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New UserGlencore to restart Australia coal mine as prices surge
02 Nov 2016
Glencore said on Tuesday it would restart a coking coal mine in southeastern
Australia that was mothballed more than two years ago, with a resurgence in prices for the
commodity breathing life into the sector.
Less than a year after the coal industry was declared to be in terminal decline, markets for
coal used to generate power and make steel have surged boosted by China's actions to
mine less of its own coal and import more.
Glencore acquired the underground Integra mine, formally called Glennies Creek, in 2015
after it was mothballed by then owner Vale of Brazil. It plans to restart it early next year.
"The Integra underground mine has been on care and maintenance since July 2014 and
Glencore has continued to assess options for a restart against global coal market
conditions," the company said.
The mine is expected to yield 1.3 million tonnes of coal in 2017, Glencore said.
A surge this year in both coking and thermal coal prices offers an opportunity for Glencore and other coal miners.
Peabody Energy Corp and Nippon Steel last month set the fourth quarter coking coal contract benchmark at $200 a tonne, more than
double the previous quarter's price.
Around the time of last December's Paris Agreement on climate change, coal prices and mining stocks were plunging and pressure from
shareholders for divestment from the most polluting fossil fuel appeared to make economic sense.
A rebound in coal and other commodities has since helped to make the mining sector the strongest performer on Britain's FTSE
share index this year, with Glencore rallying more than 170 percent.
Glencore said in October it would rehire about 200 workers at its Collinsville coal mine, also in Australia, after cutting 180 jobs to combat
weak pricing.
China has cut working days on coal mines to 276 days from 330 days to remove excess capacity, leading to higher demand for imports.
Analysts say China largely holds the key to how long the coal rally can continue as coal loses market share to cleaner, cheaper renewable
fuels.
"We don't know whether coal is in structural decline. Maybe it is, maybe it's not," Chris LaFemina, a managing director at Jefferies, said.
"Is demand declining faster than supply? The jury is out."
Another major miner Anglo American says it is still seeking to sell coal assets but only at the right price.
"The current prices in coal could go for some months. We don't see it as a longterm price," Anglo CEO Mark Cutifani told Reuters on
Monday.
SOurce: ET