Australian mining companies look to thermal coal price rise

Australian mining companies hope for thermal coal price reprieve

Predicted thermal coal price increase boosts Australian mining companies’ confidence

When we think of Australian mining companies and thermal coal, we think of Queensland and New South Wales, where vast coal mining operations dominate the landscape.

Queensland especially has been forced to tighten its belt when it comes to deciding which mine sites remain in full production as coal prices slacken off. As we have seen on many previous occasions, the Australian mining industry can be like walking a tightrope. The slightest breath of wind can cause a sway in the rope, which can have devastating effects if not dealt with promptly.

“minimise the effects of unpredictable market conditions”

Mining companies in Australia like BHP Billiton and Rio Tinto have taken huge steps forward trying to minimise the effects of unpredictable market conditions that might affect their profitability. Investments in technology have allowed these mining giants to remain in business, despite weakening global thermal coal prices.

Given the price of a commodity like thermal coal, which is exported from the East Coast of Australia from coastal ports like Abbot Point in Queensland and Newcastle in NSW, no matter how big the investment in technology, what a customer is prepared to pay for thermal coal is the real driver of progress.

This being the case, good news was welcomed this week by coal mining companies of the possible comeback in the price of Australian thermal coal, according to analysts.

When you consider that almost 50 percent of all thermal coal that is shipped out from our shores costs around $US65 a tonne to produce. Some mining companies and mine operators have a tough time if the coal price remains this low, with expected shortfalls of some $US25 a tonne.

Back in the good old days, thermal coal was sitting around $US120 a tonne.

Commodity analyst group HDR Salva has studied about 95 Australia coal mining operations and found that a high percentage of thermal coal miners would continue to find it tough going in the short term.

“price of thermal coal ‘heads north'”

Despite this finding, the HDR Salva group said mining companies in Australia who continue to focus on reducing wastage in terms of its operating costs will be placed in a better position when the price of thermal coal ‘heads north’, which could be soon.

One of the reasons for this bold prediction is the fact that in Asia there is an expected surge in demand for thermal coal to fire up power stations in Asia. Whilst this expectation is not immediate, it’s been suggested, over the next five years we will see increased demand of an additional 40 million tonnes of coal each year.

Surprisingly, Mr Uzraa from HDR Sala said he could see Australian coal mining companies could be well placed to fill this demand. He also went on to mention how the slowing thermal coal supply coming out Indonesia can only boost Australia’s hold on the global thermal coal market . . . that’s great news for the industry.

This dovetails nicely into the recent developments over the last 24 months as the Queensland government ramps up its dealings with Indian power and energy suppliers Adani and GVK.

India needs Australian thermal coal

It’s no secret that India has massive problems generating enough electricity to provide basic life support for it’s millions of citizens who continue to live in squalid conditions, void of any form of electricity.

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With development in the Queensland Galilee Basin where millions of tonnes of high-quality thermal coal are waiting to be mined and shipped direct to India, there is some merit in the findings of HDR Salva.

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