South32’s plan to buy Helensburgh’s Metropolitan colliery from Peabody may be in trouble, comments from the consumer watchdog suggest.
The Australian Competition and Consumer Commission (ACCC) is taking a long look at the deal, concerned it could leave just one supplier of coking coal in the Illawarra.
ACCC chair Rod Simms told the Mercury that with Glencore closing its Tahmoor mine by 2019, South32 buying Peabody’s mine would make it the region’s only significant producer.
“You have got two sources of supply going down to one, and that really reduces the competitive tension,” Mr Simms said.
“To the extant that significantly effects the prices BlueScope’s got to pay for its coking coal, well that could well lead to a substantial lessening of competition.”
Mr Simms said BlueScope’s arguments, put to the ACCC in recent months, were a “significant” driver of the ACCC’s concerns.
“Obviously we’re talking about the Illawarra here and that’s BlueScope’s area and they’ve traditionally got their coking coal from the Illawarra,” he said.
“You’d only have one source of supply, which BlueScope are very concerned about. So is Arrium in South Australia.
“It’s very fair to say the concerns of those two companies are driving our concerns.
BlueScope needs coking coal for for steelmaking and the nearest source of mass supply is Queensland’s Bowen Basin, which would be much more expensive, Mr Simms said.
With Peabody’s US parent company filing for bankruptcy, there had been concerns about the future of the Helensburgh mine without the South32 purchase.
But Mr Simms said the possibly of the mine closing was not relevant to ACCC considerations.
“It’s not really that relevant in the sense they’re not going to take the mine away,” he said. “The coal mine is going to remain; it’s just a matter of who operates it.”
Wollongong Coal also mines coking coal but its Russell Vale mine is closed and Wongawilli produces only a small amount.