Coal no longer profitable: Price dropped 12 per cent in four weeks

Central Queensland mines must produce more coal at less cost in order to stay profitable, according to top tier management at BHP Billiton Mitsubishi Alliance (BMA) and the Queensland Resources Council.

This was the message delivered by industry heavyweights Gerhard Ziems, Head of Finance at BMA and Michael Roche, Chief Executive of the Queensland Resources Council,  at the Bowen Basin Mining Club luncheon in Moranbah last Thursday.

“With a dropping coal price, recently falling 12 per cent in four weeks, and high exchange rates, it’s hard to stay competitive,” said Mr Ziems.

“We can’t control global economics or royalty payments, so BMA is focusing on what we can influence and we are calling it our productivity agenda.

“BMA is rolling out a program of onsite efficiencies and we are increasing coal production to offset major cost burdens and low profit margins.”

Speaking to an audience of 250, Mr Ziems said coal prices were the lowest for four years, but the company continued to invest heavily in the Bowen Basin to secure its future competitiveness.

Mr Roche said BMA’s experience was being shared across the sector. “At the moment, you’d be hard pressed to find a coal mine turning a profit,” he said.

“Coal is 14% of Australia’s Gross Regional Economy, take that out and you’re losing a big chunk.

“The biggest challenge is not if someone commutes here (Bowen Basin) to work, it is whether our coal prices stay competitive on a global scale.

“Industry is replacing price with volume to offset costs, amid falling coal prices,” said Mr Roche.

Mr Roche said Queensland Resources Council would continue to lobby for the Queensland Government to spend more of the royalties it receives from mining activities in the mining regions.
He also said the organisation was working hard to counter what he described as “the misleading orchestrated anti-coal and gas campaigns by organisations such as Greenpeace aimed at closing the industry down.”

Bowen Basin Mining Club Director Jodie Currie, who hosted the event, said it was clearer than ever contractors had to rise to the challenge to reduce costs and increase efficiency. But those suppliers of goods and services who met expectations would prosper.