The sweeping impact of decreased industrial activity across the world due to Coronavirus (COVID-19) driven restrictions, is now being felt on demand for various commodities, including thermal coal.
As per latest updates, following the substantial fall in non-coking coal demand and prices thereof, the world’s largest private coal miner, Peabody has decided to partially shut down their New South Wales (NSW)- based Wambo underground thermal coal mine for 59 days starting from 19 Jun’20.
Commenting on the decision Peabody’s spokesperson has stated that like many other Australian mining operators, the company has been affected by incredibly challenging global economic conditions caused by the COVID-19 pandemic and as a result, temporary suspension decision is taken to align the production with current coal demand.
The Wambo underground mine, which is in the Hunter valley region of NSW has a capacity of 2.5 MnT. The closure will not affect the 3.5 MnT Wambo open-cut mine, which is a part of joint venture between Peabody and Switzerland-based mining firm Glencore formally created in 2019 and scheduled to start its mining operations in late 2020.
The Australian thermal coal prices (6000 kcal/kg NAR basis) have touched four years low of USD 49/MT in first week of May amid increased competition and tepid demand. Although it managed to climb up to USD 52/MT last week, it is still lower against prelockdown level of USD 68/MT in the first week of April.
Industry participants are of the opinion that following Peabody other Australian miners are likely to follow suit given the losses they are suffering and are likely to face in the upcoming months.
The rumours in the market are quite rife that Chinese power plants have been advised against buying coal from Australia amid escalating tensions between the two countries. Apart from this, China is likely to tighten coal import rules in the second half of 2020 to shore up its struggling domestic industry which would advsersely impact the Australia’s imported coal demand.
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