Australian term coking coal deliveries deferred

Term customers have deferred taking delivery of coal coking from Australian mining firm Stanmore Coal, as the Covid-19 pandemic drags on demand for seaborne supplies.

Stanmore said it will now make no sales in June, after around 250,000t of contracted sales were deferred until later in the year. The firm is still likely to ship around 250,000t in April-June, despite the deferral, after it maintained its production guidance of 2.35mn t for the year to 30 June. But it has cut its guidance for earnings before tax and interest to A$80mn-85mn ($52mn-55mn) from A$92mn-100mn to reflect the absence of June sales.

The deferrals come as spot coking coal prices have been hit weak demand from steelmakers because of lockdowns imposed to combat the coronavirus pandemic. Other buyers are likely to look to defer shipments or buy at the bottom of their contracted volume range, potentially pushing more coking coal supplies on to the spot market.

Argus last assessed the premium hard low-vol coking coal price at $117.50/t fob Australia on 24 April, down by 24pc from $154.15/t a month earlier. Argus assessed the semi-soft mid-vol coking coal price at $80/t fob Australia and PCI low-vol price at $78.30/t, down from $104.60/t and $98.30/t, respectively, in the same comparison.

Stanmore will not sell into the spot market yet, instead stockpiling the coal as it expects term buyers to honour their contracts later in the year. The deferrals, combined with measures to meet social distancing requirements, will push Stanmore's average costs for the year to 30 June higher to A$109/t, above its previous guidance of A$107/t.

Measures to reduce spread of the pandemic are leading to higher operating costs across the Australian coal industry, but these are being offset by lower diesel prices and a weak Australian dollar.

Stanmore, which operates the Isaac Plains semi-soft coking coal mine, produced 1.89mn t in the nine months to 31 March. This was up by 12pc from 1.67mn t in the same period a year earlier.

Pricing for its coking coal sold under term contracts is based on a quarterly negotiated benchmark price agreed in advance of the start of the quarter, as well as a negotiated lagging benchmark price. This references the hard-coking coal index in the first two months of the current quarter and the last month of the previous quarter.

Stanmore is subject to a takeover bid from Indonesian-Singaporean joint venture Golden Investments.

By Jo Clarke

source: Argus Media