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$1B Central Qld project on schedule despite China coal order uncertainty

Whitehaven Coal workers
Whitehaven Coal workers

An emerging force in the industry will not decide the timing of its $1 billion coal development in Queensland’s Bowen Basin this financial year.

Whitehaven Coal will not make a final investment decision until after mid-2021 about whether to proceed with its Vickery Coal Mine Expansion and Narrabri Coal Mine Stage 3 Extension Project across the border in New South Wales.

The proponent will do the same for its Winchester South Coal Mine, 31km south of Moranbah. This will mean up to 500 construction jobs and 450 full-time operational positions are on-track to be created sometime in 2023.

‘Subdued’ market brings caution

“Subdued coal markets cause Whitehaven to continue to be cautious in allocating capital to expansion,” the company said in its September 2020 quarterly report.”

“Whitehaven does not expect to consider making a final investment decision in relation to these projects in the 2021 financial year. Projects will continue to be the subject of Whitehaven’s strict capital allocation framework.”

Souring Sino relations

The remarks came after a state-controlled utility in eastern China cancelled about 10 cargoes of Australian coking and thermal coal that were due for delivery in November and December because the ruling Chinese Communist Party (CCP) told staff to cancel the order. The cancellation was unusual since the utility had long-term contracts with another Australian mineral producer according to Argus Media.

Other utilities and industrial customers similarly confirmed with the publication that CCP representatives contacted them between October 1 and 8, and told them to immediately stop importing Australian coal. QMEB understands new orders will be made for coal sourced from Russia and Indonesia instead due to souring Australia-China relations.

“Chinese coal import restrictions have been a persistent theme this year but the current situation remains unclear,” Whitehaven said.

“Although coal import restrictions have been sporadically implemented in China since 2018, latest media reports of fresh restrictions have received a lot of Australian media attention.”

Tumbling sales

Whitehaven has already experienced a 9 per cent drop in metallurgical coal sales since the beginning of July due to coronavirus-related shipment deferrals, mostly from India. Thermal coal sales have been unaffected by any deferrals and the company is still receiving new tenders and enquiries ahead of the “traditionally stronger Asian winter demand period”.

“Despite the ongoing Chinese coal import uncertainties, coal demand from India is strong and hot metal production in the country is higher year on year which is expected to support metallurgical coal demand, industrial activity and coal prices across Asia,” the company said.

Competitor Glencore Australia previously reduced output across a number of Queensland and New South Wales mines in recent weeks, and there is potential to suspend mining for an extended period in the Christmas and New Year break. This is understood to be in response to China’s stricter import rules and an international oversupply of thermal coal.

Not surprising

China’s Ministry of Foreign Affairs claims it is unaware of any coal import freeze. However, the Australian government is still investigating whether the CCP plans to add Australian coal to the regime’s earlier ban on meat imports from four Australian abattoirs and a new 80 per cent tariff on Australian barley.

“We are looking at those reports and obviously raising those issues as appropriate with the relevant authorities,” Prime Minister Scott Morrison said in a public statement.

“They do have their own coal industry and it is not uncommon that from time to time, the Chinese government will have domestic quotas to support local production and local jobs in China, so that is not a new thing.”

Coal exports delayed after China orders companies to stop buying
More details revealed for $1B Bowen Basin mine
Mineral exports face new crackdown from China
Mining giant considers shutting down North Qld operations.

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