Yancoal blames China crackdown for coal price dive
Big miner Yancoal has blamed a sharp fall in coal prices on long Chinese holdups of Australian coal imports.
Big coal miner Yancoal Australia has blamed China’s crackdown on Australian coal imports for a sharp dive in coal prices.
Yancoal released its latest quarterly production report late on Tuesday, noting that the average realised price for its coal had fallen from $133 a tonne in the March quarter to $116 a tonne in the June quarter.
Yancoal, which itself is 61.6 per cent-owned by China’s Yanzhou Coal Mining, owns a string of coal mines in NSW, Queensland and Western Australia. It completed its $US2.7 billion acquisition of Rio Tinto’s Coal & Allied business in late 2017.
Australian coal shipments into China have been subject to customs delays since February, with industry analysts Platts this week estimating that around 15 million tonnes of Australian coal worth more than $1 billion was currently waiting to clear customs in China.
In its quarterly commentary, Yancoal said the issues in China, coupled with a diversion in coal shipments from Europe to Asia, had hurt the benchmark API5 coal index.
“During the June quarter, the impediment to Australian thermal coal deliveries into China continued to influence the regional market; as a result, API5 index has depreciated during the period,” the company said.
“Also, we have experienced a period where European gas prices have been at their lowest, which has encouraged Russian and Colombian producers to seek better prices in Asia, while Asian supply sources have been at optimal levels.”
While Yancoal has strong links to China, the company noted that no single country purchases more than 22 per cent of its total sales.
“Index price volatility seems likely to persist given the regional supply and demand factors,” Yancoal said.
“However, it is our view that market fundamentals remain positive in the longer term.”
Australian coal has been subject to lengthy processing delays of up to 50 days from around February this year.
While China’s Ministry of Foreign Affairs has said the coal is subject to environmental testing, it is widely believed the processing delays are part of a strategy to send a message to Australia that China is unhappy with some of its policies, including last year’s decision to ban Chinese telecommunications giant Huawei from supplying equipment for the next generation 5G network.
Australian coal is cleaner than Chinese domestic coal and coal imported from other sources, including Indonesia and Mongolia.
Coal players had hoped the delays for Australian coal in China may have eased after the May federal election, but the latest figures from Platts show the situation continues to be a problem.
Rival Australian coal producer Whitehaven Coal last week also blamed Chinese import restrictions, as well as low liquefied natural gas prices and trade tensions between China and the United States, for softer coal prices.
Whitehaven also noted that while overall Chinese power demand had grown, so too had the country’s wind and solar capacity. It also said increased rainfall had lifted China’s hydro-electrcity generation.
Yancoal’s quarterly showed a 6 per cent increase in saleable coal production during the quarter to 13.4 million tonnes. Its guidance for 35 million tonnes of saleable coal production this year was unchanged.
Shares in the company were up 4 per cent on Wednesday to $3.36 each.
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