Thermal coal operating revenues from Australian mines dropped by 16% to 1.8 billion while coking coal fell by 26% to $294 million.
In response to the extreme market conditions, coal production is being cut-back in Australia, Glencore CEO Ivan Glasenberg said.
“Against a challenging backdrop for many of our commodities, we have taken a range of pre-emptive actions in respect of our balance sheet, operations and capital spending-recycling in order to preserve our current credit rating and sustain our track record on equity distributions,” he said.
“Our core industrial assets remain well positioned on their respective cost curves.”
Further supply reductions are anticipated for the balance of 2015.
Declining Chinese seaborne import thermal coal demand has been a dominant feature of thermal coal markets, according to Glencore.
This decline has been driven by rising coastal ultra high voltage capacity, hydro and nuclear power supply.
“Regarding China’s revised import regulations, Indonesian low energy coals have been most impacted with higher energy coals from Australia being relatively resilient,” it said.
“In Europe, coal demand has remained flat, while Indian, Mediterranean and African demand continued to grow. Asian thermal coal demand also continues to increase in Korea, Taiwan and Malaysia as new power stations become operational.
“On the supply side, necessary cutbacks are taking place in Indonesia and the US, albeit more slowly than required by market forces. Falling prices have reduced price differentials across the various market segments and buyers are now favouring higher energy products at the expense of low energy coals, particularly from Indonesia.
“The pricing shift is supporting stable supply from Australia and Colombia while South Africa and Russia are marginally increasing supply, having disproportionately benefitted from the weaker domestic currencies.”
Glasenberg remains optimistic about the future of the company.
“We remain by far the most diversified commodity producer and marketer and are well positioned to benefit from any improvement in pricing when it finally and inevitably materialises,” he said. “Our principal objective remains to grow our free cash flow per share and return any excess capital in the most sustainable and efficient manner.”