US-based coal producer Peabody Energy plans to lift Australian thermal and coking coal exports in 2023, but cut loss-making domestic coal sales even as the New South Wales (NSW) government tries to raise domestic supply.
Peabody expects to sell 14.5mn-15.5mn short tons (st) of thermal coal and 7mn-8mn st of coking coal from its Australian operations in 2023, after it sold 15.6mn st and 6.6mn st respectively in 2022. It plans to ramp up its exports of thermal coal to 9mn-10mn st from 7.9mn st in 2022, and cut its domestic coal sales to 5.5mn st from 7.7mn st in both 2022 and 2021. Peabody's US coal sales are expected to grow to some extent this year as there is a continued need to replenish below-average power plant inventories across the country.
The 2.2mn st cut in planned domestic sales comes as the New South Wales (NSW) government plans to introduce a coal reservation policy and an A$125/t ($87/t) cap on domestic coal sales to ensure supply of low-priced coal to local power generators. But it makes good economic sense for Peabody. The producer has the entire 5.5mn st of domestic supply contracted at $28.50/st for 2023, which is a loss-making proposition given it expects an average operating cost of $52-57/st. This compares with the 1.5mn st of the anticipated 9mn-10mn thermal coal exports that Peabody has locked in at $206/st, with the rest to be sold at market prices.
The NSW government's move is partly in response to record-breaking coal export prices in 2022 that resulted in a limited supply of thermal coal, owing to extremely wet weather, drawn to exports over domestic supply. Peabody will still reserve around a third of its Australian thermal coal production for domestic supply, keeping it within the NSW reservation cap, but the 2.2mn st shortfall will need to be found elsewhere in the market. The NSW government is looking to fill these gaps by demanding that those that usually focus solely on exports sell at least 6pc of their output to local power generators.
Peabody sees a slow start to 2023 for thermal and metallurgical coal in Australia, as it recovers from heavy rains in NSW and Queensland. It expects to export 1.8mn t of thermal coal and 1.3mn-1.5mn t of metallurgical coal in January-March, compared with 2.3mn st and 2mn st respectively in October-December. Peabody plans to invest $120mn in reopening its North Goonyella mine in Queensland in 2023 to increase its metallurgical coal sales from 2024.
Argus last assessed high-grade 6,000 kcal/kg NAR thermal coal at $226.08/t fob Newcastle on 10 February, down from $410.17/t on 9 December and from a peak of $444.59/t fob on 9 September last year. It assessed lower-grade 5,500 kcal/kg NAR coal at $126.84/t fob Newcastle on 13 January, down from $200.81/t on 2 September and from a peak of $287.15/t on 11 March last year.
Argus last assessed the hard mid-volatile metallurgical coal price at $248.15/t fob Australia on 14 February, up from $269.20/t on 9 November and from $182.80/t on 5 August.
