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JULY 2017 - VOLUME 26 NUMBER 6
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This month's front cover
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Contents
World Coal is a fully-audited member of the Audit Bureau of Circulations (ABC).An audit certificate is available from our sales department on request.
Copyright © Palladian Publications Ltd 2017. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior
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03 Comment
05 Coal News
52 Suppliers Round-up
Regional Report: Australia
10 An Upturn Down Under Anthony Fensom, Australia, gives an overview of recent investment into Australian coal projects.
Mining Software
14 Raising The Technology Bar Charles Constancon, BMT WBM, Canada, and Ryan Sharp, BMT WBM, USA, discuss the development of a new system to manage accurate payload monitoring, machine health and production in truck-and-shovel mining.
Conveyor Systems
19 Feeling The HeatRichard Gagg, AMETEK Land, discusses infrared line scanning as a technique that can be applied to detect early stages of spontaneous heating and combustion for coal moving on belt conveyor systems.
23 Avoiding Wear And Tear Marius Schaub, Rema Tip Top, Germany, outlines protection and monitoring methods for conveyor belting.
Cranes, Grabs & Shiploaders
28 A Tower Of Strength Kyle Campbell, Bedeschi, USA, outlines the completion of the company’s latest three tower design shiploader at a US coal terminal for efficient and robust shiploading.
Big Data & Mining
31 The Call For Cloud Computing Alyssa Wedler and Simon Van Wegen, Modular Mining Systems, USA, explain why effective Big Data management relies on a cloud-based maintenance system.
34 Unlocking The Power Of Big DataMark Coleman, Dingo, Australia, outlines why Big Data has the potential to drive big changes in mining efficiency.
Engines & Powertrains
39 Engines At The ReadyRan Archer, MTU America, demonstrates how a new fuel-efficient engine is improving emissions and profits in the mining industry.
Roof Support & Ground Control
43 Pump ItJan Sprakel, Kamat, Germany, details the benefits of an energy efficient pump station for powered roof supports.
Size Reduction Equipment
47 Getting The Ball Rolling Jorge Omar Rodriguez and Hennie van Zyl Smit, Radio Tracker, South Africa, outline monitoring arrangements for monitoring wear and tear with the eBALL.
Since the acquisition of Joy Global in April 2017, the Joy, P&H and
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Harleigh Hobbs – Deputy [email protected]
Palladian Publications Ltd15 South Street, Farnham, Surrey, GU9 7QU, UK
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World Coal (ISSN No: 0968-3224, USPS No: 020-997) is published monthly by Palladian Publications Ltd, GBR, and distributed in the USA by Asendia USA, 17B S Middlesex Ave, Monroe NJ 08831. Periodicals postage paid New Brunswick, NJ, and additional mailing offices. POSTMASTER: send address changes to World Coal, 701C Ashland Ave, Folcroft PA 19032.
Annual subscription (monthly) £110 UK including postage, £125 overseas (airmail). Two-year discounted rate (monthly) £176 UK including postage, £200 overseas (airmail). Claims for non-receipt of issues must be made within four months of publication of the issue or they will not be honoured without charge.
CommentAustralia: home to kangaroos, iconic beaches and some of the world’s
most sort after coal mines. In the last few days, a bidding war for Rio Tinto’s Hunter Valley coal mines
has been won and lost in Australia. Swiss-based Glencore battled it out with Chinese-majority owned miner Yancoal for Rio’s wholly-owned subsidiary Coal & Allied Industries Ltd. Despite upping their bid to US$2.675 billion cash plus a coal price linked royalty, Glencore lost out. Rio passed on their second offer in favour of Yancoal’s US$2.69 billion, comprising US$2.45 billion in cash payable in full on completion, as well as US$240 million via unconditional guaranteed royalty payments of which US$200 million will be received before the end of 2018 – not quite Orion Mining’s bargain AUS$1 dollar acquisition of Blair Athol last year.
