Low coal prices bring on new Australian mine closures
Australian miner Centennial Coal, a subsidiary of Thai coal company Banpu, said on Wednesday it will temporarily close two of its thermal coal mines in New South Wales because of a fall in thermal coal prices and the strong Australian dollar.
Centennial Coal's Mannering and Airly Mine, which last year jointly produced just over 1m tonnes of coal, will be put on "care and maintenance" in January, the company said in a press release on Wednesday.
"Both mines have struggled to make a positive contribution in their own right not only through the lower coal price but a combination of difficult mining conditions, poor coal quality and, in the case of Airly, transport costs," Centennial's chief operation officer Steve Bracken said in the statement. "In the current market, their losses can no longer be absorbed without negatively impacting the Group's overall performance."
The closures of the mines came as no surprise to coal market participants with one analyst calling the closures "symptomatic of current coal market conditions".
Despite the consequent drop in thermal coal production, FOB Newcastle coal prices are unlikely to find much support, sources said, as the markets remain fundamentally oversupplied.
"There are certainly more closures to come," one participant said. "Although the market is still oversupplied the downside to prices is limited as new closures would support prices at least through sentiment, if not actual supply shortages."
The news had no immediate impact on high quality FOB Newcastle coal prices as a 25,000-tonne January-loading cargo changed hands at $90.00/tonne in the morning (through globalCOAL), down from last night's bid-offer spread at $90.00-91.30/tonne, data reported to ICIS shows.
While on "care and maintenance" the two mines will continue to meet safety and environmental regulations and the sites will be maintained to enable reopening when conditions improve, the company said. Centennial Coal mines coal with a calorific value of 6,700kCal/kg and 16% ash content. The company produced 4.8m tonnes of coal between July and September, up 11% year on year, its parent company Banpu said in a company presentation.
In September some of the world's mining majors including Xstrata, BHP Billiton, Rio Tinto as well as US coal producer Alpha Natural Resources all announced they would close or idle some of their operations.
BHP Billiton said at the time it would cease production at its Australian Gregory open-cut coking coal mine, while Xstrata said it would cut 600 jobs in Australia as a part of a "planned restructuring to respond to industry-wide pressures including low coal prices". Similarly, in a move expected to cut coal production by around 16m tonnes/year, Alpha Natural Resources announced it would idle eight thermal coal mines and cut 1,200 staff by early 2013. MV
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