Weak demand sees Peabody suspend Australian coal mine
US energy firm Peabody will close its 2.5mn t/yr Wambo
underground thermal and semi-soft coking coal mine in New South Wales (NSW),
Australia to align production with weaker demand and offset the effect of lower
coal prices.
The firm will stop coal production from the underground mine
for 59 days from 19 June, after high-grade thermal coal and semi-soft coking
coal prices fell to four-year lows amid Covid-19 related falls in seaborne
demand. It will continue some development work that could see the mine restart
in mid-August.
Peabody follows Australian independent Terracom in cutting
production in response to market conditions. Initial port data suggests that
other producers may be quietly cutting production at the margins in response to
weaker demand and lower prices. Several Australian thermal coal mining firms
are making a loss at current prices and non-premium metallurgical coal mining
firms are also struggling, with Australian coal mining firm AMCI cutting
production at the 3.5mn t/yr Carborough Downs mine.
Argus last assessed the high-grade Australian thermal coal
price at $52.04/t fob Newcastle for 6,000 kcal/kg NAR on 22 May, down from
$67.58/t at the start of April but up from $48.63/t on 7 May that was a low not
seen since May 2016. It assessed the lower grade coal price at $42.99/t fob
Newcastle for 5,500 kcal/kg NAR on 22 May, down from $53.18/t at the start of
April but up from the four-year low of $38.48/t on 7 May. Argus last assessed
the semi-soft mid-volatile coking coal price at $67.50/t fob Australia on 22
May, down from $100/t at the start of April and a record low since Argus
started publishing the data in December 2017.
The Wambo underground mine, which is in the Hunter valley
region of NSW, sold 2.2mn t of semi-soft coking and thermal coal in 2019. The
closure will not affect the 3.5mn t/yr Wambo open-cut mine, which is combining
with Switzerland-based mining firm Glencore's United mine to form the 6mn t/yr
United Wambo joint venture.
The United Wambo joint venture was formally created
in October-December 2019 following government approval and joint production is
due to start late this year. The joint venture will see operating costs
temporarily rise in 2020 during the transition to the new structure, as well as
incurring around $60mn in capital costs in 2020, at a time when most mining
firms are focused on reducing costs to maximise margins.
Comments
Post a Comment