Australian coal miner Yancoal believes the market may have reached, or even passed, the cyclical low in coal prices, as gradual supply reductions begin to offset subdued demand across key international markets.
“There is some optimism amongst industry participants that we have reached, or even passed, the cyclical low in coal prices,” the company said in its September quarter report, noting that prices would require either stronger demand or a meaningful supply-side response to recover.
During the quarter, international coal markets remained challenging for both thermal and metallurgical coal, with average index prices improving only marginally. Yancoal reported an average realised coal price of A$140/t, in line with the previous quarter.
Yancoal produced 15.8-million tonnes of run-of-mine coal and 12.3-million tonnes of saleable coal (100% basis) during the quarter. Attributable coal sales reached 10.7-million tonnes, supported by the recovery of delayed shipments from the prior quarter.
The company ended the period with a cash balance of A$1.8-billion, maintaining strong liquidity despite capital expenditure, tax payments and dividends.
Newly appointed CEO Sharif Burra, who took over in September, said Yancoal was tracking above the midpoint of its production guidance and expected to finish the year in the upper half of its 35-million- to 39-million-tonne range.
“After nine months we are 6% to 7% ahead of last year’s production levels on a 100% basis and tracking above the mid-point of our production guidance. If we sustain our attributable saleable coal production rate, we will be in the upper half of the guidance range this year,” Burra said.
Yancoal also announced it had increased its interest in the Moolarben Joint Venture to 98.75% after acquiring a further 3.75% stake for A$110.5-million, with payments linked to coal prices over five years.
The company reiterated that further supply-side cuts by higher-cost producers could support a recovery in global coal price indices, which it said were currently “well below marginal cost on the global cost curve”.
