NZ coking coal exports still going well
The prices might be hellishly volatile but exporters of New Zealand’s high-grade hard coking coals are beginning to bank solid profits from the state-owned mines sold by a panicky Nationalled government in the wake of the 2007-2008 global financial crisis.
Solid Energy’s (SE’s) former thermal coal-mining assets likewise continue to operate efficiently in private ownership.
The Spring Creek underground mine on the South Island’s West Coast is the only remaining government-owned coking coal asset left from the SE wind-down, and even that is in the process of being shut down for good.
Meantime, listed Australian miner Bathurst Resources’ chairman Toko Kapea has reported “outstanding results” for the first four months of operation of the BT Mining entity that Bathurst (65%) created in August last year with Motueka-based food processor Talley.
Bathurst operating profit for the six months to last December rocketed to 24.7 million – $22.3m of it from BT – compared to a $0.1m loss for the comparable period a year earlier when it was still sitting out the post-GFC turmoil..
BT Mining had bought the SE assets of the Escarpment and Cascade low-ash bituminous opencast mines on the West Coast, as well as SE’s Rotowaru and Maramarua thermal mines near Huntly in the North Island.
These and other purchases of SE assets have coincided with wild – but mostly upward – fluctuations in the export price of coking coal, whose New Zealand output of roughly two million tonnes (2mt) a year goes mostly into the Japanese and Indian steel-making markets.
Commentator Metal Bulletin’s premium hard coking coal index ended 2017 at around $US260/t (($NZ361/t, fob Australia), sagged to $US145/t ($NZ201/t) in late March, but by mid-April had doubled to $US309/t ($NZ429/t).
This volatility seems mild compared to 2016 when coal prices rose from $US77/t ($NZ107/t) – the tail-end of the slump that ultimately killed off SE – to a peak of $309/t within the calendar year. The mid-April price this year is thought to be another aberration, with coking coal prices expected to ease throughout the rest of 2018.
This is in part because of a (northern) winter shut-down of part of the Chinese steel-making capacity to aid that country’s battle against atmospheric pollution.
BT Mining has bought the Solid Energy assets of the Escarpment and Cascade low-ash bituminous opencast mines on the West Coast, as well as its Rotowaru, above, and Maramarua mines in the North Island.
Even so, China’s imports of coking coal received a 38% boost in March this year which, if sustained, could have a cushioning impact on the global market.
A second potentially price-dampening factor is that Japanese steelmakers, who used to set the prices paid for Australasian coking coal – by which New Zealand prices are set – through annual, then quarterly negotiations with the market-dominant Australian producers, have now begun to use index pricing instead.
The Japanese may just be experimenting with
the switch to index buying but, even if they revert to negotiations, the impact on prices is likely overall to be downward.
Not down enough, however, to slow the pace of resumption of production at all the other coalmining assets – bar Spring Creek – formerly operated by the state-owned collier. Local family company Birchfield bought the history-redolent Strongman mine and is ramping up to 20 fulltime staff.
The family also bought the Island Block project, the Mt Davy/Liverpool permit, and the coal distribution centre at Reefton.
Moore Mining and Rosco Contractors bought SE’s last Reefton assets, the Reddale and Burkes Creek mines and washery. The Ohai and New Vale thermal mines in Southland have been taken over by new company Greenbriar, with all employees keeping their jobs.
Demand for thermal coal in the domestic market continues to run around 2mt a year, with no sign of imminent diminution.
Overall, the New Zealand coal industry can be seen to be in good heart, despite its continued demonisation by the Green Party influence in the Labour-led coalition government.
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