Photo by: Bloomberg
PERTH (miningweekly.com) – Despite 18 months of aggressive cost cutting, nearly half of Australia’s thermal coal exports are lossmaking; but improved cost structures will stand miners in good stead when the price tide turns, advisory firm HDR Salva reported this week.
The analyst group estimated that nearly 40% of the country’s thermal coal exports, or around 85-million tonnes, was produced at cash costs of more than $65/t, compared with the current Newcastle spot price of $70/t, with some operations potentially making losses of more than $25/t.
HDR director Chris Urzaa noted that the company’s analysis demonstrated that a significant percentage of thermal coal producers would continue to struggle in the short term.
“While painful right now, the effort to continue improving costs will stand the producers in good stead when attractive coal prices return, and we believe they will soon.”
HDR chief analyst Mark Gresswell said that the recovery in the coal price would not only be based on Chinese demand, but on demand from across South-East Asia, which was expected to commission 23 GW of new coal-fired power generation capacity between now and 2018.
Korea and Taiwan would also commission another 12 GW in this timeframe.
“That doesn’t include China or India, who are each increasing coal-fired power generation by 30 GW and 20 GW annually.”
Gresswell said that Australian coal exports would be ideally placed to satisfy this demand, particularly as Indonesia slowed its thermal coal supply in the year ahead.