Glencore Xstrata shelve Australian coal export terminal

May 14, 2013

Glencore Xstrata announced that it will scrap its plans for a new coal shipping facility in Queensland state, a move that reflects sustained weakness in Australia’s once-booming coal export industry, The Wall Street Journal reported.

The proposed Balaclava Island Coal Export Terminal would have opened up a new route for coal exports from the resource-rich Bowen and Surat basins to buyers in Asia.

Xstrata’s Australian coal unit spent several years examining plans for the terminal’s development prior to the company’s merger with Glencore International.

The port was designed to ship (35 million stpy) from a site 40 km (24.8 miles) south of the city of Rockhampton.

Following completion of the merger and a review of the project, “Glencore Xstrata has decided to cease its work on the project, effective immediately,” the company said in a statement emailed The Wall Street Journal. It cited poor market conditions in the Australian coal industry and excess port capacity in Queensland.

The company said it also had “concerns about the industry's medium-term outlook.”

Coal prices plunged to multiyear lows last year in tandem with reduced demand in countries such as Japan and China, the latter Australia's biggest trading partner. Yancoal Australia Ltd., another major Australian producer, recently said it expected coal prices to remain under pressure “for some time.”

Given subdued demand, the coal shipping industry is faced with more shipping capacity than it needs. Australian coal producers have shut pits and delayed investments, as low prices and weak Asian demand have made many of the country’s mines unprofitable.

Port Waratah Coal Services, the operator of the world's largest coal-export facility at Newcastle, in the Australian state of New South Wales, has delayed plans to build a new coal terminal that would have expanded its shipping capacity by more than 80 percent, and may decide to scrap the project altogether, it said last month.



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