On 26 June, following its shareholders meeting, Rio confirmed that shareholders voted in favour of Yancoal. According to Rio Tinto Chief Executive Jean-Sébastien Jacques, the offer provided “compelling value to our shareholders for our Australian thermal coal assets” and he believes “it is in the best interests of our shareholders to take the greater certainty of Yancoal’s strong proposal.”
Glencore had been eyeing up Rio’s deposits for a while. And with adjacent operations in the Hunter Valley region, the Swiss miner seemed like a more logical buyer, as it could have combined blending facilities and processing plants, as well as connecting and extending pits. Yet instead, Yancoal has taken the crown as king of coal in Australia, becoming the country’s largest independent producer.
Despite missing out on the Coal & Allied assets, Glencore isn’t left in such a bad spot. It is the world’s largest exporter of seaborne-traded coal and will continue to dominate that market, providing cheap energy to the developing world as other key players depart the market, according to a recent outlook from BMI Research. While noting coal will decline over the years, BMI predicts coal will remain the largest source of power globally by the end of 2026. It indicated that Glencore’s higher quality coal output is likely to help retain its market share. Additionally, the Swiss company’s recent deal with Japan’s Tohoku Electric Power (where the Japanese utility provider agreed to pay above market price – US$85/t – to secure supplies of high-grade Australian coal from Glencore) will be very valuable in the next year, while the Rio set back will not stop Glencore from remaining on the lookout for future coal acquisitions.
Sticking with Australia, in this issue, Anthony Fensom takes a broader look at Australian coal assets (p. 10) and details how a recent slump in the sector could turn into a potential revival, if a certain new mine goes ahead. Adani’s Carmichael mine has had quite the journey, with protests, challenges and setbacks, but construction is set to go ahead. Whether Swiss owned, Chinese owned or Australian owned, there seems to be lots of potential in the Aussie mines for the coming years.
Australia remains centre stage next month with the international coal industry descending on Sydney for AIMEX 2017, the largest trade show for the Asia-Pacific mining industry. The global mining exhibition will be held from 29 to 31 August, and include a technical conference, The Future of Mining. This will bring together industry leaders and mining experts, and include keynote addresses from major mining personnel, case study presentations and white paper discussions.
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July 2017 | World Coal | 5
Co
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Coal NewsA ccording to a recent report from
the US Energy Information Administration (EIA), the US electric power sector consumed 677 million short t of coal in 2016, the lowest amount since 1984. It reported that electric power sector coal consumption made up more than 93% of all coal consumed in the US, and more than two-thirds of this coal was shipped either completely or in part by rail. Most of the remainder was shipped by barge, truck, or – for power plants located near a coal mine – by conveyor.
Electric power sector coal consumption in 2016 was 35% lower than in 2008, when US coal production reached its highest level, but the share of coal shipped to the electric power sector by rail (completely
or in part) has consistently remained near 70%.
After rail, the next two most common modes of transporting coal are barge and truck. Both modes have accounted for about 10% of yearly coal shipments since 2008, but truck shipments have decreased slightly, reaching 9% in 2016, while barge shipments have increased slightly, reaching 13% in 2016.
The EIA notes that the increase in barge traffic coincides with the growth of coal produced in the Illinois Basin, which relies on shipments along the Ohio River and its tributaries for a significant portion of its production. Slight declines in shipments by truck coincide with declines in Appalachian production that supplied generating facilities a relatively short
distance from the mines. Many generators receiving shipments by truck in the Appalachian region have either closed or significantly reduced their output.
The cost of transporting coal can vary greatly along different routes. In addition to costs associated with a particular mode of transport, factors such as route length, availability of transport mode and supply source options, and the competition between coal and other commodities for transport can affect the transportation cost.
The delivered cost of coal for all transport modes was US$41.64/short t in 2016, a decline of 6% from 2015 and the second consecutive year of declines in the delivered cost of coal. Transportation costs have accounted for about 35% of the total delivered cost of coal in recent years.
