Cliffs, Atlas, BHP cut jobs as price crash hits Australian miners

Australian miners are slashing jobs in response to critically low raw materials prices, with iron ore miners and coal producers alike making severe cuts in headcounts to adjust to the new pricing climate.

Iron ore producers Cliffs Natural Resources, Atlas Iron Ore and BHP Billiton have all been reported to have reduced employee complements at their Australian iron ore operations in the past month.

Cliffs contractor BGC, which provides mining and civil services to the US iron ore producer, has cut a proportion of its 950-strong workforce at Cliffs' Koolyanobbing mine in recent weeks.

"Through productivity and efficiency improvements at Cliffs' Koolyanobbing mine, our labour contractor BGC has been instrumental in streamlining and best aligning our resources for the operation," a Cliffs spokeswoman said.

Cliffs did not confirm the number of jobs cut at the mine, but said that the reduction in headcount would not affect targeted sales or production volumes from its Asia Pacific Iron Ore business segment.

Benchmark prices

Benchmark 62% Fe iron ore prices have almost halved since the beginning of the year, dropping from more than $130 per tonne cfr China in January 2014 to less than $78 per tonne on Monday September 29.

Prices for 58% iron ore have fallen by 43% from the start of the year, from $118.73 per tonne to Metal Bulletin's index calculation on September 29 of $67.90 per tonne cfr China.

The Australian press has reported that Atlas Iron, a mid-tier producer of 58% Fe grade iron ore, also cut jobs, with around 40-70 permanent roles being affected.

Atlas also uses contractor BGC, which is reported to have eliminated about 50 jobs from Atlas Iron's Wodgina iron ore mine.

Neither Atlas nor BGC responded to requests for comment at the time of publication.

The latest round of job cuts in Australia's iron ore sector follows a paring down of logistics staff at BHP Billiton's Port Hedland operations.

The mining major imposed job cuts at the iron ore terminal in Western Australia earlier this month in an attempt to slash costs, but did not disclose how many positions would be affected.

Coking coal cuts

While coking coal prices have held relatively steady over the past six months - in comparison with the steady decline in iron ore prices - producers continue to scale back operations, citing the poor outlook for the steelmaking raw material.

Last week, coking coal mining major BHP Billiton Mitsubishi Alliance (BMA) announced 700 jobs cuts across its coking coal operations in Australia.

BMA, the largest employer in Queensland, said that the job cuts were part of a continuing review of its operations. The cuts represent 8% of the miner's Queensland staff.

Alpha Natural Resources idles mines, cuts jobs amid coal weakness

US coking coal producer Alpha Natural Resources has idled mines across three of its coal businesses, eliminating hundreds of jobs.

Independence Coal's Twilight mine and Pioneer Fuel's Ewing Fork 1 mine, both located in the state of West Virginia, will be idled immediately, Alpha said on Friday September 26.

The two mines, which produced a combined total of 660,000 tonnes of coking coal in the first six months of 2014, will be maintained to allow for a restart of operations, should market conditions and coal demand improve.

Almost 200 jobs across the two mines will be lost.

Alpha affiliate Marfork Coal will idle the Marsh Fork mine and eliminate 68 jobs across its operations. Marfork shipped 100,000 tonnes of coking coal in the first half of 2014.

Alpha said that the mines were being idled due to sustained weak market conditions, fundamental oversupply, and US government regulations challenging the central Appalachian mining industry.

"Prices for metallurgical coal used to make steel have remained depressed throughout the year, reflective of oversupplied markets," Alpha said.

The miner joins a growing number of coking coal producers retrenching operations amid persistently low prices.

Vale announced on Monday that it planned to idle its Isaac Plains mine in Australia, a 50:50 joint venture with Japan's Sumitomo.

And last week, coking coal mining major BHP Billiton Mitsubishi Alliance (BMA) announced 700 jobs cuts across its coking coal operations in Australia.

Premium hard coking coal index fob Australia's DBCT port has dropped from more than $130 per tonne at the beginning of 2014 to about $113 per tonne at the end of September.

