Gloucester Coal sets hot pace for June quarter

Q: Was thermal coal demand strong for Gloucester Coal in the quarter?

Yes. The article says thermal coal demand remained robust, with excellent offtake contributing to the 19% rise in thermal coal sales to 373,000 tonnes.

GLOUCESTER Coal has increased sales in the June quarter - taking advantage of buoyant prices, strong demand and surplus port capacity - as wet weather continued to weigh on production.

By InvestSMART · 28 Jul 2011

By InvestSMART ·
28 Jul 2011

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GLOUCESTER Coal has increased sales in the June quarter taking advantage of buoyant prices, strong demand and surplus port capacity as wet weather continued to weigh on production.

Coal sales in the quarter surged 16 per cent to 612,000 tonnes, from 527,000 tonnes in the June quarter a year ago, reflecting a 19 per cent increase in sales of thermal coal, which is mostly used to generate electricity, to 373,000 tonnes.

Sales of coking coal, used in steel production, rose a more modest 11 per cent to 238,000 tonnes.

The company "maximised sales for the quarter by taking advantage of its port capacity", it said yesterday. "Only minimal stocks were on hand at the end of the quarter."

Because of a drop in demand for coking coal in Japan, the coal was sold into the spot market during the quarter, "to ensure mine stockpiles remained manageable".

Thermal coal demand "remained robust, with excellent offtake occurring".

Xstrata, which owns large coalmines in Queensland as well as in New South Wales, along with base metals mines, posted essentially flat coal production in Australia in the June half, reflecting the continued effect of flooding and wet weather.

Overall, its coal production in Australia slipped to 25 million tonnes from 25.1 million in the same period of 2010, with rises in output of steaming coal offset by declines in coking coal and semi-soft coking coal, a poorer-quality coking coal.

Even so, average prices received remained strong, with the export price of Xstrata's Australian steaming coal rising to $US104 a tonne from $US80.

Similarly, its Australian coking coal export price surged to $US259 a tonne from $US193 a year earlier, with the semi-soft coking coal export price rising to $US187 a tonne from $US123.

Output of semi-soft coking coal was hit by the closure of the United colliery last year and the effect of the earthquake and tsunami in Japan.

Coking coal was also hit by the moving of longwall mining units at the Tahmoor mine south of Sydney and the Oaky No.1 and Oaky North mines in Queensland.

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Frequently Asked Questions about this Article…

What were Gloucester Coal's sales results in the June quarter?

Gloucester Coal reported coal sales of 612,000 tonnes in the June quarter, up 16% from 527,000 tonnes a year earlier. Thermal coal sales rose 19% to 373,000 tonnes, while coking coal sales increased 11% to 238,000 tonnes.

Why did Gloucester Coal manage to increase sales despite wet weather impacting production?

The company said it took advantage of buoyant prices, strong demand and surplus port capacity to maximise sales for the quarter. Even though wet weather continued to weigh on production, those factors helped lift sales volumes.

How did Gloucester Coal handle reduced demand for coking coal in Japan?

Because demand for coking coal in Japan dropped, Gloucester sold that coal into the spot market during the quarter to ensure mine stockpiles remained manageable.

Was thermal coal demand strong for Gloucester Coal in the quarter?

Yes. The article says thermal coal demand "remained robust," with excellent offtake contributing to the 19% rise in thermal coal sales to 373,000 tonnes.

What did Xstrata report about its Australian coal production in the June half?

Xstrata posted essentially flat coal production in Australia for the June half, with output slipping slightly to 25.0 million tonnes from 25.1 million tonnes a year earlier. Flooding and wet weather were cited as continuing effects on production.

How did Xstrata's export coal prices change year-on-year?

Xstrata's export prices strengthened: Australian steaming (thermal) coal rose to US$104 a tonne from US$80, Australian coking coal rose to US$259 a tonne from US$193, and semi-soft coking coal increased to US$187 a tonne from US$123.

What operational issues hit Xstrata's coal output during the period?

The company said declines in some coal types were linked to wet weather and flooding, the closure of the United colliery, the effects of the earthquake and tsunami in Japan on semi-soft coking coal, and the movement of longwall mining units at Tahmoor, Oaky No.1 and Oaky North.

What does the company mean when it says there were "only minimal stocks on hand" at quarter end?

According to the company statement in the article, minimal stocks on hand reflects that sales were maximised and only a small amount of coal remained in inventory at the end of the quarter. The company used port capacity and spot-market sales to keep mine stockpiles manageable.