6.5 | coking and thermal | stood down 250 contractors to cut costs |
| Stanmore Coal | Isaac Plains | 2.5 | coking | delayed term sales and cut guidance |
| Yancoal/Peabody | Middlemount | 4.0 | PCI and coking | reduced equipment fleet |
| Source: company reports | ||||
