HUNTER VALLEY miner Gloucester Coal is struggling to shift stockpiles worth almost $40 million as demand for its semi-hard coking coal softens.
Gloucester, which will this week release details of its proposed $8 billion merger with Chinese-owned firm Yancoal, disclosed in its half-year earnings presentation that stockpiles at its Gloucester Basin operations remained high at the end of last year due to difficulty in shifting its coking product.
"In response to this sharp decline in demand for metallurgical coals, management took steps to change its production profile towards producing a higher percentage of thermal coal," Gloucester said.
Gloucester's earnings figures implied stockpiles of more than 300,000 tonnes, down from the 463,000 tonnes reported in the September quarter. At Gloucester's average revenue of $130 a tonne of coal sold, that equates to product worth more than $39 million.
Gloucester would not comment on Friday but it is understood the soft demand is due to global economic uncertainty having an impact on Asian steel mills, which are themselves stockpiling coking coal.
Prices for coking and steaming coal have fallen lately but it is not clear how many producers may be stockpiling product. The Whitehaven Coal managing director, Tony Haggarty - also in the middle of a merger with Nathan Tinkler's Aston Resources - said "our stocks are low" on Friday.
A representative with coal industry analysts IHS McCloskey, Bruce Jacques, said Gloucester's situation could be "atypical, because the type of coal they produce is sometimes not as easy to sell."
Mr Jacques said transport bottlenecks could also be responsible at the "pretty congested" Newcastle port.
"There's the best part of 40 vessels waiting off the terminal," he said. "Companies are sitting on some allocation through Newcastle that they're not going to be able to use."
"It's no secret that demand is easing. In fact, demand for both thermal and coking coal is easing. The coking coal price has been falling for three quarters and it's likely to fall for the next quarter as well."