Glencore to suspend Hunter Valley coal mines as China restricts imports
Swiss-based mining giant Glencore will suspend several coal mines across the Hunter Valley in New South Wales for at least two weeks as the coronavirus pandemic and Chinese government policies to avoid Australian coal cargoes hit demand for the commodity.
Glencore on Friday said the site and equipment shutdowns,
which would coincide with September school holidays, were necessary in order to
wind back output volumes and manage the severe impact on demand. Workers would
be required to take annual leave over this time, it said.
"Our focus is on taking the necessary steps to continue
operations, manage the current market volatility and limit the impact on our
workforce," the company said on Friday.
"These measures will enable us to align our production
levels with market demand, while providing the flexibility to ramp back up as
economies recover."
Export prices for thermal coal, one of the country's top
export commodities, have been sliding as the coronavirus-driven industrial
downturn weighs on global energy demand. But the situation for exporters to
China including Glencore has been made tougher this year following an
escalation of Chinese import restrictions.
While unofficial limits are often imposed in China as away
to support its domestic miners, a souring of diplomatic relations between
Canberra and Beijing this year over calls for a coronavirus inquiry prompted
the Chinese government to instruct state-owned utilities to avoid Australian
coal in particular – favouring Indonesian or Russian cargoes instead.
Revenue from Glencore's sales of Australian thermal coal -
coal used to generate electricity - was 23 per cent lower in the past six
months compared to the prior year due to lower demand and prices. Glencore told
investors earlier this week it would reduce Australian coal production by 7
million tonnes, or 8 per cent, in response.
Glencore is the biggest thermal coal producer in the NSW
Hunter Valley. During the previous downturn in the coal market in 2015 Glencore
cut coal production by 15 per cent.
"The changes are consistent with measures we have put
in place in the past in response to challenging market conditions," the
company said on Friday.
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