BHP sees coal price getting worse before it gets better – by Mark Ludlow (Australian Financial Review – November 25, 2015)

A senior BHP Billiton executive has warned the market for Australian resources will get a lot worse before it gets better, saying it would be “dangerous” to invest in a new mine based on the assumption coal prices will recover.

As big miners continue to cut costs following a plunge in international coal prices, BHP Billiton Mitsubishi Alliance asset president Rag Udd painted a bleak picture of the resources sector in Australia.

“I think it’s dangerous to try and align a business around prices improving in metallurgical coal. I personally think it will get worse before it gets better,” Mr Udd told a Queensland Resources Council forum in Brisbane on Wednesday.

“The reality is we need an ever-green strategy to see ourselves through these sort of fundamentals. We have to design a business model which is going to work with these prices and even lower prices to ensure we have a low-cost environment so we can put jobs in place for Queenslanders.”

Mr Udd said there had been a flood of low-cost producers into the metallurgical coal market in the past few years, including Mozambique and Mongolia.

The price of metallurgical or coking coal has slumped to $US70 a tonne after once being as high as $110 a tonne. The price of thermal coal, used for power generation, has also plummeted since the global downturn.

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