Coal news and updates

Japan forces cut in coal price

JAPAN has forced a  15per cent price cut from Hunter Valley coal producers, putting even more pressure on the industry.


One of Hunter’s biggest mining companies, Glencore Xstrata, is understood to have accepted a 14.7per cent price cut in negotiations with Japanese power station operator Tohoku Electric Power Company, setting a “reference price” for the Japanese financial year of $US81.80 (about $88.90 at recent exchange rates).

This is well down on last year’s reference price of $US95 ($103), but still above the $US75  ($81.50) that similar quality coal has been selling for in one-off “spot sales”.

With the Hunter industry already having shed at least 1500 mine working jobs in the past two years as coal companies pushed to cut production costs by about 20 per cent, the latest price cut could well be the precursor of further job cuts.

Neither Glencore nor its major competitor, Rio Tinto, would comment on the reported price settlements, which are in line with predictions made in recent days by Macquarie Bank and other industry analysts.

News of the price cut coincided with BHP Billiton confirming plans to simplify its corporate structure, which were interpreted by some analysts as meaning its thermal coal assets, including the  Mount Arthur open-cut mine near Muswellbrook, could be up for sale.

But BHP Billiton says that coal remains one of its major “pillars”, and that this goes for thermal coal used in power stations – the Hunter’s main product – as well as the coking coal used in steelmaking and found mostly in Queensland and the Illawarra.

While the Japanese price was broadly in line with predictions, it also represents the best price the Hunter industry will receive for the thermal coal that makes up about 80 per cent of the region’s output.

The Japanese have traditionally paid a premium for stable supply and good quality, Chinese buyers look for lesser quality coals at the lowest price, with high-ash, low-energy coal leaving Newcastle for that market at about $US65 ($70) a tonne or less.

China now accounts for about one quarter of the coal leaving Newcastle, while Japan’s share has slipped from more than 60 per cent a few years ago to just above 40 per cent.

Despite the price slump, Newcastle coal exports are continuing to rise, with the exports for the first three months of this year running at an annualised rate of about 156 million tonnes, up slightly on the 2013 total of 150 million tonnes.

Despite the potential question mark over Mount Arthur, BHP Billiton Coal president Dean Dalla Valle stressed the company’s commitment to thermal in a speech in Brisbane on Wednesday.

Mr Dalle Valle said thermal coal had fallen from $US130 ($141) in 2011, and “today it sits at about $US75 ($81.50) per tonne”.

"This is a significant fall and has had a major impact on producers all around the world,’’ Mr Dalla Valle said.

“In response companies have moved rapidly to decrease costs and maximise production to stay profitable.”

Mr Dalla Valle said price cuts were nothing new to the coal industry and while it had been “a difficult adjustment” in terms of job losses, the company was determined to ensure a viable and sustainable future over the longer term.

On climate change, he said the company had “long accepted the findings of the Intergovernmental Panel on Climate Change” and supported “an appropriate price on carbon”.

But an attempt to address climate change without “providing access to energy to maintain living standards and alleviate poverty” was “destined to fail”.

Source: Newcastle Herald