South32 cuts Australian coal guidance

Market: Coal, Coking coal
24/10/22

Australia-based mining firm South32 has cut its coking coal guidance by 8pc and boosted its thermal coal target by 11pc for the financial year to 30 June, after industrial action and difficult geological conditions saw it produce less coking coal than expected in its first quarter.

South32 cut its Illawarra coking coal guidance for 2022-23 to 6mn t from 6.5mn t, but increased its thermal coal production target to 1mn t from 900,000t. The mining firm produced 1.6mn t of coal in July-September, up from 1.58mn t in April-June but down from 1.89mn t in July-September 2021. The quarter-on-quarter increase was driven by higher thermal coal sales, while sales of its hard coking coal declined.

The firm blamed workforce disruption related to a pay dispute and difficult strata conditions at its Appin mine for the weaker-than-expected production numbers. This led to a lack of product availability for blending, which saw coal sales fall by 26pc in July-September compared with April-June to 1.39mn t and by 19pc compared with July-September 2021.

Unions and South32 signed a new enterprise agreement for Appin in October, which secures workers' entitlements for four years to 2026 and should stop any further industrial action.

South32 retained its Illawarra coal cost guidance at $116/t, with the weaker Australian dollar against the US dollar reducing costs and offsetting the effects of the expected lower volumes. It reported costs of $129/t for January-June and $123/t in July-December 2021.

The firm abandoned plans to expand Dendrobium in August, leaving it reliant on Appin as its sole Illawarra coal mine from around 2028.

Argus last assessed the hard mid-vol coking coal price at $276.15/t fob Australia on 21 October, up from $273.25/t on 30 June but down from a peak of $623.65/t on 15 March. It assessed high-grade 6,000 kcal/kg NAR thermal coal at $393.41/t fob Newcastle on 21 October, up from $383.82/t 1 July.

By Jo Clarke

South32 Illawarra Coal						mn t
	Jul-Sept '22	Apr-Jun '22	Jul-Sep '21	FY22	New FY23f	FY23f

Met coal production	1.27	1.38	1.58	5.71	6.00	6.50
Met coal sales	1.19	1.59	1.49	5.82	N/A	N/A
Thermal coal production	0.33	0.20	0.31	0.79	1.00	0.90
Thermal coal sales	0.20	0.30	0.22	0.78	N/A	N/A
— South32
f=forecast

Australian coal price comparisons $/t

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