Australian coal mining firms are forecasting firm thermal coal prices into next year, with thermal coal producer TerraCom locking in sales from its 2.5mn t/yr Blair Athol mine in Queensland until the end of January.

TerraCom joins fellow Australian producers Yancoal and Whitehaven in expecting strong thermal coal prices will continue into 2022 on firm demand from the northern hemisphere during its winter. This optimism persists despite the vessel queue at the main Australian thermal coal port of Newcastle in New South Wales halving to around 18 from over 40 during June-August. This is still above the average of 10 in 2019, but it has fallen despite the larger Port Waratah Coal Services terminal having major maintenance this month that has limited its throughput. The fall could be a sign that demand for Australian thermal coal is not as strong as domestic producers are expecting.

TerraCom has contracts for 575,000t of coal from Blair Athol during October-December, which is above the 565,000t it exported from Australia for July-September and the 510,000t sold in April-June. It has also sold all planned production for January and plans to use the proceeds from the high-margin sales to pay down debt.

The firm has slightly reduced its margin expectation for October-December to A$134/t ($100/t) from a prediction of more than A$140/t made on 18 October, although this is still significantly above the record margin of A$101/t achieved in September.Blair Athol made earnings before interest, tax depreciation and amortisation of A$36.4mn during July-September and the firm expects this to more than double to A$77mn for October-December.

Wary investment

But few Australian coal mining firms are yet prepared to invest in growth despite these firm earnings and positive statements about thermal coal prices remaining strong into 2022. Chinese owned Yancoal has promised to maintain a disciplined approach to production, while Whitehaven is focused on washing coal to boost quality rather than increasing output.

Australian high-grade thermal coal prices last week eased for the first time since late April, while the lower grade price continued to rally, almost halving the premium for the higher grade that had blow out to nearly $80/t. Volumes could start increasing out of Australia if the premium continues to ease, as Australian mining firms reduce washing in favour of higher yield, lower grade sales.

The heat-adjusted premium on a NAR 6,000 basis for higher grade thermal coal fell to $41.55/t on 21 October from $79.57/t on 15 October and below $55.91/t on 10 September, although it is still up on the $1.65/t a year earlier before Beijing's informal ban on Australian coal took full effect.

Argus last assessed the high-grade 6,000 kcal/kg NAR thermal coal price at $220.46/t fob Newcastle on 22 October, down from a high of $251.43/t on 15 October but up from $151.90/t on 30 July. It assessed lower grade coal at a new high of $164/t fob Newcastle for NAR 5,500 kcal/kg on 22 October, up from $108.67/t on 10 September.