Whitehaven says China trade clash reshaping coal trade
Whitehaven expects a strong recovery from the pandemic, but warns China bans are changing the global trade in coal.
Whitehaven Coal says it expects its markets to recover strongly from the pandemic-hit 2020, but warned shareholders China’s reluctance to buy Australian coal was reshaping global trade in the commodity.
The company will also be forced to seek talks with Itochu, its joint venture partner in the Maules Creek mine in NSW, after the Japanese giant declared it would sell out of the thermal coal production over the next four years, joining the rush by international miners and investors to exit the energy coal business.
Maules Creek is Whitehaven’s flagship mine and Itochu has owned 15 per cent partner in the operation since 2010.
But Itochu said on Wednesday it planned to exit the thermal coal business by March 2024, likely putting its stake in Maules Creek, as well as its 10 per cent share of Glencore’s Ravensworth North mine in NSW and a stake in the Drummond mine in Colombia, on the market.
Speaking to analysts after delivering Whitehaven’s December quarter production report on Thursday, chief executive Paul Flynn said he had not yet spoken to the Japanese trading house about its announcement.
“The only relevant issue for us is, does that include Maules or not? They have previously said ‘no’. Whether or not that has changed, we have heard nothing from them,’’ he said. “We will have to wait until they explain themselves further.”
Whitehaven released its December quarter production report on Thursday, saying the prices it got for coal sales lifted in the period from long-term lows hit in August, with a recovery in thermal coal markets under way across Asia.
The company produced 3.2 million tonnes of saleable coal in the December quarter, up 30 per cent from December 2019, when its operations were hit by bushfires and trouble finding staff at its Maules Creek mine in NSW.
After a dire period in 2020 due to the pandemic, average pricing for the quarter lifted, with the price received for its thermal coal up $US10 a tonne from the September period to $US62/tonne a tonne, and coking coal sales value up $US4/tonne to $US77/tonne.
Whitehaven said China’s trade war on the Australian coal sector was reshaping the market, as producers reshuffled deliveries around China’s bans on Australian coal.
“China has supplemented its domestic coal production with higher-cost coal from alternative origins such as Russia, Indonesia and South Africa. In addition, late in 2020 China lifted its total import quota in response to strong domestic demand and an extremely cold winter,” the company said.
“China’s restrictions have altered seaborne coal trade flows where, instead of being delivered to China, Australian coal is now finding customers in alternate destinations including India, Pakistan and the Middle East, and traded coal historically delivered into these markets is finding its way into China.”
But the bans on Australian metallurgical coal were still having a major impact on prices, Whitehaven said, despite a recovery in other key markets for coking coal.
“Prices for Australian-origin metallurgical coal remain weak in the absence of Chinese buyers. Asian steelmaking output ex-China continues to improve as economic stimulus activity drives increased coal demand and consumption in Whitehaven’s key metallurgical coal markets of India, Japan, Korea, Vietnam and Taiwan,” the company said.
“Following India’s mid-year COVID-19 lockdown, demand has rebounded strongly.”
Whitehaven expects sales volumes in 2021 to return to pre-COVID-19 levels. Its shares closed up 3.1 per cent at $1.80.
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