Metallurgical Coal

The November spot price for premium low-volatile HCC averaged US$301/t FOB Australia, up 29% from October, with prices starting November at US$265/t and remaining relatively steady above US$300/t for the last three weeks of the month. This sees the premium low-volatile HCC spot price currently around 42% higher than the US$200/t December Quarter contract price that was settled in October.

The spot price for low-volatile PCI also continued to increase strongly throughout November, averaging US$180/t, up 28% month on month and currently 34% above the December Quarter contract price. The spot price for semi-soft coking coal averaged US$143/t in November, up 13% month on month and 11% above the December Quarter contract price.

China’s metallurgical coal imports totalled 48.6Mt from January to October 2016, an increase of 24% year on year, as the country’s supply-side reforms reduced domestic production and increased coking coal imports. October metallurgical coal imports, however, declined around 7% month on month, as the Chinese Government allowed a number of domestic mines to increase production in order to ease pressure on prices and secure additional supply. The availability of Chinese domestic metallurgical coal is expected to be higher for the remainder of the year compared to previous months, leading to a potential decrease in metallurgical coal spot prices in December. The majority of Chinese coking coal imports continue to be sourced from Australia, accounting for around 49% of the total. Metallurgical coal imports into Japan, the world’s largest coking coal importer, have increased 4% year on year to around 55Mt from January—September 2016. South Korean metallurgical coal imports, however, have declined around 3% over the same period to 23.9Mt.

Operations restarted, new projects progressed and asset sales continued throughout November.

  • Glencore announced that it will restart production at its Integra underground mine in New South Wales, Australia, aiming to produce 1.3Mtpa from early 2017. Grande Cache Coal also announced plans to reopen its 2Mtpa Grande Cache mine in Alberta, Canada, by the end of the March Quarter of 2017. TerraCom restarted operations at its 1–2Mtpa Baruun Noyon Uul mine, Mongolia, which was idled in February 2016.
  • Prairie Mining signed a strategic co-operation agreement with China Coal to advance the financing and construction of Prairie’s 6Mtpa Jan Karski project, Poland. A new BFS is to be completed mid-2017, with construction on target for 2018.\
  • South32 acquired Peabody’s 2Mtpa Metropolitan mine in New South Wales, Australia, for a cash consideration of US$200m, as well as a first-year, price-related royalty. Additionally, Phoenix Coal entered into an agreement to acquire Solid Energy’s 2Mtpa Stockton mine and Rotowaro and Maramarua domestic thermal mines in New Zealand for US$34.5m, plus semi-annual payments for four years to a total of US$37.5m provided metallurgical prices are over US$113/t.
  • Anglo American lifted its force majeure on shipments of hard coking coal from its 5Mtpa Grasstree mine in Queensland, Australia. The force majeure was declared in early October due to a significant weighting event on the longwall roof support.
  • Kolmar announced plans to increase production to 5.8Mtpa in 2017 and 9Mtpa in 2018 at its Inaglinsky and Denisovskaya operations in Sakha Republic, Russia. The mines are forecast to produce 3.7Mt in 2016.

Metallurgical coal supply disruptions continued in November.

  • Production was suspended in late October at South32’s 3Mtpa Appin mine, a part of its Illawarra complex in New South Wales, Australia, after a failed ventilation fan resulted in elevated gas levels on the Appin Area 7 longwall. The shutdown exacerbated geological conditions on the Appin Area 9 longwall, leading to the requirement for four weeks of remediation work. Operations recommenced on the 23rd of November 2016, with approximately 500kt of production lost.