Coal sales deferred as Newcastle ships queue growsadmin
January 26, 2007 Filed Under: Coal Mining, Mining Services
THE queue of coal vessels at the Newcastle Port has grown so large that some customers are deferring purchases rather than let their ships idle offshore for 20 days before loading.
Gloucester Coal this week revealed its demurrage costs – the amount it pays per tonne when a ship is forced to wait in the long queues – had risen five-fold in the past year. In December, demurrage added more than $2.50 a tonne of coal to Gloucester’s costs.
The delay between ships arriving and loading blew out to 20 days this month from 16 days in December, so the costs are not likely to abate soon.
“Demurrage costs ”¦ are forecast to continue at higher levels [this quarter],” Gloucester said in its quarterly production report.
As of the week ended January 22, 52 vessels were waiting off Newcastle to load 4.5 million tonnes of coal from producers such as Gloucester, Centennial Coal, Rio Tinto’s Coal & Allied subsidiary and Xstrata Coal.
Some customers had elected to defer sales rather than have vessels stand in the queue, Gloucester said.
In a recent research note, UBS analysts noted demurrage costs had risen as high as $5 a tonne. But they said Gloucester had only to pay the fees on half of its sales, since some coal is sold under customary dispatch – a system in which there is no penalty for long waiting times at port.
Xstrata Coal is said to be lobbying other Hunter Valley producers to reintroduce a quota system which was dropped at the end of last year. In the September quarter, mines were struggling to produce enough coal and get it to the port in time to meet their alloted shipments. But as the production situation improved in the December quarter, huge shipping queues were formed.
Gloucester sold 621,000 tonnes of coal in the December quarter, of which 77 per cent was export thermal coal and 23 per cent was export coking coal. The December sales figure was 37 per cent higher than the 455,000 tonnes sold in the September quarter.
ABN Amro Morgan this week rated Gloucester as its top pick of the coal stocks, warning that producers such as Centennial, with a high amount of domestic production, faced higher labour and equipment costs.
The market expects good news when Gloucester updates its resource statement in March. It recently discovered a large coal seam on its tenements which could increase its production by 40 per cent from 2009.