The company’s total coal output for FY20 (Jul’19 – Jun’20) stood at 69.8 mn t, registering a fall of 8% against 69.8 mn t in FY19.
Metallurgical coal
–BHP’s metallurgical coal production for FY20 ended in Jun’20 recorded a drop of 3% y-o-y at 41.1 mn t.
–This fall has been attributed to a significant wet weather events in the prior quarter and geotechnical constraints at South Walker Creek.
–The company has stated that its largest mine, Blackwater’s operations were severely impacted due to heavy rains during Jan-Feb’20 and were stabilised only in June. The company expects a return to a full capacity only towards the end of Sep’20 quarter.
–For FY21 started in Jul’20, production is expected to be between 40 and 44 mn t, similar levels of FY20, amid an expected deterioration in the market outlook due to COVID-19.
Thermal coal
–BHP’s thermal coal production fell by 16% y-o-y basis in FY20 at 23.2 mn t.
–New South Wales thermal coal mine production decreased by 12% y-o-y at 16 mn t in FY20 as a result of the change in product strategy to focus on higher quality products and unfavourable weather impacts from December 2019 to February 2020.
–This was partially offset by a strong performance in the June 2020 quarter driven by record truck utilisation.
–Cerrejón mine’s production decreased by 23% to 7 mn t due to a temporary 6-weeks shutdown during the Jun’20 quarter in response to COVID-19, as well as a focus on higher quality products, in line with the mine plan.
–For FY21, production is expected to be between 22 and 24 mn t. However, potential impacts from COVID-19, including weak demand, represent possible downside risk to the 2021 financial year guidance.
Price
–The average realised price (ARP) for metallurgical coal in FY20 stood at $130.9/t against $179.7/t in FY19 Whereas in first half of 2020 (Jan-Jun), the average price stood at $121.3/t against $140.9/t in last six months of Jul-Dec’19.
–In case of thermal coal (ARP) stood at $57.1/t in FY20 against $77.9/t in FY19 and in H120 the same stood at $55.9/t against $58.5/t in last six months of 2019.
Outlook
–The company has mentioned that energy coal market is in a difficult state. The thermal coal 6000 kcal price recently fell below the levels reached during the 2015/16 downturn. Short term increases in producer currencies and diesel prices have amplified cost challenges.
–However, an uplift in power demand across developed Asia as re-starts progress could help to stabilise the market. Only China’s policy in respect of energy coal imports would remain a key uncertainty.
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