USA Rail remains dominant mode of coal transport for power sector
A ll conditions precedent to Coal of Africa Ltd’s (CoAL) acquisition of
100% of the shares in and claims against Pan African Resources Coal Holdings Proprietary Ltd (PAR Coal) have been fulfilled. This follows Uitkomst Colliery Proprietary Ltd having entered into
a supply of coal agreement on terms acceptable to CoAL.
As a result, the effective date of the implementation of the Transaction is 30 June 2017, when CoAL will take over ownership, control and management of PAR CoAL and the Uitkomst Colliery.
“We look forward to incorporating the Uitkomst Colliery into CoAL, which we believe represents a transformative opportunity to provide cash flow to support CoAL as the company continues to progress its flagship Makhado project” CoAL’s CEO David Brown commented.
AFRICA CoAL seals deal to acquire Uitkomst Colliery and PAR CoAL
Duke Energy has announced the proposed location for a third coal
ash reprocessing unit at its Cape Fear Plant in Moncure, North Carolina.
Last year, the company shared plans to build units at the Buck Steam Station in Salisbury, and the H.F. Lee Plant in Goldsboro, both in North Carolina.
The units are requirements of the state’s coal ash law and the company has met its obligations in advance of each deadline.
Once constructed, the three facilities in total are expected to reprocess
900 000 short t of coal ash a year from basins, making it suitable for use in concrete.
Before deciding to put the third reprocessing unit at Cape Fear, the company planned to excavate ash from the facility for beneficial use in structural fills, another important form of ash recycling.
“We’re building a smarter energy future through safe, smart recycling of coal ash, turning a waste into a valuable ingredient in concrete and other
construction materials,” said Brian Weisker, Vice President of Coal Combustion Products, Operations and Maintenance. “Reusing the ash also benefits our customers and our state, often lowering the total cost of basin closure when compared to excavation and transport to a new location, for example.”
In 2016, Duke Energy recycled about 75% of the coal combustion byproducts (coal ash and gypsum) produced in North Carolina.
USA Duke Energy increases its coal ash recycling
DIARY DATES
6 | World Coal | July 2017
Asia-Pacific’s International Mining Exhibition (AIMEX)
29 – 31 August 2017 Sydney, Australia
www.aimex.com.au
Katowice 201729 August – 1 September 2017
Katowice, Polandwww.ptg.info.pl/en/targi-katowice/
informacje-o-targach
Coal Mongolia 2017 7 – 9 September 2017 Ulaanbaatar, Mongolia
www.sxcoal.com/meeting/mongolia_en
Bluefield Coal Show13 – 15 September 2017
West Virginia, USAwww.bluefieldchamber.com/
bluefield-coal-show
Coal Canada Conference 201727 – 29 September 2017
Vancouver, Canadawww.coal2017.ca
BULKEX17 18 – 20 October 2017
Nottingham, UKwww.bulkex.co.uk
The World Coal Leaders Network™25 – 27 October 2017
Barcelona, Spainwww.coaltrans.com
6th Coaltrans Emerging Asian Coal Markets7 – 8 November 2017Ho Chi Minh, Vietnam
www.coaltrans.com
MetCoke World Summit 2017 07 – 09 November 2017
Rosemont, USAwww.metcokemarkets.com
Coal News
Co
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The World Coal Association (WCA) has signed on to the United Nations
Global Compact, the world’s largest and most widely embraced corporate citizenship initiative. With this action, WCA joins thousands of members globally, and confirms its commitment to sustainable development.
“We are delighted to become a signatory to the UN Global Compact. This is a great initiative which encourages organisations to act responsibly and keep their commitments to society,” commented Benjamin Sporton, CEO of WCA.
“We are committed to making the Global Compact and its principles part of
the strategy and culture of our organisation, and to engage in projects which advance the broader development goals of the United Nations,” Sporton added.
Launched in 2000, The Global Compact is the world’s largest global corporate sustainability initiative, with over 8000 companies and 4000 non-business participants based in more than 160 countries. The initiative is a call to companies and organisations everywhere to voluntarily align their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption.
Mitsubishi Hitachi Power Systems Ltd (MHPS) has completed
construction of a coal gasification furnace plant at its Nagasaki site.
