The company said that the thermal spot price in 2002 had been volatile, starting at US$29.5/tonne FOB, dropping back to US$20.5/tonne in August and then recovering sharply to around US$27.0/tonne in the final quarter of the year.
A mild European winter, lower gas prices in the United Kingdom, increased competition from Russian, Indonesian and Australian imports into Europe, and higher than average hydro-generation, all contributed to create an oversupplied market, resulting in depressed spot prices.
In the second half sales volumes rose, related to reduced competition from Russia, Indonesia and Australia, a lack of hydro reserves and re-stocking by generators prior to the onset of the European winter.
Increased demand, and an estimated 7.5Mt production cuts, in South Africa, Colombia and Russia, facilitated the year-end recovery. Higher freight rates are still keeping Asian supply into European markets tight, one reason prices in the first quarter of 2003 are expected to hold up.
Xstrata Coal South Africa (XCSA) exported 12.5Mt through Richards Bay Coal Terminal in 2002, some 200,000t less than export volumes in 2001. Average annual prices received for RBCT exports fell some 19%, from US$30.3/tonne in 2001 to US$24.6/tonne for 2002, before recovering to US$27.86/tonne at the end of December 2002. As a result of the dramatic increase in demand in the last quarter, RBCT ended the year with historically low stock levels of some 2.1Mt.
There was a steady performance from the South African domestic market. The 2002 average ex-mine domestic prices of ZAR127.40/tonne increased by 10.3% year on year, reflecting XCSA’s strategy to optimise domestic prices whilst maximising export sales volumes.
Demand for seaborne thermal coal in the Pacific region increased by approximately 8% compared to the previous year.
The predicted increases in Chinese coal exports failed to materialise due to China’s strong domestic market, which resulted in domestic prices exceeding those available in the export market.
Asia remains the predominant market for sales from Xstrata Coal Australia’s (XCA) operations, taking some 70% of 2002 total sales. XCA production amounted to 27.6Mt, 18% higher, than 2001.
Australian power utilities took 18% of production, up from 13% last year. The projected growth in coal demand by power stations in New South Wales is expected to lead to a number of new, long-term opportunities for XCA mines.
“While XCA continues to build a broader customer base for its thermal and semi soft coal products in non-traditional markets, with sales into India and Brazil supplemented by a recent 2.5Mt thermal coal contract into Mexico, the Far East (Japan in particular) remains the prime focus,” the company said.
“Our positive outlook for the Far East takes into account external factors, including the recently announced phased introduction of a coal tax by Japan. Given coal's enviable position as the cheapest fossil fuel for power generation, and the fact that existing taxes on competing fuels (LNG and LPG) will increase simultaneously with the introduction of the coal tax, we do not believe that this tax will have any material impact on Japanese thermal coal demand growth in the medium term.”
See operational report, link below.
