BHP shows no signs of cutting back met coal production

BHP Billiton is favouring cost-management and efficiency over production cuts in its efforts to tackle the current weak coal market, according to global coal business president Dean Dalla Valle.

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The executive made the comments at the energy and resources series held by the Committee for Economic Development of Australia (CEDA) in Brisbane, Australia on Wednesday April 2.

Benchmark hard coking coal prices have reached their lowest point since 2007 with the June quarter settled at $120 per tonne fob Australia last week. Steel First’s fob Australia premium hard coking coal index has fallen by more than 17% since the start of the year to reach $110.69 per tonne on Tuesday April 1.

As spot prices continue to hit new lows, some participants have said that the market will recover to sustainable levels if supplies from Australia tighten.

However, BHP has found another way to counter lower prices.

“Over the past 18 months we have focused on our cost base throughout our [coal] operations and there is still more we need to do as we continue to look for ways to improve the productivity and competitiveness of our mines,” Valle said.

“The process we are undertaking is essential to ensure that we have a viable and sustainable industry over the longer term,” he added.

Valle said the company expects global demand for metallurgical coal to grow “over the next couple of decades”, and that India is anticipated to be the most significant source of new demand.

“Productivity improvements will be essential if we are again going to produce the returns required to attract capital to sustain existing operations to maintain current production levels, and to improve the business case for new coal mines in the future,” he said.

BHP expects to produce 41 million tonnes of metallurgical coal for the fiscal full year 2014. The miner produced 21.7 million tonnes during the December 2013 half-year.