Australia: Major miners’ coking coal production takes a hit in FY22, guidance for next fiscal lowered

Australia’s major miners have released their FY2021-22 (July 2021-June, 2022) results and the overall production of coking coal for the year has recorded a considerable fall. Uncontrollable issues such as Covid-19 disruptions, geopolitical tensions, delays caused by wet weather and other inflationary cost pressures, affected coal production during the year.

In fact, the past few months have seen erratic coking coal price movements, from $530/t in mid-May to $230/t in July, the price of premium grade coking coal decreased. The fall is due to sluggish steel demand globally.  

BMA, A BHP Mitsubishi Alliance coking coal joint venture, saw coking coal production fall by 9% to 58 mnt in FY22. The average price of metallurgical coal rose by 225% y-o-y in FY22 and stood at $347/t. Another key miner, Whitehaven Coal, produced 20.30 mnt in FY22, down by 3% y-o-y. The average price of coking coal in FY22 stood at $223/t, more than double of what it was in the previous fiscal year of FY21. Yancoal’s H1 (January-June) results show a drop of 11% in its coking coal production at 12.4 mnt with an average realized price of $402/t, up by 230% y-o-y basis.

Lowered production guidance for FY23 

BHP had reduced its coking coal production guidance from 60-68 mnt in 2021-22 to 58-64 mnt for 2022-23. The key reason behind the same is the increase in royalty rates by the Australian government which would add to the inflationary pressure on the miner. The Queensland government has increased royalty rates from 7% to 19% effective from July. 

Yancoal has not given the break-up of coking and thermal coal but it expects 31-33 mnt of coal production for FY23, down from an earlier forecast of 35-38 mnt. In case of Whitehaven, although guidance is not out yet the company has hinted a change given more-than expected rainfall this year due to the La-Nina event.

The only factor that can make Australian miners revise their guidance would be more-than-expected demand especially from Europe and a few Asian countries due to sanctions on Russian coal following the Ukraine conflict.