Costs an issue as coal industry falters, ALS chief warns
Laboratory testing operator ALS has warned that companies serving the coal industry must be prepared for a sustained period of cost cutting as miners move to rein in costs amid weak market conditions.
The warning came as New Hope Corp called conditions "difficult" in the coal market, as it cut output at high-cost mines in the Clarence-Moreton basin.
ALS, formerly known as Campbell Bros, posted flat earnings in the year to March, hit by the downturn in coal testing and also geochemistry activity. In response, the company has quickly reduced costs.
"With the coal cycle in Australia, the cost base still has not come under control," ALS managing director Greg Kilmister said. "Therefore there could be a three to four-year period as [the miners] get costs under control - and everyone needs to co-operate. If the currency weakens, that may change."
His comments came as New Hope disclosed a further hit to production at the Moreton Basin coalfield, cutting a shift a week at its Jeebropilly mine near Ipswich, west of Brisbane. Earlier this year, it closed the nearby Oakleigh mine, with output of its Moreton mines to drop to 0.7 million tonnes from 1.1 million tonnes a year. The high cost of operations at the two mines was highlighted, as New Hope moved to rein in costs.
The same moves are being made across the industry, which has prompted ALS to cut employee numbers in its coal business by about 30 per cent over the past few months.
Along with cuts to export tonnages, contract prices have slumped, particularly for steaming coal, while the slowdown in China's steel production has also weighed on demand for coking coal. Good-quality steaming coal from the Hunter Valley is fetching about $US85 a tonne in export markets, with coking coal realising about $US142 a tonne, according to McCloskey Coal.
Mr Kilmister's comments come in the wake of a series of profit warnings by mining services companies such as WorleyParsons, Boart Longyear and Coffey International.