Coking Coal Prices Surge

Peabody Energy has reportedly sold North Goonyella premium mid-volatile coking coal for $200 per metric ton (mt) FoB Australia under contract for the fourth quarter to Nippon Steel. The third-quarter 2016 benchmark was $92.50/mt FoB. The $200/mt benchmark would be the highest level since the third quarter of 2012 when contracts reached $225/mt. Japanese steel mills were negotiating prices with Australian miners at the 33rd Japan-Australia Coal Conference, a closed meeting that occurs every two years. Nippon Steel was reportedly asking for December quarter contract prices of $160/mt, while Anglo American was reportedly wanting $212/mt. BHP Billiton, the world’s biggest coking coal shipper, stands to benefit the most as it has moved almost completely to spot pricing and is reaping the benefits of the surge.

Adani Buys Abbot Point in Australia

India-based firm Adani Enterprises has taken over the operator of Queensland’s Abbot Point Coal Terminal, Abbot Point BulkCoal (APB), from Glencore. The deal is worth $14.52 million. Adani first purchased the Abbot Point Coal Terminal from the government of Queensland under a 99-year lease, but control of operations was maintained by Glencore via its ownership of the operator. Since then, that ownership has been at the center of a legal battle. Also during its ownership, Adani put approximately $1.8 billion into facility updates. “[This] transition is a key milestone in our well advanced plans for Abbot Point, and is yet another demonstration of Adani’s commitment to building a long term future with Queensland,” Adani Australia CEO Jeyakumar Janakaraj told Reuters. “This is an exciting and important step forward for employees, their families, the Bowen and surrounding communities and for Queensland, and reflects the vital role that Abbot Point plays in the company’s plans to build a long term future in this state.”

Glencore will continue to supply export coal though the terminal, located north of Bowen.

Vitol, Burgh Take Tegeta’s Share of Richards Bay

Vitol and Burgh Group Holdings have taken over Optimum Coal Terminal (OCT), a 7.6% holder in South Africa’s Richards Bay Coal Terminal (RBCT), from Tegeta Exploration and Resources for an undisclosed amount. The transaction is currently pending regulatory approvals; no target closing date has been confirmed.

South Africa-based Burgh, which is domestically strong but is currently growing its export business, produces 500,000 tons of coal monthly and projects that will more than double by the middle of next year. “This is a major step forward for the Burgh Group,” said Burgh CEO Quinton van der Burgh. “It will enable us to invest confidently in expanding our business and developing new and existing projects.”

RBCT, which managed almost all of the country’s coal export tonnage, has an annual capacity of 91 million metric tons (mt). It shipped a record 75.4 million mt in 2015.

Exxaro Completes Sales of Inyanda to Burgh

During early October, South Africa’s Exxaro Resources concluded the sale and purchase agreement with a consortium of Burgh Group Holdings Pty. Ltd. and Lurco Group Pty. Ltd. It first announced on November 23, 2015, the intention to acquire Inyanda Colliery (mainly the mining right, plant, Blackhill private rail siding and associated liabilities) situated in the Emalahleni district in Mpumalanga.

“The acquisition of Inyanda’s assets is a critical building block of our organization,” said Quinton van der Burgh, CEO for Burgh Group.

Burgh and Lurco will continue using Inyanda Colliery for coal beneficiation and foresees the beneficiation of more than 25 million metric tons (mt) of coal over the next five years.

“Inyanda Colliery was one of Exxaro’s flagship mines and will continue to generate immense value for the new shareholders,” said Mxolisi Mgojo, CEO of Exxaro.

CIL Looking Abroad for Coking Coal

Despite few aborted projects, Coal India Ltd. (CIL) once again hit the road scouting for coal assets in Mozambique, Russia and Indonesia. However, considering the glut of thermal coal available domestically in India, the miner, accounting for more than 80% of the country’s coal supplies, would primarily focus on acquiring coking coal assets. Officials in CIL said given the backdrop of projected rise in steel production in the country and severe limitations of ramping up coking coal availability from domestic resources, CIL’s overseas acquisition strategy would be pinned on coking coal.

