Thermal Coal December 2016
The Newcastle premium thermal coal spot price averaged...

The Newcastle premium thermal coal spot price averaged U$103/t in November, up 9.8% month on month, but decreasing approximately US$20/t to end the month at US$92/t. China’s two largest coal producers, Shenhua Group and China National Coal Group, signed long-term contracts with major domestic power generators at CNY535/t (US$78.60/t) on an FOB Qinghuangdao 5500 kcal/kg NAR basis, lower than the domestic spot price of CNY585/t (US$86/t) to limit thermal coal prices.

China imported 13.8Mt of thermal coal in October, up 45% year on year, but down 17% month on month. Lignite imports decreased by approximately 20% or 1.7Mt month on month to 6.9Mt, and combined bituminous and sub-bituminous thermal imports were down by 13% or 1Mt month on month to 6.9Mt. China National Development and Reform Commission (NDRC) allowed selected Chinese mines to operate 330 days a year for the entire winter season to the March Quarter of 2017, rather than the December Quarter of 2016. China produced a total of 282Mt ROM coal in October, up 1.8% month on month. With China’s coal output slowly increasing and long-term contract prices signed between China major coal producers and power generators, AME expects that the thermal coal spot price will gradually decline in December 2016.

By the end of October, state-owned Coal India Limited (CIL) produced 274Mt of coal in FY2016/2017, the same level as last year and missing its target by 33Mt. India imported 56Mt thermal coal during the same period, down 6.53% year on year. In response to environmental concerns, the Indian government doubled its Clean Environment Cess tax on coal from RS200/t (~US$3/t) to RS400/t (~US$6/t) in February of this year. The impact of the tax on low-cost thermal coal is proportionally greater than on high-cost coal and has resulted in decreased imports from Indonesia in 2016. From January to July 2016, Indonesia exported 44.3Mt thermal coal to India, down 18.8% year on year. Indian buyers are buying high energy coal from Australia, South Africa, and Colombia, instead of Indonesia.

Due to higher coal prices, expansion, construction, and mine acquisitions progressed in November.

  • Glencore’s Mount Owen coal complex in NSW, Australia, has received approval to mine an additional 86Mt ROM coal, extending mine life 12 years to 2030.
  • Prairie Mining has signed a strategic co-operation agreement with China Coal to advance financing and construction of Prairie's Jan Karski (formerly Lublin) project in Poland. China Coal will provide mine construction service and a debt financing package to fund development.
  • Wesfarmers plans to sell its wholly owned Curragh (8.5Mtpa of metallurgical coal and 3Mtpa of thermal coal) in Queensland and 40% interest of 6Mtpa Bengalla open-cut thermal coal mine in New South Wales, Australia for ~A$2bn (US$1.5bn).

    Mine closures in November include:

  • Engie of France announced that its 1,600MW Hazelwood power station and associated mine will be closed in March 2017. The mine produces approximately 19Mt of lignite per year to fuel the power station, which provides approximately 20% of Victoria's power.