Australia coal firms dig in for years of mine closures, job cuts
UBS expects Australian coal exports to drop around 5 per cent to around 162 million tonnes, after increasing 31 per cent to 171 million tonnes last year
Australian coal miners are steeling themselves for years of production cuts, job reductions and asset sales as swelling shipments from international rivals lower hopes of a recovery in prices for coal.
Prices have slumped around 30 per cent since their peak two years ago as coal flooded global markets, especially from the United States where cheap gas has cut domestic demand and led to a nearly 50 per cent jump in thermal coal exports last year. Even robust Chinese and Indian demand growth is failing to soak up the plentiful supply.
To boost their thinning margins, miners in Australia such as BHP Billiton, Rio Tinto, Glencore Xstrata and Peabody have trimmed output and laid off thousands. Clinging to barely profitable operations, coal producers now face the prospect of further cost-cutting, which they fear could benefit rivals when the market recovers.
“Everyone is waiting to see who blinks first,” said Tom Sartor, an analyst with Morgans Stockbroking in Brisbane. “You don’t want to be the one curtailing production knowing that it’s going to benefit your competitor.”
Australia’s coal industry has become a victim of its own success. In its rush to meet growing Chinese demand, producers churned out more and more coal, and miners are now stuck with more than they can sell.
This has been compounded by the dramatic ascent of shale gas production in the United States, whose displaced coal has headed to the rest of the world.
