Clyde Russell is a Reuters columnist. The views expressed are his own.
LAUNCESTON, Australia, May 27 (Reuters) – Like a pot of water being slowly brought to boil, it’s taken a long time for Australian coal miners to reach the point where the pain becomes too much to bear.
In recent weeks a slew of announcements of mine closures, production cuts and job losses has served to underscore that ultimately the sustained low-price environment would have to result in lower output from the world’s largest coal exporter.
So far the announced closures have been modest, but the chances are increasing that they are merely the harbinger of more cutbacks in the beleaguered coal industry. The cost of producing about half of Australia’s thermal coal and about 45 percent of its coking coal is above the prevailing prices, Morgan Stanley said in a report on Monday.
The spot price of thermal coal at Newcastle Port , an Asian benchmark, was $74.33 a tonne in the week to May 23, close to a 4-1/2 year low of $72.98 hit in March. It has lost 45 percent since the post-2008 recession high of $136.30 reached in January 2011.
Prices for coking coal, used in steel-making, are currently around $116 a tonne, about 35 percent of the $330 commanded in mid-2011 when supplies from Queensland state were disrupted by flooding and demand from Chinese steel mills was robust.
Up until recently most Australian coal miners have been trying to ride out the weak prices by pursuing a combination of output gains and cost-cutting in a bid to lower per unit costs.
This has probably exacerbated the problem by increasing production at a time when the global seaborne coal market is in structural surplus.
But now some of the miners have thrown in the towel and started to close output at higher cost facilities.
Glencore Plc said on May 22 it will close its Newlands underground coal mine in late 2015, opting not to extend the life of the mine, which produced 2.75 million tonnes of thermal coal last year.
In March, the global commodities giant said it would suspend operations at the Ravensworth underground mine, placing the facility, which produced 2.1 million tonnes of semi-soft coking coal in 2013, on care and maintenance.
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