In November South32 announced it had entered a binding agreement to buy the colliery and its associated 16.67% interest in the Port Kembla Coal Terminal from Peabody for $US200 ($A260) million plus a mechanism that would let both companies share in commodity price upside on the first year of production.
South32 and Metropolitan are two of the Illawarra region’s largest coking coal producers and the two largest coking coal suppliers to Australian steelmakers.
If the deal proceeds South32 will become the Illawarra’s only supplier of large volumes of coking coal in the medium-term, following the expected closure of Glencore’s Tahmoor mine.
“Australian steelmakers currently appear to benefit from competition between South32 and Metropolitan in the form of lower prices and a wider product range,” ACCC chairman Rod Sims said.
“This transaction will remove that competitive rivalry.
“The ACCC recognises coking coal is a globally traded commodity where producers typically compete on a global basis. However, local competition between South32 and Metropolitan to supply the Australian steelmakers is important in determining the prices paid by Australian steelmakers.
“The ACCC’s preliminary view is that coal suppliers outside the Illawarra region may not act as a strong competitive constraint on South32, largely due to the additional costs to the Australian steelmakers associated with transporting material volumes of coal from other regions such as the Bowen Basin in Queensland.”
South32 was keen on the Metropolitan deal because it would integrate a well-capitalised underground operation that would add about 1.9 million tonnes per annum of saleable metallurgical coal production.
It would also give it blending opportunities and resource synergies, including the potential development of South32’s CCL724 mining lease adjacent to Metropolitan. That lease has a 71Mt coal resource.
