05 Aug 2020

Australia Braces for Lower Thermal Coal Output

05 Aug 2020  by Jo Clarke   

Australia's thermal coal exports during January-June were slightly ahead of the same period in 2019, although the outlook for the second half is for lower sales as mining firms react to loss-making weaker prices.

Australia exported 17.67mn t of thermal coal in June, up from a revised 15.95mn t in May but down from 18.07mn t in June 2019, according to data from the Australian Bureau of Statistics (ABS). Exports fell in July because of weaker demand and bad weather, with early shipping data indicating a 23pc fall in shipments at the key Newcastle thermal coal port in New South Wales compared with June.

June is often a strong month for exports because of the end of the Australian fiscal year on 30 June. But the year-on-year decline for the month is expected to be the start of a steep slump over the coming months as mining firms look to stem losses by curbing output.

Chinese, and to a lesser extent Vietnamese, demand has maintained Australian thermal coal shipments in the year to date, offsetting falls in exports to Japan, South Korea and Taiwan. But China took less coal in June than in June 2019 and expectations are growing that import quotas and political tensions between China and Australia could see shipments slip further in the second half of 2020.

India bought 13pc more thermal coal from Australian during January-June than in the same period last year but it was still small volumes compared with other major markets.

The Argus Newcastle 6,000 kcal/kg price averaged $51.34/t fob Newcastle in June, up from $50.54/t in May but down from $72.46/t in June 2019. It was assessed at $48.29/t yesterday.

The Argus Newcastle 5,500 kcal/kg price averaged $40.29/t in June, down from $40.88/t in May and from $53.55 in June 2019. It was last assessed at $36.63/t, which is below the lows in December 2015.

The heat-adjusted price differential between the Argus Newcastle 6,000 kcal/kg and 5,500 kcal/kg prices on a 6,000 kcal/kg basis widened to an average of $7.39/t in June from $5.94/t in May and but was narrower than $14.04/t a year earlier.

Australia's average thermal coal export price was $57.39/t in June compared with $59.03/t in May and $74.86/t in June 2019, according to the ABS. China paid an average price of $44.34/t, while Japanese customers paid an average of $66.84/t, reflecting differences in the quality of the coal and the terms by which prices are set.

The June prices are based on the Australian/US dollar exchange rate of $0.6892 used by the ABS for June. This is an increase in the monthly average of the Australian dollar against the US dollar from $0.6510 in May. The Australian dollar has continued to strengthen to $0.7132 yesterday, further reducing the profitability of Australian coal mines.

Thermal coal export sales revenues were A$1.01bn in June, up from A$929mn in May but down from A$1.35bn in June 2019.

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