Wollongong born and educated now AngloAmerican chief Mark Cutifani says he expects metallurgical coal mines will be mothballed at a rate of one every two or three weeks until enough supply has fallen out of the beleaguered sector to drive a price recovery.
AngloAmerican is Australia’s second-biggest producer of metallurgical coal, and last week announced it was putting its Peace River coal mine in British Columbia, Canada,on care and maintenance, citing poor prices for the commodity.
Mr Cutifani expected other producers around the globe, including in Australia, to follow suit, saying, “I suspect others will have to do fairly similar moves to keep themselves whole”.
Hard coking coal spot prices have fallen to about $US120 a tonne from well over $US300 ($330) in the heady days of 2011.
The market is in oversupply and Mr Cutifani says, “if the price is not north of $US150, you’ve got stress right across the industry.”
“We’ve been seeing some production come out of the market, 20 to 30 million tonnes,” Mr Cutifani says.
“We’ve dropped another 2.5 million tonnes out of the met coal market with the closure of Peace River. I think you are going to continue to see some of those announcements, maybe once every two or three weeks.
“It won’t make much of a difference this side of the year end, but as we go into next year I am hoping it will start to make a difference.”
He said more than 30 million tonnes would need to disappear from the global market “to have any sort of meaning”.
“I think everybody is doing it tough in met coal, even the markets and our customers are saying there needs to be a higher met coal price, but people keep throwing volume into the market.
“So, at the end of the day, production that is not making money starts to be turned off, prices will remain tight.”
Peace River is AngloAmerican’s only met coal operation outside Australia, where it has six mines, mainly in Queensland.
Mr Cutifani stressed that AngloAmerican was in metallurgical coal for the long haul, and although they mining giant had fielded approaches for its Australian operations, it was not a seller. AFR