Coal news and updates

BHP set to more than double its coal revenue amid global supply crunch

Australian mining giant BHP is on track to more than double its coal revenue this year amid a worsening global supply crunch, even as it seeks to divest its last-remaining thermal coal mine.

In a push to realign its portfolio with global efforts to combat climate change, BHP has been seeking to quit thermal coal, the heaviest-emitting source of energy, but intends to retain extensive interests in coking coal mines that supply the steel-making industry.

Markets for both kinds of coal crashed to multi-year lows last year as the coronavirus pandemic wiped out demand and a diplomatic stoush led to China escalating unofficial bans on coal shipments from Australia.

Coal’s outlook in the coming years is also facing enormous uncertainty as world leaders ratchet up pressure for countries to urgently phase out coal-fired power to avoid the most catastrophic effects of climate change. Key markets for Australian coal including Japan and South Korea have pledged to hit “net-zero” emissions by 2050.

However, the fossil fuel’s near-term fortunes have lifted this year, with coal prices hitting new peaks on the back of a sharper-than-expected post-pandemic rebound in economic and industrial activity colliding with global supply shortages.

A stunning surge in coal revenue is now on track to drive BHP’s earnings higher and help cushion the impact of falling prices of its biggest commodity, the steel-making raw material iron ore.

Investment bank Macquarie updated its forecasts this week and expects coal to deliver revenues of $US12.4 billion ($17 billion) over the 2022 financial year, up from $US5.1 billion in 2021. The miner generated iron ore revenue of $34.5 million in 2021.

“Financial year 2021 was weak and the coal division a relative drag on BHP, however rallying coal prices in financial year 2022 to date have driven material earnings upside momentum for BHP,” Macquarie’s analysts said.