BHP Billiton expects growth in the seaborne coking coal market
The latest assessment from BHP Billiton, the world's largest supplier of seaborne coking coal, is much more upbeat than previously. The company predicted a year ago that prices would return to the marginal cost of production once short-term supply disruptions eased.
BHP Billiton's coking coal cash costs rose by 8pc in the 2016-17 financial year that ended 30 June to $60/t fob Australia excluding royalties, after several years of significant cost cutting. The increase was the result of a fall in production caused by Cyclone Debbie in Queensland and a stronger Australian dollar against the US dollar. The firm expects costs to remain elevated in the current financial year at $59/t, despite an expected increase in production, as it enters a period of higher strip ratios and debottlenecking.
The firm's Queensland coking coal division made a profit before interest and tax of $2.65bn in 2016-17, after making a loss of $139mn on the same basis a year earlier. Higher prices more than offset the increase in costs during the period.
The firm produced 40mn t of coking coal in 2016-17 and expects to produce 44mn-46mn t in 2017-18.
BHP Billiton received an average hard coking coal price of $180/t in January-June, up slightly from $179/t for July-December last year. It received an average price of $180/t in 2016-17, up from $83/t in the previous fiscal year. Spot premium hard coking coal prices have rebounded to $194.95/t fob Australia yesterday from $137.90/t two months earlier, although they are still short of the $304.25/t peak recorded in mid-April after Cyclone Debbie disrupted supply.
The company received an average semi-soft coking coal price of $121/t for January-June, down from $122/t during July-December. The 2016-17 average rose to $121/t from $69/t a year earlier.