Switzerland-based trading and mining firm Glencore will stop operating two of the five excavators at its 4.5mn t/yr Glendell thermal coal mine in Australia in response to a fall in coal prices that has already curtailed production at several other mines.
The longer-term scale-back of operations at Glendell, which is part of Glencore's Mount Owen thermal coal mining complex New South Wales' (NSW) Hunter Valley, comes as a 2-3 week closure of the company's Australian coal mining operations starts this week. The excavators will be halted from November but will be available for Glencore to restart if prices increase.
The direct impact on production levels is unclear. Around 60 support jobs will be lost as a result of the decision.
Glencore is the latest of several mining firms to curtail production in response to the fall in coal prices caused by the economic slowdown sparked by Covid-19. Estimates suggest that three quarters of thermal and low-grade metallurgical coal producers supplying the seaborne market were losing money at pricing lows reached at the beginning of this month, and are likely still lossmaking despite modest increases in prices over the past two weeks.
Australian exports of thermal coal dropped to a seven-month low in July, according to the Australian Bureau of Statistics, but then rebounded in August, port and initial shipping data show. The first three weeks of September were more in line with August than the depressed figures in July. But shipments may taper off with the majority of Glencore's temporary 2-3 week mine closures due to start on 25 September.
Chinese mining firm Yancoal has maintained its coal production guidance for 2020 despite its Hunter Valley Operations (HVO) coal mining joint venture with Glencore closing for two weeks from 25 September.
Many other major mining firms, including Anglo American and Peabody, have already moved to cut production to stem losses amid low prices. Others, including UK-Australian resources giant BHP, are reviewing operations with a view to making them more financially viable. BHP has also put all its thermal coal and some of its coking coal assets up for sale.
Australian thermal coal at $49.95/t fob Newcastle for NAR 6,000 kcal/kg on 22 September, up from a low of $46.18/t on 7 September but down from $65.70/t at the start of the year. It assessed lower-grade coal at $39.79/t fob Newcastle for NAR 5,500 kcal/kg on 22 September, up from a low of $35.04/t on 7 September but down from $51.52/t at the start of the year.
PCI and semi-soft coking coal prices at $72.15/t and $71.29/t fob Australia, down from $82/t and $100/t respectively at the end of March.
Glencore has applied to the NSW government to expand Glendell to 10mn t/yr and extend its lifespan by a further 20 years to 2044.
