BHP Billiton Ltd. and Mitsubishi Corp. said they expect their
newest coal-mining operation in eastern Australia to be able to
ride out a prolonged market slump, even as new Chinese import
tariffs raise concerns over the outlook for the country's coal
sector.
On Monday, the companies, which together operate a 50-50 joint
venture known as BHP Billiton Mitsubishi Alliance, officially
opened the US$3.4 billion Caval Ridge coking-coal mine in
Queensland state. The operation, designed to produce 5.5 million
metric tons a year, first started producing coal earlier this
year.
"We are confident that if we maintain our productivity focus
then we will continue to have a globally competitive business," BHP
coal president Dean Dalla Valle said. Coking coal is a key
ingredient in steel, used widely in the construction and
manufacturing sectors.
China last week said it would impose tariffs not seen in a
decade on imports of certain types of coal, raising concerns among
analysts about the outlook for Australian coal. The move comes as
the pace of China's coal demand is slowing.
"The exact impact of an import tariff on domestic and seaborne
volumes is subject to a range of coal price and demand
elasticities," Commonwealth Bank of Australia analyst Lachlan Shaw
said. "However, what is certain is that a coal import tax would be
negative for China's coal import demand and, by virtue of likely
resultant slower seaborne demand, seaborne coal pricing."
The price of Australia's premium coking coal has fallen more
than 15% this year, to around US$112 a ton, according to data
provider the Steel Index.
That has already sparked widespread cost-cutting and workforce
cuts, including in BMA's business. Only last month, the companies
announced they would have to shed 700 jobs across their operations
as they redoubled their efforts to reduce spending.
As recently as 2011, coking-coal prices traded above US$300 a
ton, but have been ravaged by oversupply.
Despite recent job cuts, BHP and Mitsubishi Monday argued their
operations are highly efficient and would be able to withstand
pressure from a weak global market. BMA runs eight coal-mining
operations in eastern Australia, making it the world's biggest
exporter of coking coal.
"As the low prices have driven high-cost mines out of business,
there should be more demand for coking coal from efficient mines,"
said an official of Mitsubishi. Mitsubishi wants to double its
coking coal sales to 40 million tons a year by 2020 from 20 million
tons in 2012.
"Global coking coal demand is rising, mainly due to India and
China. It's true that prices are not high right now, but we will
keep going by [running] efficient operations," the Mitsubishi
official said.
Write to Mari Iwata at mari.iwata@wsj.com and Rhiannon Hoyle at
rhiannon.hoyle@wsj.com
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