Australia's Stanmore calls 40% of seaborne-traded thermal coal 'unprofitable'

Perth (Platts)--13May2014/603 am EDT/1003 GMT


Australian coal exploration company Stanmore Coal estimates that 40% of global seaborne-traded thermal coal production of roughly 800 million mt and 45% of internationally traded coking coal production of around 300 million mt is "unprofitable at current pricing levels," it said Tuesday in a presentation filed with the Australian Securities Exchange.

That amounts to roughly 320 million mt of thermal coal and 135 million mt of coking coal supplied into the seaborne market as being in the unprofitable range, according to Platts calculations based on data in Stanmore's presentation.

The Australia-listed company based its assertion on an analysis of separate production cost curves for seaborne-traded thermal and coking coal and on a present-day spot price of $113/mt FOB for coking coal and $73/mt FOB for Newcastle thermal coal.

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"A significant percentage of seaborne coal producers are unprofitable at current pricing levels -- an unsustainable position," Stanmore Coal said in the presentation prepared for a resources industry event in Sydney.

Current prices for Australian thermal and coking coal are at the lowest levels since the global financial crisis, Stanmore Coal said, suggesting that "a number of unprofitable producers will be forced to shut."

The company went on to suggest that higher-cost coal producers that continued to operate on a marginal basis through the recent coal price boom could be among the first miners forced to close.

Long-range demand for thermal coal remains strong from Asian countries on their growing demand for energy, the company said.

"Thermal coal demand for electricity in Thailand, Vietnam, Philippines and Malaysia is expected to increase by 187 million mt/year (a 446% increase) by 2030, while Indonesia's coal exports are expected to stagnate," Stanmore Coal said. "This equates to Australia's total thermal coal exports today."

Stanmore Coal has several projects in its investment pipeline including The Range project in Queensland's Surat Basin coal field that has a production target of 5 million mt/year for thermal coal. It is in the feasibility stage, awaiting connection to the proposed Surat Basin rail line.

The Range project will be capable of producing a "gold product" with 10% ash that is lower than benchmark Newcastle thermal coal, 0.43% sulfur and 7.9% moisture and a gross calorific value of 6,466 kcal/kg on an air-dried basis, and a 16% ash "silver product" with a gross cv of 5,904 kcal/kg GCV, 0.43% sulfur and 7.5% moisture, said the company presentation.

"Marketing trips to Japan and South Korea confirmed strong interest in product coal," the company said.

The company's Belview project for coking coal is located on the Blackwater rail line for coal exports that runs through the Bowen Basin to Gladstone port and is due to start exporting in 2018, according to the presentation.

--Mike Cooper, michael.cooper@platts.com
--Edited by Meghan Gordon, meghan.gordon@platts.com

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