(Repeats story from April 7 for wider readership with no change
By James Regan
SYDNEY, April 7 Australia's thermal coal
producers will look to plug the supply gap in the coking coal
market after Cyclone Debbie disrupted supplies from Queensland
by modifying their thermal supplies to meet steelmakers needs.
Thermal, or steam, coal miners may try to take advantage of
the large price gap between so-called semi-soft coking coal and
steam coal, said industry sources on Friday. The semi-soft
settlement price for first quarter term shipments stood at $130
a tonne versus a thermal price of just under $90..
Thermal coal can be sold as semi-soft coking coal, which can
be used in steel making, after it is washed to reduce the ash
content. The practice results in a lower yield and is typically
only happens when the price spread is great enough to cover the
loss of volume.
"The price spread is definitely there, and do we expect to
see switches to semi-soft? Absolutely," said the chief executive
of a large coal mining company. "It's inevitable that we'll see
more semi-soft coal hitting the market given where prices are
His company operates near Queensland's Bowen Basin mines but
was spared the impact of Cyclone Debbie, which flooded rail
lines that disrupted hard coking coal exports from the state,
which is Australia's biggest producer of coking coal.
Most of semi-soft these sales will come from Hunter Valley
collieries located some 1,600 kilometres (1,000 miles) south of
the cyclone's impact zone in New South Wales, where lower-ash
thermal coal is already mined in abundance, typically to supply
Asian power generators, said the executive.
Other producers, such as South 32 and Peabody
Energy are already mining coking coal and are also
positioned outside the cyclone zone in New South Wales.
Those supplies could then be exported from the port of
Newcastle, the world's biggest export terminal for thermal coal,
untouched by Debbie.
Most steelmakers would blend the semi-soft coking coal with
prime hard coking coal to achieve the required amount of coke.
Coal is converted to coke in a furnace to remove the oxygen
from iron ore to make steel.
In the meantime, negotiations for second-quarter supplies
between the major Australian coking coal miners, including BHP
Billiton, Mitsubishi Corp and Anglo American
and Asian steel mills have been postponed until a
clearer assessment emerges of the damage to rail lines in the
Bowen Basin, said Marian Hookham, coal analyst at consultancy
Rail operator Aurizon Holdings Ltd on Friday said
there was no change to the five-week repair schedule for the
major Goonyella line that connects into the Dalrymple Bay and
Hay Point Coal terminals.
"It could be weeks before negotiations resume and until then
anything goes as far as price until then. Just how much of a
shift by those producers that can into the semi-soft market will
depend on how quickly things return to normal," she said.
Premium hard coking coal was priced at $285 per tonne under
the first quarter contract, while spot sales are fetching about
(Reporting by James Regan; Editing by Christian Schmollinger)