Brazilian mining group Vale expects continued reduced demand for metallurgical or coking coal during this year. The company has metallurgical coal operations in Mozambique and Australia. “Demand will most likely remain subdued with additional supply curtailments being the focus of 2016,” it stated in its recently published report Vale’s Performance in 2015.

“Chinese seaborne demand decreased by 22% to 48 Mt [million tons] in 2015, compared with 62 Mt in 2014,” it stated. “This decrease was partially offset by a 14% increase in Indian demand, which increased from 40 Mt in 2014 to roughly 46 Mt in 2015. Global metallurgical imports declined 4% on a worldwide basis in 2015 further pressurising coal prices. Australian producers benefited from low freight rates and increased sales into the Atlantic market. “Preliminary data shows that Australian exports of metallurgical coal totalled 186 Mt in 2015 (slightly less than in 2014), while US exports totalled 38 Mt (28% lower than in 2014). Further supply cuts are expected with the consolidation of US producers, whereas currency depreciation in other exporting countries slowed down supply reductions outside the US.”

The price of benchmark low volatility Australian premium hard coking coal (free on board) declined from $89/t in the third quarter of last year (3Q15) to $81/t in the fourth quarter (4Q15) – a drop of 8.9%. The price of pulverised coal injection-quality coal fell by 2.8% over the same period, from a 3Q15 price of $71/t to a 4Q15 price of $69/t.

Since it placed two Australian operations in care and maintenance (Integra Coal in 2Q14 and Isaac Plains in 3Q14), Vale has had two functioning coal operations, both focused on metallurgical coal: Carborough Downs, in Australia, and Moatize, in Mozambique. Together, these produced 7.3 Mt last year (a fall of 1.4 Mt in comparison to 2014), of which 2.4 Mt came from Carborough Downs (an increase of 0.5 Mt over 2014) and 4.9 Mt from Moatize (pretty much the same as in 2014). However, Moatize’s metallurgical coal production increased by 8.9%, while thermal coal production fell by 12.6%, giving the mine an improved product mix. The decline in total coal output was due to the stopping of operations at the other two Australian operations.

Regarding Moatize, Vale’s biggest and most important operation in Africa, Phase 2 of the project is currently under going commission- ing. Cargo testing of the duplicated coal pre- paration plant is forecast to finish this month. Moatize Phase 2 mine and plant expansion will double the operation’s output to 22 Mt/y by adding another 11 Mt/y in production capacity, and has now reached 99% in terms of physical progress, with a capital expenditure of $196-million during 4Q15. Moatize’s fourth quarter costs were in line with its third quarter costs, once the effects of higher volumes are taken into account.

Because of logistical constraints on the Moatize operation (due to the limitations of the Sena railway from Tete province, where the mine is located, to the port city of Beira), Vale has been developing an alternative railway/port route: the Nacala Logistics Corridor. By the end of last year, the physical progress on the Corridor had reached 97%.