UK-based miner Anglo American has declared force majeure on fourth-quarter shipments of German Creek met coal to a few long-term contract customers, market sources told S&P Global Platts Friday.
The force majeure was effective October 3, although notices were only issued Friday.
It affects only the German Creek hard coking coal brand mined from the German Creek-Grasstree underground mine operation in Australia's Queensland state for the fourth-quarter laycan.
There were no firm details on the volumes affected, according to sources from two Asian steel mills who received the force majeure notification.
Anglo American had declared force majeure because of "a significant weighting event on the longwall roof support which impacted the working height of the longwall and created multiple cavities," an Asian steel mill source said.
An Australia-based spokeswoman declined to comment on any production issues when contacted Friday.
Earlier, Anglo American had been plagued with issues including industrial action due to workers' employment terms and hazardous working environment at the German Creek-Grasstree operation, sources have said.
The force majeure declaration comes amid ongoing negotiations for fourth-quarter term contracts with Northeast Asian end-users.
The talks have been challenging this quarter with prices of Premium Low Vol HCC spiking since July, and with Anglo American in the middle of divesting its coal business.
Premium Low Vol HCC was assessed at $213/mt FOB Australia Thursday, up 179% from the beginning of this year, and up 132% from the start of Q3.
Quality specifications for German Creek are: 70% CSR, 19% VM, 10.5% TM, 9.5% ash, 0.54% sulfur, 0.06% phosphorous, and 180 ddpm max fluidity.
The German Creek-Grasstree mine produced 6.28 million mt of saleable product in fiscal 2014-15 (July-June), according to the Department of Natural Resources and Mines.
This means that an estimated 1.5 million-1.6 million mt of coal output could be disrupted should all Q4 deliveries be affected by the force majeure.
The German Creek- Grasstree operation has been suffering from persistent production issues over the last few months.
Customers had on September 16 received notifications from Anglo American that production issues at its Grasstree longwall mine remained unresolved.
At that time, the miner had said that production would not return to normal levels until the longwall commences in the subsequent panel.
Anglo American's force majeure notification also comes on the heels of production outages at other Australian mining operations earlier this year.
A force majeure was declared in early September at South32's Appin mine at its Illawarra project due to roofing problems.
IMPACT LIKELY ON PREMIUM LOW VOL MARKET
The force majeure declaration will likely squeeze near-term supply for Premium Low Vol HCC -- creating increased demand for spot November and December laycan cargoes, said sources.
"We're still assessing the impact, but we definitely need to replace a cargo loading in November," a Northeast Asian steelmaker said. "This is [at too] short notice."
Anglo American was the second largest Australian producer of met coal, as well as the third largest supplier of prime hard material in 2015, according to company reports.
Another steelmaker in the region stated that there were not likely to be many Australian alternatives to replace the lost tonnage. BMA's Peak Downs and Saraji, as well as Rio Tinto's Hail Creek are the other commonly traded coal brands.
"We have been under the impression that the price rally is coming to an end," the mill source said. "This completely changes things."