The facility will supply core facilities for integrated coal gasification combined cycle (IGCC) plants. With the completion of the new plant, MHPS now has the ability to create a fully integrated production system for IGCC, a next-generation technology in high-efficiency coal-fired power generation.
Production of furnaces is now underway, with a furnace now being produced for use in a 540 MW IGCC plant in Iwaki, Fukushima. The Iwaki plant is currently under construction by Nakoso IGCC Power GK and delivery is scheduled for June 2018.
Coal gasification furnaces provide a high-temperature, high-pressure environment required for efficient gasification of coal. They use gasification equipment capable of withstanding high temperatures and a pressure container that can raise pressure levels.
In order to produce furnaces that can accommodate these conditions, a production system was adopted that uses both conventional underlying technologies, including welding, and newly developed proprietary technologies, such as automated welding machines and ICT systems. To shorten construction time, furnaces produced at the new plant will be modularised (integrating gasification equipment and pressure containers), and will then be transported to the construction site for installation.
In IGCC systems, coal is gasified in the gasification furnace and power is generated through a high-efficiency combined cycle that integrates gas and steam turbines. The system is groundbreaking, offering significantly higher efficiency and lower carbon dioxide emissions than conventional coal-fired plants.
MHPS will continue to promote the adoption of cutting edge IGCC power generation technologies, thereby contributing to the efficient use of resources and protection of the environment.
GLOBAL World Coal Association joins UN Global Compact
JAPAN MHPS completes construction of coal gasification furnace plant
Coal News
L U B R I C A N T S
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8 | World Coal | July 2017
Co
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Coal NewsINTERNATIONAL Coal exploration and mine development
A round-up of news from coal development projects around
the world.
Canada
Atrum CoalEnvironmental baseline water surveying and monitoring has commenced at Atrum Coal’s Groundhog North anthracite project in British Columbia.
According to the company, the information obtained from the programme will be critical for further exploration and mine planning, and is mandatory for permit applications in British Columbia.
The freshet monitoring programme consists of two components, namely surface hydrology monitoring and a baseline surface water quality programme.
Altitude ResourcesAltitude Resources Inc. has received formal Alberta government approval for a drill programme at its Palisades property located in west central Alberta.
The Palisades drill permit is valid for two years. The 2017 drilling programme is expected to consist of up to 2000 m of combined rotary and core drilling. The budget for the 2017 Palisades exploration programme is US$1200 000. Drill targets include a new area defined in the 2016 programme and, for the first time, drilling in Palisades Extension. The Palisades property is operated through a joint venture agreement between ALI (68.125%) and JOGMEC (31.875%).
Jameson ResourcesJameson Resources has awarded the first work towards drafting an
application for an EA certificate for the Crown Mountain metallurgical coal project, located in the Elk Valley coalfield in south eastern British Columbia.
Dillon Consulting will now commence developing an outline and organisational plan for the application. This work will be performed concurrently with several environmental field activities this summer at Crown Mountain.
According to Jameson, it is at an advanced stage with the application information requirements (AIR), which Dillion has been instrumental in developing. The AIR represents the final internal guidance document of the pre-application stage of the EA process. The British Columbia Environment Assessment Office (EAO) is reviewing the latest version of the AIR.
Mongolia
Aspire MiningNorthern Railways LLC, a subsidiary of Aspire Mining Ltd, has entered into a non-binding cooperation agreement with China Gezhouba Group Co. Ltd (CGGC), a subsidiary of China Energy Engineering Corp. Ltd, to advance the Erdenet to Ovoot railways project as part of the Northern Rail Corridor.
Northern Railways will provide CGGC with access to the existing technical database and will work with CGGC to source debt and equity funding for the rail feasibility study and EPC construction funding from Chinese funding institutions. CGGC and Northern Railways will also work together to promote the Northern Rail Corridor and connectivity with the Russian Rail system.
South Africa
Acacia CoalAcacia Coal Ltd has reached another significant milestone towards the development of the Riversdale Anthracite Colliery (RAC) project after commencing the process for transferring the key project licences from the project vendor, Rio Tinto.
