The Chinese coal sector is maturing and growing sleeker through consolidation, according to a report from Xinhua. At the end of 2012, the number of large coal-producing companies — those with revenues greater than 20 million yuan — shrank by nearly 20 percent, from 7,700 firms to 6,200.
This streamlining was reportedly driven by overcapacity. Data from the China National Coal Association shows that coal stockpiles held by producers nationwide leapt 58 percent during 2012; they now stand at 85 million metric tons (MT). China’s production is up 4 percent on the year, to 3.66 billion MT, while prices at some locations in the nation have fallen as much as 27 percent, to 630 yuan ($100) per MT.
Coal companies globally are being held back by regulatory issues, according to the 2012 Mining Executive Insights survey recently released by IT-services provider Ventyx. Of the over 75 coal companies surveyed, 35 percent said that government approvals are the main constraint to the growth of their existing operations.
The second-most common response was customer demand — flagged by 21 percent of respondents — followed by available reserves at 18 percent. Only 11 percent of coal companies surveyed identified port or rail infrastructure as their main constraint.
Indian coal imports continue to surge on the back of flagging domestic production. Coal imports rose 45 percent year-on-year in December 2012, from 9.77 million MT to 14.2 million MT, according to data from Interocean Group. That includes 12.1 million MT of steam coal and 2.1 million MT of steel-making coal.
Growth efforts in India’s domestic coal sector are finally starting to gain some traction, as Coal India (BSE:533278) — the world’s largest coal mining company — accelerates production, according to reports from the company and the Indian government. The company is targeting an overall increase of 7 percent for this fiscal year and is aiming for further growth of 6 percent for the coming year. That will put this fiscal year’s total at 492 million MT.
Coal India’s production growth has been stagnant for the past two years due to problems obtaining environmental and regulatory approvals for mining.
One of the world’s largest undeveloped coal deposits — Mongolia’s Tavan Tolgoi, host to some 7.5 billion MT of coal — will remain undeveloped for some time longer, according to reports last week from the government company charged with moving the project forward.
State-owned Erdenes Tavan Tolgoi said that it will delay a planned IPO of the project; the IPO was previously projected to raise up to $3 billion. The company plans to put off the transaction until more infrastructure is in place for a mining operation.
The owners of the project are reportedly also looking to renegotiate prices for an existing coal purchase contract with Aluminum Corporation of China (NYSE:ACH), which some analysts say may be pricing coal up to $20 per MT cheaper than coal being sold to China from elsewhere in Mongolia.
Spain is working on ways to keep its government-subsidized coal sector alive beyond an EU-mandated closure in 2019, according to Platts. The Spanish government had previously submitted plans to close subsidized coal mines in the country, but has now done an about-face and is looking for ways to keep the mines active, the nation’s industry minister said.
As the world’s coal markets are still without direction, NYMEX coal prices have remained mostly flat through the beginning of 2013. Central Appalachian moved up slightly last week, from $55.75 per ton to $57.22 per ton. Both Indonesian McCloskey and Eastern Rail held steady at $63.60 and $60.38 per ton, respectively. Western Rail PRB sits at $9.90 per ton.
Indonesian coal explorer Indus Coal (ASX:ICZ) expanded its project footprint this week, purchasing a 38-percent interest in two companies that own three coal projects in Indonesia’s Jambi province for $6.5 million.
Major producer Xstrata (LSE:XTA) declared force majeure on several shipments of coal from its Queensland, Australia operations after heavy rainfalls flooded rail lines there. The disruption affected over a dozen mines that ship coal to the port of Gladstone. The company said mine operations themselves were not materially affected by the rains.
US coal junior Corsa Coal (TSXV:CSO) said last week that the company sold 57,000 tons of metallurgical coal during the fourth quarter of 2012 for an average realized price of US$123 per ton. The output was slightly above previous guidance of 55,000 tons. For the 2012 year in total, Corsa produced 373,000 tons of metallurgical coal.
Also in America, Tennessee coal developer NovaDx Ventures (TSXV:NDX) announced the purchase of a mine and facilities adjacent to its Rex coal project. The Mine 12 property was bought by the company and its streaming-model investor, Sandstorm Metals & Energy (TSXV:SND), for a total price of US$8.5 million. NovaDx believes the new property will provide additional reserves plus another mine entry for an overall project development.
Forbes and Manhattan Coal (TSX:FMC) saw a significant drop in production from its South African operations during its third quarter, which ended November 30, the company reported this month. A four-and-a-half week labor action during the quarter resulted in the company’s total sales falling to 147,000 MT — a 48-percent decline from the previous quarter.
The company also cited a “challenging international coal market” as responsible for the quarter’s performance, which saw it post a net loss of $4.97 million.
Securities Disclosure: I, Dave Forest, do not hold equity interest in any companies mentioned in this article.