Sign in Subscribe
Petroleum

Australian Coal Miners to Emerge Leaner and Meaner Amid Downturn

Strategic Insights

— 2 min read

Australian coal miners, battered by depressed demand and low prices, are expected to pull through the current period and emerge as leaner and more internationally competitive, industry officials and analysts said. Despite the current difficulties, the sector is poised to capitalize on the lower Australian dollar and cost-cutting measures implemented in the past few years. However, profitability will be under pressure in the current year, especially as cost cutting becomes increasingly difficult.

Key Takeaways:

  • Australian coal miners are expected to emerge leaner and more internationally competitive after the current downturn, according to analysts and industry officials.
  • The sector has benefited from the lower Australian dollar and cost-cutting measures implemented in the past few years, improving its competitive position over the past year and a half.
  • Analysts said that on a margin per tonne basis, the most successful mines were generally the Queensland coking coal mines, including Portman and some of the BHP and Central Queensland Coal Associates and Gregory joint venture ones.
  • BHP Coal manager of strategic marketing Neil Bristow said that the $US9 reduction in coking coal prices and exchange rate implications would likely result in some unproductive, high-cost mines closing or restructuring.
  • QLD's labor minister, Clare Howard, plans to set up a regime for third-party access to rail freight to make charges more competitive.
  • MIM Holdings Ltd's executive general manager mining Mike Menzies said they would further reduce costs at their Oaky Creek, Newlands, and Collinsville joint venture coal mines.
  • MIM's new longwall at Oaky Creek is expected to become a world-class asset, improving productivity.
  • Rio Tinto Ltd's planned sale of its New South Wales coal assets to its listed subsidiary Coal and Allied Industries Ltd is expected to improve the efficiency of the group's mine management and competitive marketing position.
  • Analyst Clyde Henderson added that while most Australian coal mines would still be operating on a cash positive basis, some might be operating on an accounting loss basis due to exchange rate hedging positions.

Statistics:

  • The Australian dollar's value has dropped substantially over the past year.
  • Queensland's royalty regime will be simplified with a uniform 7% charge on coal producers from June/July next year.
  • BHP Coal has maintained its production at a lower cost by closing down some of its higher-cost mines and ramping up production at lower-cost mines.
  • The sector will use more efficient equipment and improved maintenance procedures in 1999.
  • MIM's Oaky Creek and Newlands mines will double their output in the last couple of years and Newlands could be profitable with stricter exchange rate hedging positions.
  • The drought will lower coal demand in the southeastern Australian region.

Sources:

  • Queensland Mining Council chief executive Michael Pinnock
  • AME Mineral Economics analyst Clyde Henderson
  • BHP Coal manager of strategic marketing Neil Bristow
  • BHP Coal public affairs manager Ian Dymock
  • MIM Holdings Ltd executive general manager mining Mike Menzies
  • Rio Tinto Ltd's (ASX:RIO) managing director Kim Tronson
  • Asia Pulse Pte Ltd
  • COMTEX

Read more