Acacia has an exclusive option, in partnership with African Onca Ltd, to acquire the Mining Right for the RAC project from a subsidiary of Rio Tinto and its partner Khulani Resources.
The application for the transfer of these licences under Section 11 of the Mineral and Petroleum Resources Development Act has been submitted to the relevant authorities, marking an important milestone in the eventual development of this project.
USA
Paringa ResourcesParinga Resources has signed a fixed price turnkey contract for the design, procurement, construction and commissioning of the Poplar Grove mine’s coal handling and preparation plant and barge loadout facility on the Green River.
The fixed price contract totals US$21.8 million, which represents CAPEX savings of US$1.2 million when compared to the final CAPEX cost estimate in the final bankable feasibility study (BFS) release on the Australian Securities Exchange (ASX) on 28 March.
The company has reported that all major contracts for the development of the Polar Grove mine have now been awarded on a fixed price basis significantly reducing pricing and timing risk.
Coal News
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10 | World Coal | July 2017
July 2017 | World Coal | 11
Anthony Fensom, Australia, gives an overview of recent investment into Australian coal projects.
A ustralia’s coal industry has received a welcome confidence boost, after Indian giant Adani’s announcement that it had reached the final investment decision on its AUS$16.5 billion
Carmichael coal project. The move followed an upturn in coal prices that has boosted profits for established operators and brightened the outlook for one of the nation’s biggest exports, amid a renewed debate over the industry’s future.
Adani’s 6 June announcement followed seven years of court battles and protests by environmental groups, with analysts also questioning whether the project would secure the necessary financing.
Yet the promised jobs and investment surge has come at a welcome time for the North Queensland region, with government and industry eyeing the opening of the Galilee Basin.
"This is an historic day for Adani, an historic day for regional Queensland, and an historic day for Indian investment in Australia," Adani Chairman Gautam Adani said.
"This is the largest single investment by an Indian corporation in Australia, and I believe others will follow with investments and trade deals.”
Adani said the thermal coal mine would commence with a capacity of 20 million tpy but could be expanded to 60 million t. It would create 10 000 direct and indirect jobs, with pre-construction works to begin later in 2017.
Queensland shipped more than 162 million t of metallurgical coal in 2016 worth an estimated AUS$17 billion, along with thermal coal exports, with the Carmichael mine set to significantly boost the latter.
Queensland Premier Annastacia Palaszczuk, who helped celebrate the opening of Adani’s regional headquarters in Townsville, said: “there will be jobs right across this state.”
Federal Resources and Northern Australia Minister, Matt Canavan also welcomed Adani’s announcement, saying the Galilee Basin could become the nation’s biggest coal-producing district.
“It’s the first time we as a country will open up a coal basin for 50 years. If Adani gets their mine up and running, others will follow,” he said.
Yet environmental activists have vowed to stop the mine’s development, with Queensland Greens senator Larissa Waters describing it as a “climate change disaster in the making.”
Others pointed to a AUS$3.3 billion funding shortfall that needed to be filled before financial close on the first stage of the mine, rail and port project. Adani has also sought an AUS$900 million concessional loan from the federal government’s Northern Australia Infrastructure Facility to help build a rail line to its Abbot Point coal terminal, with federal opposition leader Bill Shorten as well as rival Hunter Valley investors arguing against taxpayer support.
Yet the Indian company’s persistence could yet mark a turning point for the industry.
“It’s a very encouraging move…there are a number of other proponents in the Galilee Basin, including GVK Hancock, Resolve Coal and AMCI in the south, and Adani’s new mine will increase the viability of these projects,” Balance Advisory Director Michael Ryan said.
However, he noted: “competing thermal coal producers may be worried as it could mean a significant amount of coal coming onto the market. The central question is does final investment decision equal actual investment, but you can’t ask for more from Adani at this point in time.”
