Coal news and updates

Queensland coal mines threatened by a demand squeeze in China

COKING coal prices have dived below $US120 a tonne placing further pressure on Queensland coal mines and threatening the viability of projects.

Thermal coal for power generation has also fallen below $US80 a tonne.

According to the latest McCloskey Report, there are now rumours of defaults in China’s industrial sector as financial squeeze hits demand.

It comes as Yancoal’s parent, China’s Yanzhou Coal Mining Company, withdrew its offer to privatise the Australian based coal miner.

Yancoal owns the Middlemount and Yarrabee mines in central Queensland.

Chinese manufacturing activity also contracted in March to its weakest rate in eight months.

HSBC’s preliminary purchasing managers’ index (PMI), which tracks manufacturing activity in China’s factories and workshops, fell to 48.1 from a final reading of 48.5 in February.

The figure is down from 49.5 in January and was the worst result since July’s 47.7, according to the bank. The index is a closely watched gauge of the health of the Asian economic powerhouse and key driver of global growth.

Despite the poor outlook the Galilee Basin projects remain upbeat with both Adani and GVK saying they were still pursuing the development of the Abbot Pt terminal after several proponents pulled out and environmental groups announced a legal challenge.

GVK is on track to finalise its joint venture arrangements with Aurizon over the transport of its coal by mid year.

McCloskey said the free-on-board price for coking coal used in steel production was about $US110 a tonne, well below prices reached by BHP Billiton recently of $US131 a tonne for

Peak Downs coal.

BHP is also copping a lot of the flak for the plummeting prices because of its expansion through Daunia and Caval Ridge as well as its decision to ramp up production to lower its unit costs.

The prices are a long way from the $US300 a tonne producers were receiving during the boom when companies were concerned only with production and paid little attention to costs.

The blow out in wages and prices has forced significant closures and the loss of about 8000 jobs in the Queensland coal industry.

China’s coal imports also fell sharply in February but McKloskey said this was more about China’s New Year holidays, but its total import of 22.8 million tonnes was also down on the same period last year.

However, imports of coal and lignite for the first two months were up 9 per cent on the previous year.

Japan’s electricity companies are expected to start negotiations for thermal coal contracts at $US84 a tonnes.

Source: www.couriermail.com.au