BHP Billiton foresaw little improvement in coal prices in the near term as the market was likely to remain oversupplied for some time, coal chief Dean Dalla Valle said yesterday.
Prices for metallurgical coal have slumped to around $105 (R1 109) a ton from more than $300 in 2009, while thermal coal prices have dropped to $75 a ton from highs around $130 in 2011, which has led producers to shut some mines, axe jobs and shelve projects.
At the same time, some mining firms have boosted output, looking to lower production costs per ton, while BHP Billiton opened a new mine a year ago and has another due to start producing this year, exacerbating the glut.
“It’s tough out there. It’s hard to see any relief in the short term, certainly when you’ve got such strong supply,” Dalla Valle told reporters.
Producers in Indonesia, the biggest exporter of thermal coal used in power stations, have been ramping up volumes to offset the drop in prices, and he said output would probably increase further.
Nevertheless, BHP Billiton remains optimistic about long-term demand for coal, even in the face of global efforts to cut use to combat climate change and China’s efforts to curb pollution in its biggest cities.
Dalla Valle’s focus was to improve returns from the business from a poor 7 percent by cutting costs and boosting productivity, not just by wringing more from BHP Billiton’s coal miners but also from the company’s suppliers.
He did not rule out selling some collieries, such as those in South Africa, and its stake in the Cerrejón mine in Colombia, an issue raised as BHP Billiton said this week it was looking to streamline to focus on its biggest and best assets.
“When you look at these things, you have to look at the commodity, the mine and the jurisdiction it’s in.”