Australia: Glencore’s temporary shutdown outs 7 mn t of coal production offline

According to market sources, mining giant Glencore has decided to temporarily shut down several coal mines in Australia during Sep-Oct’20 amid dwindling coal demand triggered by COVID-19 pandemic and import restrictions by its key buyer – China.

Chinese commerce ministry has delayed issuing import licences for Australian coal amid worsening trade relations between the two countries. As a result, the issuing of import licences for Australian coal now takes 11 days compared with one or two days previously.

The closure which is expected to result in production loss of 7 mn t includes a shut-down at Hunter Valley thermal coal mine (10 mn t per year capacity) in NSW (New South Wales), Collinsville (3.5 mn t/year) and Newlands (5.5 mn t/year) mines in Queensland for 3-4 weeks starting September.

Earlier this year, the company had already revised its annual coal output target from 129-135 mn t to 111-117 mn t due to sluggish market environment. Along with this the company has also announced its decision to stop the operations of its Prodeco in Columbia for four years.

Thermal coal is the most significant export commodity of Australia. However, its average export price has declined by 26% since Jan’20 and is assessed at $48.5/t (6000 kcal/kg NAR) amid coronavirus-hit global market.

Impact on Indian market

India is fourth-top export destination for Australian coal. During Jan-Jul’20, the country exported about 21.3 mn t of coal, CoalMint’s vessel line-up data reveals.

While India majorly meets its coking coal requirements from Australia, Glencore’s closure of mines is mostly going to impact its thermal coal supplies.

India has imported about 3.12 mn t of its thermal coal requirement from Australia during Jan-Jul’20 which is about 3.6% of India’s total thermal coal imports during the said period.

Given the tepid demand than usual for thermal coal in India from sponge iron sector where Australian coal is majorly used, the temporary closure of Glencore mines is unlikely to cause any major supply disruption for Indian buyers.