Gloucester Coal sets hot pace for June quarter

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.

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

Why did Gloucester Coal increase sales despite wet weather affecting production?

The company maximised sales by taking advantage of buoyant coal prices, strong demand and surplus port capacity. Gloucester said only minimal stocks remained at the end of the quarter, indicating they prioritised moving material to market even as wet weather weighed on production.

How did wet weather and flooding affect coal production in the June period?

Wet weather and flooding continued to weigh on production, contributing to production disruption for operators mentioned in the article. The conditions were cited as a factor limiting output even as sales were increased where possible.

How did lower demand in Japan affect Gloucester Coal's coking coal sales?

A drop in demand for coking coal in Japan meant Gloucester sold some coking coal into the spot market during the quarter to ensure mine stockpiles remained manageable.

What did Xstrata report about its Australian coal production and prices?

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. However, average prices received rose strongly: export steaming coal increased to US$104/tonne (from US$80), Australian coking coal rose to US$259/tonne (from US$193), and semi-soft coking coal rose to US$187/tonne (from US$123).

Why did semi-soft coking coal output fall for Xstrata?

Semi-soft coking coal output was hit by the closure of the United colliery the previous year and by the impact of the earthquake and tsunami in Japan, both of which reduced available tonnes for that product type.

What operational issues affected coking coal production mentioned in the article?

Coking coal production was impacted by the moving of longwall mining units at several operations, including the Tahmoor mine south of Sydney and the Oaky No.1 and Oaky North mines in Queensland, which temporarily reduced output.

What should everyday investors take away from Gloucester Coal and Xstrata's updates?

The updates show that strong coal prices and solid demand can boost sales and revenues even when production is disrupted by wet weather and operational moves. Investors should note the mix of higher prices and logistical constraints described in the article—price strength helped offset modest production slips, while weather and mine-specific issues remain risks to watch.