BMA, which is 50pc owned by Australian resources firm BHP and 50pc by Japanese trading house Mitsubishi, cut its 2023-24 guidance to 46mn-50mn t of metallurgical coal in January from the previous guidance of 56mn-62mn t issued in July. But heavy rainfall so far this year means it is trending towards the lower half, according to BHP chief executive Mike Henry.
The firm was already operating on low inventories because of higher than average rainfall in 2022, as the La Nina weather pattern delivered increased rainfall to the east coast of Australia. This meant that heavy rainfall in 2023 and early 2024 has quickly flown through into disruptions to production, although the firm is working on building inventories through the system, Henry added.
The wet end to 2023 and start of 2024 was not expected because of the El Nino weather phenomenon that typically drives drought conditions on the east coast. The atypical wet weather has prompted US-Australian coal mining firm Coronado to factor in more heavy rainfall disruptions in Queensland into its 2024 guidance.
Around 3mn-4.5mn t of BHP's cut in BMA guidance is because of the planned sale to Australian mining firm Whitehaven of its Blackwater and Daunia coking and thermal coal mines in Queensland, which is on track to be completed on 2 April. BHP estimates that the sale will increase its proportion of premium hard coking coal so 86pc of its Queensland coal sales from 64pc now and 55pc prior to its sale of its 80pc stake of BHP Mitsui Corporation to Australian independent Stanmore in 2022.
Henry remains optimistic on the outlook for coking coal prices, with demand growth from India and a muted supply response. But he argues that an effective tax rate of 62pc in Queensland following higher royalty rates imposed in July 2022 makes it an unattractive investment opportunity.
BHP despite the lower production outlook retained BMA's cost guidance, which it revised in January, for 2023-24 at $110-116/t.
The Argus premium hard coking coal price averaged $295.86/t in 2023, down from $365.60/t in 2022 but up from $223.16/t in 2021 and $124.26/t in 2020.
By Jo Clarke
Australian metallurgical coal prices ($/t)