Asian seaborne met coal market stable on weak demand

The Asian seaborne metallurgical coal spot market was largely stable on Tuesday September 16 as demand remained sluggish.

Top Australian brands were heard traded at $121-125 per tonne cfr China, while lower-rank premium hard coking coal was changing hands at about $115 per tonne.

For second-tier hard coking coals, few materials were available in the market at the moment.

CFR Jingtang premium hard coking coal was calculated at $122.26 per tonne, up $0.55 on the day. The cfr Jingtang hard coking coal index was up $0.27 to $107.42 per tonne.

The fob Australia premium hard coking coal index was up $0.01 to $111.94 per tonne, while the fob Australia hard coking coal index went up $1.88 to $98.52 per tonne.

"There's no sign as of yet of any restocking activity from buyers for the winter," a trading source told Steel First. The trader added that he was only sourcing material from suppliers when there was firm customer demand to minimise risks.

Several mill sources said they have no immediate demand for material, with one suggesting he would not actively seek cargoes until the end of the year.

In Japan, no numbers have been tabled for the fourth-quarter benchmark, but sources said a settlement is expected sometime next week, when Australian miners visit the country.

While a roll-over is widely expected, a trading source said the current market is "not healthy" and more mines would be shut if the $120-per-tonne benchmark continues.

In other news, China will ban the import and domestic sale of coal with high ash and sulphur content from 2015 onwards in a bid to tackle its pollution woes. However, as coking coal is largely spared from the new ruling, the impact on the market has been minimal.

On the Dalian Commodity Exchange, the most-traded January coking coal futures contract closed at 788 yuan ($128) per tonne on Tuesday, down from Monday's close of 794 yuan ($129) per tonne.

The most-traded January coke contract also closed lower, at 1,082 yuan ($176) per tonne, than the previous trading day's close of 1,091 yuan ($177) per tonne.

The yuan prices are the equivalent of cfr prices plus 17% VAT and port charges of about 35 yuan ($6) per tone.

Asian coking coal prices stable as raw material falls stifle gains

Seaborne Asian coking coal prices held relatively steady on Tuesday September 23, with any buying prompted by low port inventories muted by further falls in the iron ore and steel markets.

Physical iron ore prices were expected to drop to new lows of less than $80 per tonne on Tuesday, driven down by oversupply and a slowdown in Chinese demand growth.

Traders speaking to Steel First said that although the outlook for coking coals, especially pulverized coal injection (PCI), was more positive than it had been for several weeks, the fundamental weakness across the raw materials complex was weighing on any price upside.

"It's a really mixed bag," a trader commented. "Although there is a bit more demand from the traditional markets such as Japan and India, China is still a mess, and that means that any possible gains we might make could easily be cancelled out."

Recent gains in Chinese coking coal port stock prices, reported to have increased by 20 yuan ($3.25) per tonne in the past week, could be due to restocking ahead of China's week-long National Day festival at the beginning of October, a producer said.

Some supply tightness was reported in the second-tier hard coking coal market, as a number of Australian producers on the North Coast railway line linking mines in the region to Gladstone port were affected by a derailment at the end of last week, sources said.

Mines on the line include Kestrel, Gregory, Lake Vermont, Curragh and Blackwater.

CFR Jingtang premium hard coking coal index was calculated at $122.96 per tonne on Tuesday, down by $0.20 from Monday's level.

The cfr Jingtang hard coking coal index was up by $0.79 at $108.83 per tonne.

The fob Australia premium hard coking coal index rose by $1.56 to $113.54 per tonne, while the fob Australia hard coking coal index was up by $0.21 at $98.02 per tonne.

On the Dalian Commodity Exchange, the most-traded January coking coal futures contract closed at 784 yuan ($127) per tonne on Tuesday, up from Monday's close of 771 yuan ($125) per tonne.

The most-traded January coke contract also closed up at 1,066 yuan ($173) per tonne, compared with the previous trading day's close of 1,049 yuan ($171) per tonne.

The yuan prices are the equivalent of cfr prices plus 17% VAT and port charges of about 35 yuan ($6) per tonne.