Wood Mackenzie’s Pralabh Bhargava said Adani’s Carmichael mine would likely commence production in 2023, based on the demand and pricing outlook, as well as
Melbourne, Australia.
accounting for “delays due to Native Title Law challenges and finance risk.”
New projectsAdani’s decision has not been the only good news, with the reopening of previously closed mines, such as Collinsville, along with other new projects.
In May, Japan’s JFE Steel Corp. announced the start of construction work on the Byerwen coal project, a joint venture between JFE Steel and QCoal, with the aim of starting shipments “in early 2018.”
Located in Queensland’s Bowen Basin, the AUS$1.76 billion project is expected to produce up to 10 million tpy of metallurgical and thermal coal.
In the same month, the Queensland government approved mining leases for New Hope’s AUS$300 million Colton coal mine near Maryborough, which is expected to produce 500 000 tpy of metallurgical coal.
Echoing Stanmore Coal’s famous AUS$1 acquisition of its Isaac Plains mine, TerraCom subsidiary Orion Mining took control of the Blair Athol coal mine in May after acquiring it for just a dollar. TerraCom said it planned to ramp up production to 2 million tpy “very quickly,” with the mine creating more than 600 jobs.
In April, the Queensland government announced further progress towards the opening of Pembroke Resources’ AUS$1 billion Olive Downs mine near Moranbah. The mine is expected to produce up to 14 million tpy of metallurgical coal.
BHP Mitsubishi Alliance announced in April plans to invest US$204 million in its Caval Ridge Southern Circuit project, which would transport coal from its Peak Downs mine to a coal handling preparation plant at the nearby Caval Ridge mine.
Exploration activity has also steadily increased, with privately owned Vitrinite announcing in May its discovery of 123 million t of metallurgical coal in its Karin Basin tenement in the Bowen Basin, reportedly offering some of the nation’s highest quality metallurgical coal.
Further south in New South Wales (NSW) state, coal has continued its reign as the state’s main export earner with around AUS$13.2 billion worth of exports
in fiscal year 2016, “greater than the value of our tourism and education exports combined,” the NSW Resources Ministry noted.
Exports through the Port of Newcastle hit a record high of 59 million t, with Port Kembla exporting an additional 10 million t. The Newcastle port also expanded capacity to 211 million tpy, making it the world’s largest coal export port.
Among new NSW coal projects, Whitehaven Coal has stated plans for a new mine near Gunnedah, with its Vickery project targeting 10 million tpy of thermal coal.
Meanwhile, merger and acquisition (M&A) activity has continued to heat up, with major miner Rio Tinto announcing in January the sale of its Hunter Valley coal assets to Chinese miner Yancoal for US$2.45 billion. Rival miner Glencore countered in June with its US$2.55 billion bid, which would allow the Swiss miner to merge its Hunter Valley mines with Rio’s.
Further M&A activity surrounded Queensland’s Dawsons and Moranbah South mines, with Anglo American owing equity in both assets. After reportedly pulling out of Australia in 2015, the London-listed miner returned the following year with plans to keep mines such as Dawson and Moranbah North, while selling others such as Drayton South and Foxleigh.
Industry hurdlesDespite the positive momentum, the Australian coal industry has encountered a range of environmental, financial and legal hurdles.
In April, Westpac, one of Australia’s 'Big Four' banks, declared it would not finance new mines in previously undeveloped coal basins nor lend to mines producing coal with low energy content, a move seen blocking any loans to the Carmichael project. Rival banks ANZ and NAB reportedly have also ruled out funding it, amid a campaign by activists against lenders and suppliers to the Adani project.
The coal industry has also faced the re-emergence of coal workers’ pneumoconiosis, or 'black lung' disease, with 21 Queensland miners diagnosed with the disease as of May 2017. In a
29 May statement, Queensland Resources Minister Dr Anthony Lynham pledged further reforms to improve workers’ health, amid reports that more cases could be uncovered.
In NSW, the state’s Greens party proposed the end of thermal coal mining within a decade, despite the state obtaining around 80% of its electricity from coal. Opposition to new mines in the Liverpool Plains region pushed the state government to buy back BHP Billiton’s Caroona exploration licences for AUS$220 million, while protests have continued against Shenhua’s proposed Watermark and other mines.
