Coal industry forced to cut prices

INDUSTRY: Rio Tinto’s Bill Champion called a meeting with its suppliers.  Picture: Louise Kennerley
INDUSTRY: Rio Tinto’s Bill Champion called a meeting with its suppliers. Picture: Louise Kennerley

RIO Tinto has told its Hunter Valley coal industry contractors to cut their prices if they want to keep the company’s business in 2013.

Despite the need to cut costs, Hunter coalminers have hit another year of record output, with exports totalling 134 million tonnes in interim figures published this week.

This is a 17 per cent increase on the 2011 total of 114 million tonnes.

Rio’s call on its contractors and suppliers was made clear when representatives of the various companies were called to Brisbane for a December 12 meeting with Rio Tinto Coal Australia managing director Bill Champion.

A spokesman confirmed the meeting, saying Rio chief executive Tom Albanese had announced a major cost-cutting drive in November.

“Like others in the Australian coal industry, Rio Tinto is facing the challenge of increasing costs in an environment of significantly lower coal prices and a high foreign exchange rate,’’ the Rio spokesman said of the Brisbane meeting.

“We are working to improve the productivity of our business to ensure we remain competitive and reducing costs is an essential part of this picture.”

Sources said Mr Champion had not put a figure on the size of cuts Rio was seeking but one put the ball-park figure at about 20 per cent.

Sources said Mr Champion told those present that Rio needed them to ‘‘share the burden’’ of this year’s cuts to coal prices.

Costs vary from mine to mine but Rio’s three Hunter businesses – Bengalla, Mount Thorley/Warkworth and Hunter Valley – are all regarded as efficient, low-cost operations.

Contractors have borne the brunt of the cost cuts already announced by the major coal companies, and the mine workers’ union has accused the industry of exaggerating the impact of recent price falls.

But the competitive nature of the contract business means that most coal industry suppliers may have little choice but to reduce their prices.

The ‘‘spot’’ price for one-off cargoes of Hunter Valley steaming coal has rebounded in recent weeks to more than $US90 ($A87) a tonne but it remains well short of the $115  a tonne that Japanese power stations were paying for long-term supplies during 2012.

Figures published this week by the Hunter Valley Coal Chain Co-ordinator show Port Waratah Coal Services (PWCS),  which operates loaders at Carrington and Kooragang Island,  shipped about 106 million tonnes in 2012, up from 98 million tonnes in 2011.

Newcastle Coal Infrastructure Group moved about 28 million tonnes through its Kooragang loader, up from 16 million tonnes in 2011.

About 55 per cent of PWCS exports went to Japan, with, 18 per cent to China, 13 per cent to South Korea and 8 per cent to Taiwan. 


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