News Wrap

IN THIS morning’s News Wrap: Rail deals force coal miners to operate at a loss; China's new cities ‘to fuel demand’; and Yancoal shares in freefall as parent walks away from buy-out.

Lou Caruana

Rail deals force coal miners to operate at a loss

Some of the world’s biggest miners are running Australian mines at a loss because the fixed costs of their rail contracts mean it would hurt more to close them, according to the Sydney Morning Herald.

Several coal mines in Queensland are understood to be operating under such a scenario, because of long-term “take-or-pay” rail access contracts that miners struck when commodity prices were high.

Several coking coal mines run by global miner Anglo American are understood to be affected in this way and one source said he was confident that Anglo was not “Robinson Crusoe” in that regard.

Australia's coal sector is already facing multi-year lows for both thermal coal and coking coal prices, and the fixed-rail contracts highlight the multitude of challenges facing the local industry.

When asked to confirm the situation in Queensland, an Anglo spokeswoman said the company would not comment on “matters of this nature”.

But Anglo is known to have take-or-pay contracts in place with Aurizon for rail access, and Anglo chief executive Mark Cutifani referred to the problems it was causing during the company's annual results in February.

China's new cities ‘to fuel demand’

Fortescue Metals chief executive Nev Power has forecast that China will need to consume at least 800 million tonnes of steel a year for the next four decades if the nation is to maintain its rapid urbanisation, according to The Australian.

The company used historical economic data, based on the US industrialisation era, to issue the bullish forecast that it believes will help underpin the volatile iron ore price.

Yancoal shares in freefall as parent walks away from buy-out

Shares in Yancoal Australia, the listed coal miner controlled by Chinese state-owned entity Yanzhou Coal, continued to plummet yesterday as the group's cornered minority shareholders headed for the exit, according to The Australian.

Yancoal shares plunged another 12.5c to 45.5c yesterday, continuing a slide that started on Monday when Yanzhou quietly walked away from its plans for an outright takeover of the company.