Output has slumped at BHP and Whitehaven Coal’s mines, but booming prices still deliver rivers of cash
Major coal buyers are offering to pay a premium to ensure delivery of shipments, Whitehaven Coal chief executive Paul Flynn says, as Australian exports slump.
Major coal buyers are offering to pay a premium to ensure delivery of shipments, Whitehaven Coal chief executive Paul Flynn says, as Australian exports slump.
Thermal coal production from major Australian mines slumped in the September quarter amid torrential rain on the east coast, boosting prices, with both BHP and Whitehaven reporting sharp declines in shipments.
Wet weather cost BHP as the thermal coal price hit record highs in the quarter, with exports from its Mt Arthur mine in NSW down by more than a third. BHP said it had sold only 2.4 million tonnes in the period, down 37 per cent on the June period.
Despite a 32 per cent slump in managed coal sales from its own operations, Whitehaven said it had generated an extraordinary $1.55bn in cash from its operations in the quarter, as average prices lifted to $581 a tonne.
In an analyst call on Wednesday, Whitehaven’s Mr Flynn confirmed that major buyers in Japan and its other markets were offering premiums of up to $15 a tonne to lock in longer term contracts.
“Certainly not all customers are engaging in that, and certainly we’re not offering longer terms to everybody either,” Mr Flynn said. “But where we are offering longer terms, those types of premiums are being seen. We don’t call it the price of certainty, we just call it a premium.”
Despite production constraints, the cash keeps rolling in for the Australian thermal coal major, with Whitehaven saying it is now sitting on a war chest of $1.9bn – despite wet weather hitting its output and coal sales.
The benchmark price for thermal coal shipped through the Port of Newcastle set three successive monthly average records, Mr Flynn said, with September averaging $US434 a tonne, above the previous record to $US417 a tonne in August and $US411 a tonne in July.
Sales from Whitehaven’s coal operations slumped 32 per cent to 3.8 million tonnes as flooding cut off access to its Maules Creek mine for a week and closed haulage roads at Tarrawonga for 14 days.
Whitehaven produced 3.4 million tonnes of saleable coal in the period, down 17 per cent on the June quarter. It had previously flagged lower output flowing from its mine plan, but said the extraordinarily heavy rains – as well as the labour constraints hitting the entire coal industry – had slowed work at its mines.
But the company said the heavy weather had helped boost prices for coal as major developed nations continued to shun Russian output amid its war on Ukraine.
The wet weather battering taken by Queensland and NSW also hit BHP’s coking coal sales for the quarter, which fell 25 per cent to 12.9 million tonnes for the period, with the tight labour market on the east coast also hitting the company’s export rates.
BHP’s Pilbara iron ore sales slipped in the period, down 3.4 per cent to 70.3 million tonnes, although output from the company’s mines lifted to 72.1 million tonnes compared to the June quarter total of 71.7 million tonnes. Copper output at its global mines also fell for the quarter, down 11 per cent to 410,100 tonnes for the September period, although it was 9 per cent up on the same time last year.
Whitehaven said major European and Asian customers had been stocking up ahead of winter, but prospects for coal pricing remained strong given constraints in Australia and bans on Russian exports roll through key markets.
“The large state-owned power utility in Taiwan stopped taking Russian coal in August and Japan will stop taking delivery of Russian coal at the end of March, when pre-existing contracts run out in line with the Japanese fiscal year,” the company said. “Given the lack of available supply side response, we continue to view thermal coal prices as well-supported throughout FY23 and beyond. La Niña and labour shortages may continue to impact production, with strong demand for high-CV coal and extremely tight supply in the absence of Russian coal.”
With the thermal coal price sitting well above the value of coking coal, Whitehaven has switched to selling the majority of its output into energy coal markets.
Benchmark prices for semisoft sold into metallurgical markets averaged $US237 a tonne in the quarter, Whitehaven said, compared to $US421 a tonne for thermal coal. A year ago Whitehaven sold about 15 per cent of its output to steelmakers, but only 8 per cent of its shipments were sent to coking coal markets in this quarter.
Mr Flynn said Whitehaven would keep selling coking coal to long-term customers, however, even though it meant the company would be “leaving some money on the table” by doing so.
BHP closed down 38c to $39.25, with Whitehaven up 11c to $10.52.
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