Legal battles have continued too, engulfing even brownfield expansions, such as New Hope’s New Acland expansion, which has been stuck in legal limbo for 10 years. On 31 May, Queensland’s Land Court ruled against the company’s planned AUS$900 million project, citing risks to groundwater, although the Queensland government still had the power to approve the project.
However, the coal industry’s longer-term future in Australia received some reassurance following the June release of the Australian government’s Finkel Review into energy policy.
It projected coal’s share of power generation would fall to 53% by 2030 from 76% in 2016, based on the government’s Clean Energy Target (CET). By 2050, coal would still account for around a quarter of generation.
Coal-fired power plants fitted with carbon capture and storage would be eligible for inclusion under the CET, “provided they meet or are below the emissions intensity threshold,” although its proposed threshold would exclude high-efficiency, low-emissions (HELE) coal generation.
While welcoming the review’s “technology-neutral” approach, the Minerals Council of Australia (MCA) said it implied that HELE coal generation was not “clean energy.”
“This conclusion is contradicted by the fact that countries around the world, including Germany, Japan, China, India and dozens more in East Asia, are relying on HELE coal generation to meet their Paris targets while ensuring low-cost, reliable energy. That is why there are more than 1200 HELE plants under
12 | World Coal | July 2017
construction or planned in East Asia alone,” the MCA said.
Price rallyAustralian miners enjoyed a price surge in April 2017 after the destructive Cyclone Debbie hit North Queensland, damaging rail lines and other infrastructure. Prices for premium Australian metallurgical coal reached as high as US$314/t, although they subsequently eased to around US$150 by June.
Thermal coal was trading at US$74/t in early June 2017, having reached US$93/t in late 2016 due to China’s government-imposed cutbacks and weather-related disruptions.
However, Wood Mackenzie sees metallurgical and thermal coal prices returning to US$110/t and US$72/t respectively, in the year ahead.
“At current spot levels for coking coal, all the Australian coal mines are making money,” said Brent Spalding, Principal Analyst, APAC coal costs.
The Australian government Industry Department’s “Resources and Energy Quarterly” for March 2017 predicted a AUS$16 billion export boost for the nation on the back of higher metallurgical coal prices and export volumes in fiscal year 2017, with production projected rising by 3.4% to 196 million t.
For fiscal year 2018, it projected similar production of 198 million t, rising to 210 million t by fiscal 2022 as new mines, such as Byerwen, come into production, along with the resumption of Collinsville and Eagle Downs.
While benchmark metallurgical coal prices between Australian and Japanese negotiators reached US$285/t in the March quarter – the highest such price in five years – the department said prices would likely average US$194/t in 2017.
Meanwhile, export volumes are seen rising on the back of stronger demand from the ASEAN region and India, currently the largest importer of Australian metallurgical coal.
For thermal coal, the department sees higher prices and demand from India and Southeast Asia spurring steady production growth. Total production is seen rising by 1.1% to reach 253 million t in fiscal year 2017,
thereafter climbing to reach 268 million t by fiscal year 2022. New mines expected by 2022 include the Carmichael, Grosvenor West and Monto mines, all in Queensland.
Benchmark Newcastle thermal coal FOB spot prices averaged US$93/t in the December quarter – the highest average since 2012 – on the back of supply disruptions in China, although the department sees prices averaging US$77/t in 2017.
Nevertheless, in May 2017, an annual benchmark price of US$84.97/t was agreed with Japanese buyers – the highest
since 2013 and a 38% rise on the previous year’s level.
Coal industry consultant Brice Mutton said Australian producers were well positioned to take advantage of the improved conditions.
“Costs, both operating and capital, have been cut, companies streamlined, mines and projects made more efficient, and we will now see good performances under solid prices,” he said.
After suffering its share of pain, Australia’s coal industry appears on the verge of a major upturn, should Adani’s new mine proceed as planned.
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