Quarrying & Mining Magazine
Q&M Q&M Comment

Future still bleak for Solid Energy


Coal miner Solid Energy has suffered a sharp decline in its fortunes over the past two years and it fronted up the AusIMM conference in Hamilton a very changed outfit.

Tony King, Solid Energy’s chief development officer – strategy, planning and projects, describes the shrinking of the company’s staff by more than half in the past 15 months and its dropping of non-core activities as “a fairly radical change”.  King, who has rejoined the company after an earlier time as a Solid Energy executive, explained to the 2014 AusIMM conference that the significant downsizing (from 1700 staff in early 2013 to under 800 staff), followed a sharp drop in the past three years of coking coal export prices – which has been a major source of the company’s income.
Back in August 2011 the export coking price expressed in Kiwi dollars was between $340 and $360 a tonne. In the last six months the price has only been around $130 a tonne.  “That is an extraordinary change in the price of what has been the single largest component of our business,” says King.  If just the last 12 months is examined, there has been a continuing decline in the spot price of coking coal from about $180 a tonne a year ago down to about $130 a tonne for the last six months– that’s $50 a tonne on a couple of million tonnes of coal that Solid Energy has lost.
King says the company has successfully taken a lot of structural cost out of its principal export mine at Stockton.

“We have done a pretty good job of following that decline in price down. But we have really not been able to get ahead of it.”
The coal coming out of the $123 million wash plant at Stockton (built in 2010) is by far the cheapest coming off the site. The productive plant has had actual production 40 percent higher than projected. It has been a key to keeping Stockton open at the current low prices.
Still, Solid Energy was forced to announce just three months ago a significant downsizing of about half a million tonnes a year.  King says this is all about trying to finesse everything that they do at that site.
“We have to be thoughtful about which sites we work, which products we work, which customers we focus on and what shift rosters we work to maximise productivity.” Looking to coal’s future, King says international coal industry analysts’ consensus of forecasts is for a steadily increasing trend in coal spot prices to 2018 and 2019.
But these forecasts would only mean a long-term real price rise of about $30 a tonne.
“The only conclusion we can draw is that the current range of prices is going to continue and we should cut our cloth to live with that.”
By Lindsay Clark

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