Chinese-Australian coal firm Yancoal expects to produce 38mn t of saleable coal in 2020, up by 6.7pc from 35.6mn t in 2019. The company has deferred all non-essential spending until at least next year as it tries to cut costs in response to low prices.
Yancoal sees a mixed outlook for thermal coal, with the prospect of increased gas use weighing against price increases but stronger demand from China potentially strengthening prices. The market for pulverised coal injection (PCI) and other lower-grade coking coal is difficult, as steelmakers prefer hard coking coal. Lower steel production outside of China has seen coking coal prices cut across the board, giving hard coking coal a competitive advantage.
The amount of metallurgical coal sold by Yancoal fell by 40pc in April-June compared to the same period last year, as the firm cut sales of lower-margin PCI grade coal and increased thermal coal exports by 25pc in the same comparison.
The projected increase in Yancoal’s production in 2020 over 2019 will largely come from its increased ownership of the Moolarben coal mine after it acquired partner Sojitz’s 10pc stake in the complex. The firm produced 8pc less coal on a 100pc basis in April-June than in both the January-March and April-June 2019 quarters, but had a higher attributable production than in the year-earlier period.
The decline in production on a 100pc basis was largely the result of a 33pc year-on-year fall in output at Yancoal’s Middlemount joint venture with US energy firm Peabody, after the equipment fleet was reduced across the site. Production was also 20pc lower at the Hunter Valley Operations (HVO) joint venture with global trading and mining firm Glencore, in which Yancoal has a 51pc stake. The firm expects production from HVO to increase this quarter following maintenance work on the coal handling plant in May.
Yancoal hopes to cut its costs to A$61/t ($43/t) excluding royalties in 2020 from A$70/t in 2019 through productivity improvements, lower input costs and cost deferrals. The main headwind is the Australian dollar, which is staying stubbornly high against the US dollar despite lower coal and other commodity prices that usually weaken the currency.
Yancoal reported an average combined thermal and metallurgical coal price of A$87/t in April-June, down from A$101/t in January-March and A$116/t in April-June 2019, as well as from an average of $111/t across 2019.
Argus last assessed the high-grade thermal coal price at $49.53/t fob Newcastle for 6,000 kcal/kg NAR coal on 17 July, down from $67.58/t at the end of March and $92/t a year earlier. It assessed the lower-grade thermal coal price at $37.30/t, down from $53.18/t and $53/t in the same comparisons.
Argus assessed the PCI low-vol price at $69.50/t, down from a recent high of $99.80/t at the beginning of March and from $112/t a year earlier.