Coal prices feel the heat as China mulls import ban

Iron ore isn't the only major Australian export item to have tumbled this year – coal has also been on a roller-coaster ride as Chinese demand decreases.

The price of coking coal, used in steel production, dropped to a four-year low of $US113.50 a tonne in early September. Lower-grade thermal coal, used to generate electricity, hit a fresh five-year low on Monday of $US95.90 a tonne – less than half of what it used to sell for during the 2008 price rally.

To add salt to the open wound, the Chinese government is deliberating on a quality-based import ban on thermal coal.

Last week, the Chinese government published a draft version of the law which would prohibit all coal imports containing more than 15 per cent ash and 0.6 per cent sulphur.  Nearly half of all exportable thermal coal would not meet the cutoff, according to numbers crunched by mining research firm Wood MacKenzie.

Macquarie analyst Stefan Ljubisavljevic said although the proposed Chinese ban was unlikely to materialise, some milder form of import restriction was still on the cards, which would ­further dampen the price.

But it was not all bad news for steam coal. Indonesia, the world's biggest exporter of coal, dropped its exports by 2.4 per cent year on year, which should make room for a future price hike.

The largest buyer of  thermal coal is still Japan, where prices are largely based on long-term contracts and annual pricing is determined near the start of the Japanese financial year on April 1. The latest contracts were fixed at about $US73 a tonne.

As for metallurgical coal, which includes coking coal, some analysts were optimistic the price would pick up. According to Citi's commodities research desk, the price of metallurgical coal was likely to rise to $US139 in 2015 and $US150 in 2016.

"We believe that metallurgical coal prices have bottomed and are likely to rebound over the coming months," Citi commodities strategist Ivan Szpakowski said in a note. The price was likely to be supported by improving Chinese demand and increasing cutbacks by miners, he added.

Patersons Securities research analyst Matt Trivett predicted the coking coal price would pick up slightly but not rise above $US125 in 2015, as oversupply of the commodity weighed on price.

"Take or pay" obligations, where coalminers are forced to pay for infrastructure and transport costs regardless of whether they use the service, were a contributing factor to the oversupply. "Shutting down a mine is not cheap. It's not a straight arithmetic situation," Mr Trivett said.

But he said a price rebound was inevitable as the growing demand for the commodity absorbed the oversupply.

"We're hopeful we're at the bottom or at least close to the bottom," Mr Trivett said.

Pacific Coal Resources swings to Q2 loss

The Toronto-listed stock of Colombia-focused miner Pacific Coal Resources on Tuesday shed one-third off its value after reporting negative second-quarter results, as coal output from its flagship La Caypa mine was impacted by adverse geological conditions.

For the three months ended June 30, the Toronto-based miner's net profit swung to $12.77-million, or $0.26 a share, compared with a profit of $2.05-million, or $0.04 a share, a year earlier.

Revenues declined 40% to $22.29-million, as sales sagged 35% to 229.3-million tonnes of coal.

The average realised coal price also declined 10% year-on-year to 95.39/t.

Output was down 30% at 279.6-million tonnes of coal, as La Caypa missed its output forecast, owing to adverse geological conditions at the section produced from in the quarter.

The second-quarter output from the company’s Cerro Largo mine represented a 12% increase year-on-year, despite only representing 64% of planned output for the quarter, owing to ongoing negotiations with a new third-party operator.

Ukraine to buy 1Mt of coal from South Africa – PM Yatseniuk

Ukraine will buy one million tonnes of coal from South Africa because the military conflict in its Donbass region has disrupted domestic coal production, Prime Minister Arseny Yatseniuk said on Wednesday.

Pro-Russian separatists are battling Kiev's forces in eastern Ukraine, which is home to much of the country's heavy industry and coal mines and accounts for about 18 percent of the economy's output.

"They (the rebels) bombed our main coal mines ... and so the government has already signed an agreement on the supply of one-million tonnes of coal from South Africa," Yatseniuk told a televised cabinet session.

"The first vessel is loading now," he added.