South32 cuts Illawarra energy coal sales as COVID, wet weather hit production

Constant rain in first three months of the year made for unsafe conditions at ports, meaning less coal made it onto ships in Port Kembla.

The local factors have been compounded by a higher Australian dollar, and will see less coal produced locally in the current financial year.

South32 has maintained its guidance for Illawarra Coal production in the current financial year at an estimated 6800 kilotonnes, down from 7645 kilotonnes in the financial year 2021.

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The dip comes despite a 31 per cent increase in metallurgical coal production in the third quarter of 2022 compared to the previous quarter.

In the results, South32 said the local arm of the business had some success despite the adverse conditions.

"Illawarra Metallurgical Coal realised a 42 per cent increase in quarterly production, despite the ongoing impact of wet weather and disruptions to labour availability caused by COVID-19," the documents state.

Capital works such as the extended longwall move at the Dendrobium Mine in the December 2021 quarter impacted this year's production, but consistent wet weather has had a noticeable impact.

"Poor weather contributed to a 5 per cent reduction in coal sales during the March 2022 quarter with multiple shipments slipping into April 2022 due to the prioritisation of the health and wellbeing of seafarers slowing loading conditions," the miner said.

Local labour availability also took a hit due to COVID-19 workforce restrictions.

Amid these factors, South32 announced that it stopped sales of low-margin coal wash material, a by-product of the production of metallurgical coal, in part due to high freight costs.

Sales of energy coal at Illawarra Coal dropped from 281 kilotonnes in the third quarter of last financial year to 107 kilotonnes this year, a 62 per cent decrease.

With the wet weather expected to ease and South32 expecting COVID-related labour force pressures also to improve, the miner expects to produce another 1600 kilotonnes of metallurgical coal in the final quarter of 2022.

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