Australia's Centennial Coal costs double in two years

Market: Coal, Coking coal
23/11/22

Thai-owned Australian coal producer Centennial is operating at a 43pc gross profit margin, but the near doubling of costs over the past two years leaves the firm and many of its competitors vulnerable to thermal coal price corrections from near record highs.

Centennial's cost of coal sales averaged A$142.18/t ($97.32/t) in July-September, up from A$110.95/t in April-June, partly because of lower volumes sold, and from an average of A$76.50/t in the 2020 calendar year. The increase in costs was offset by an improvement in the average selling price to A$249.14/t, driven by its average export sales price reaching A$569.86/t. The firm's domestic sales, which were two-thirds of the total volume, were at A$102.69/t, below the cost of production.

Centennial, owned by Thai energy firm Banpu, is one of the main suppliers of coal to power plants in New South Wales (NSW) and would be impacted by Canberra's review of options to ease household and business energy bills, particularly on the east coast. One option is to put a price cap on coal and gas supplied to domestic power generators, with reports it could be at A$70/t for coal. This would result in Centennial operating at a loss domestically at current costs.

Centennial made its last quarterly operating loss in January-March 2021, following a series of loss making quarters because of low coal prices that led Banpu to settle an A$150mn debt owed by Centennial in late 2020. The Thai firm may not be prepared to step in again if it is unable to benefit from strong coal prices.

Centennial is not alone in reporting significant increases in costs which would see them making losses if average prices return to 2019 levels with current costs. Earlier this month, Australian producer Whitehaven increased its cash cost guidance by 7pc to A$95-102/t for the year to 30 June 2023 as it cut its export guidance because of wet weather.

Argus' average 6,000 kcal/kg NAR thermal coal price was $76.64/t fob Newcastle in 2019 and $54.47/t for 5,500 kcal/kg NAR.

Argus last assessed high-grade 6,000 kcal/kg NAR thermal coal at $334.70/t fob Newcastle on 18 November, down from $439.50/t on 16 September and from $383.82/t on 1 July. It assessed lower-grade 5,500 kcal/kg NAR coal at $135.57/t fob Newcastle on 18 November, down from $189.49/t on 16 September and from $188.73/t on 1 July.

By Jo Clarke

Centennial Coal
	Jul-Sep 2022	Apr-Jun 2022	Jul-Sep 2021

Coal sales (mn t)	2.28	2.78	2.49
revenue $/t	170.39	124.39	75.38
cost $/t	97.32	79.50	64.58
Gross profit margin (%)	43	36	14
Source: Banpu

Australian thermal coal prices $/t

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