Glencore in Australia said Wednesday it plans to close its Tahmoor metallurgical coal mine in the state of New South Wales by early 2019 as a result of "continued low prices in global coal markets."
The move may soon remove one of the remaining high fluidity coking coals available from Australia, which has already seen this year the end of production from BHP Billiton-Mitsubishi Alliance's key Gregory mine in Queensland after the depletion of resources.
Tahmoor is located 50 miles southwest of Sydney in the Southern coal field and has been in operation since 1979.
Tahmoor is adjacent to BHP Billiton spin-off company South32's Appin metallurgical coal mine producing the high CSR mid-vol Illawara product. Other miners in the Southern coal field include Centennial Coal and Peabody Energy. New South Wales is predominantly made up of thermal coal and semi-soft producers.
The underground mine had saleable coal production of 2.1 million mt last year, with its export metallurgical coal transported 73 miles by rail for shipment via Port Kembla coal terminal, in which Glencore is a shareholder.
"The decision has been made as a result of continued low prices in global coal markets, which has meant the economic return from reserves still available at Tahmoor is not sufficient to warrant the investment required to mine them," Glencore said in a statement.
Tahmoor's 350 workers have been informed of the decision and the size of the workforce will be gradually reduced over the next 18 months as production winds down, the company said.
Current market conditions did not support Glencore's earlier proposed development projects of Tahmoor North and Tahmoor South, it added.
Coking coal prices have recovered in the past few months but remain well below peak and average values in the past few years.
Tahmoor traded at a discount to premium coal prices, which for the Q2 period settled at a Australia-led industry benchmark of $84/mt FOB. Platts PLV FOB Australia spot prices in May averaged at $90.66/mt. Prices peaked in early 2011 at over $300/mt FOB, with average prices since 2013 at below $150/mt FOB.
Tahmoor's washed coal is rated at 3,000 ddpm fluidity, with 60 CSR and 28% VM as well as 0.4% sulfur and 9% ash, according to data compiled by Platts from market participants.
Gregory had higher fluidity and was higher in VM with lower CSR. Rio Tinto's Kestrel has 3,000 ddpm with weaker CSR and higher VM than Tahmoor.
US high-vol B commonly traded has 25,000-28,000 ddpm, and usually over 35% VM with higher sulfur than Australian coals. Platts assessed high-vol B at $79.75/mt FOB US East Coast on Wednesday.
Fluidity in coking coals is coveted by steel mills to help blend different coals and pet coke together in coke ovens. Tahmoor was understood to be mainly sold on a contract basis, with some spot demand appearing.
As several types of met coals, pet coke and other materials are ground up before being heated to make blast furnace coke, the weighted average of fluidity and dilatation properties in the blend is key. This may allow smaller amounts of high fluidity coals to be used and caps the scale of any price differentials with lower fluidity coals.
Glencore in Australia operates 18 coal mines in New South Wales and neighboring Queensland that produce around 92 million mt/year of metallurgical and thermal coal, the company said in the statement.
