Miners in talks with Australian state over new coal export limit
Major coal producers are in talks with the government of New South Wales, Australia’s most populous state, over its surprise plan to have miners reserve up to 10% of production for domestic supply, as part of efforts to curb soaring energy costs.
The talks will review what the shortfalls are and how miners can fill them without disrupting supply chains. Early signs point to a limited impact on coal producers though, as there are limited spot supplies to be requisitioned under the rule.
Australia is seeking to drive down costs for households by capping gas and coal prices, which soared last year partly due to the Ukraine war and domestic factors. The New South Wales government is trying to boost the effort on the coal front by beefing up domestic supply of coal, most of which gets exported.
Australia’s Labor government led by Prime Minister Anthony Albanese in December passed legislation to cap natural gas prices for one year, and secured agreements from the coal producing states of New South Wales and Queensland to cap the price of coal sold to power plants.
NSW Treasurer Matt Kean said on Thursday the state would expand the scheme to include coal miners that do not currently sell into the domestic market, requiring them to reserve between 7% and 10% of their output for domestic use. The scheme will apply to uncontracted supply.
But with exporters locking in sales to take advantage of record prices, uncontracted supply is likely to be scarce.
“I would imagine most of the players are relatively committed, given that the market is very tight anyway,” Whitehaven Coal chief executive Paul Flynn told analysts at a quarterly conference call on Friday.
Major exporters including BHP Group , Glencore Plc , Whitehaven Coal, New Hope Corp and Yancoal are likely to be part of the wider scheme.
Flynn said the government had not provided much detail on the proposal, leaked to the media, and was still seeking information from coal producers. He said there is talk the government is looking to fill an estimated shortfall of between 3 million and 5 million tonnes – equivalent to up to 3% of the state’s coal exports.
“It’s very strange waking up one morning thinking that a portion of production is about to be expropriated by the government,” he said.
The NSW Treasurer’s office did not immediately respond to a Reuters request for comment.
A spokesperson said Glencore is waiting to receive information from the NSW government about the expanded scheme. Any reservations should be spread equitably across all NSW thermal coal producers, they added.
The move comes as China has lifted an unofficial ban on Australian coal, further boosting demand and prices, especially for thermal coal used in power plants.
On Thursday, Coronado Global Resources said it had received coking coal enquiries from Beijing. A day later Yancoal announced the sale of two cargoes for delivery to China in February.
Yancoal chief executive David Moult said on Friday there had been several “preliminary” meetings with NSW officials over the reservation scheme. He expects Yancoal to be included in the expanded scheme.
“Yancoal is currently evaluating the potential implications of the scheme and plans to continue to engage with the NSW government to understand fully the implications,” he said.
Source: Reuters (Reporting by Lewis Jackson in Sydney and Sonali Paul in Melbourne; Editing by Jacqueline Wong)