According to the Ministry of Coal, domestic coking coal production could not be ramped up in the short and medium term and in the best case scenario, local production would touch the 71-million-metric-tons-per-year (mtpy) mark by 2020. The ministry maintained that with current coking coal production pegged at 54 million mtpy, geological challenges and limitations of metallurgical grade coal reserves in the country, it would be extremely challenging to meet higher demands from domestic sources as sought by the local steel producers. The Ministry of Coal’s stand was in response to the Ministry of Steel, which pointed out that Indian coking coal imports in the current fiscal year would be around 50 million mt against 43 million mt shipped during 2015-2016 and projected to touch 180 million mt by 2025, if India was to achieve total steel production of 300 million mt, the official said.

It was against this backdrop that CIL had approached the government of Mozambique to allot a new high-grade coal asset to the Indian miner. This comes within one month of CIL formally relinquishing coal blocks in the Tete province of Mozambique after the miner’s initial prospecting investments failed to find any viable fuel that could be categorized as coal, a CIL official said. Last month, the board of directors of CIL formally approved a move to surrender prospecting license numbers 345L and 3451L granted to Coal India Africana Limitada, CIL’s African subsidiary to the government of Mozambique.

Mitsui to Acquire Coal Mine Interest in Mozambique

Mitsui & Co. agreed to purchase a stake in Vale’s coal mine in Mozambique and its associated rail and port facilities for about $770 million, according to the Nikkei Asian Review. Mitsui will acquire a 15% stake in the coal mine and a 35% interest in the rail and port project from the Brazilian mining company. The mine’s high-quality coking coal will be transported by rail to the Nacala port some 900 km away for export to such countries as Japan. The railway and port will serve as key infrastructure for exports of not only coal but also domestically produced grains, and for imports of various resources. The mine’s coal output, some 5 million tons in 2015, will grow to 18 million tons by 2018. This will increase procurement options for Japanese steelmakers, who rely mostly on Australian coal.

Iran, Russia to Build 4 Thermal Power Plants

Iran’s Ambassador to Moscow Mehdi Sanaei and the First Deputy Prime Minister of the Russian Federation Igor Shuvalov discussed the latest status of bilateral economic cooperation between the two countries at a recent meeting. During the joint session, both parties pointed out the importance of expanding mutual economic relations and the need to expedite implementation of Green Corridor customs, seasonal electricity exchange projects among Iran, Russia and Azerbaijan, as well as finalizing the contract for construction of four thermal power plants.

China to Take Measures to Stabilize Coal Supply, Prices

China has plenty of policy tools and space to stabilize rapidly rising coal prices, the country’s top economic planner said, as temporarily strained supply has prompted worries about capacity cuts, according to Xinhua. “The current rise in coal prices lacks a market foundation and cannot last. China’s coal supply will not see big problems,” an unnamed official with the National Development and Reform Commission told the Chinese press. The assurance came as China is working to cut ineffective supply in the sector, but some local governments and companies have wavered in their efforts due to price increases in recent months.

The official attributed the rise to increasing coal consumption due to high temperatures, a crackdown on illegal production, as well as some transportation and logistics problems. But the industry’s supply-demand mismatch is not fundamentally changed, the official stressed, as coal demand will not see a significant boost amid government efforts to consume cleaner energy. If the rise in coal prices continues, the government will take steps to unleash capacity to stabilize supply, the official said. “Confidence in the capacity cuts should not waver, and the efforts should not be weakened,” the official said.

During the first eight months of the year, China’s coal output fell 10.2% year-on-year to 2.18 billion tons. But earlier data also showed that as of the end of July, China had only achieved 38% of its goal for coal-production cuts. China plans to cut coal capacity by half a billion tons in the next few years, with huge amounts of funds set aside to help displaced workers. This year, the government aims to shave coal capacity by 250 million tons.