WoodMac's coal country leaderboard

AUSTRALIA remains a competitive coal producer of both metallurgical and thermal coal not only in terms of production but also for cash costs and operating margins, according to global rankings made by Wood Mackenzie.
WoodMac's coal country leaderboard WoodMac's coal country leaderboard WoodMac's coal country leaderboard WoodMac's coal country leaderboard WoodMac's coal country leaderboard


Blair Price

Data from a total of 464 mines from most of the key coal producing nations was compiled, with all prices mentioned for free-on-board tonnes.

Most key coal producing countries were covered in WoodMac’s research report with the notable exceptions of Russia and Mongolia.

Thermal coal

The country average total cash costs came up to $US48 per tonne for thermal coal while the average operating margin was $65/t.

Unsurprisingly, Indonesia was ranked best for cash costs in the commodity at an average of $40.71/t for its mines, while Colombia came in second at $45.29/t, and South Africa third at $49.79/t.

Australia was in sixth place at $55.50/t, followed by the US at $57.46/t and China, which holds a lot of deep mines, in eighth position at $59.67/t.

But operating margins for thermal coal were a different story with Australia shooting up to second place at $34.07/t due to its quality product.

Colombia’s low cash costs gave it pole position in this regard with an operating margin average of $37.07/t, while Indonesia was third at $29.78/t, China fourth with $28.20/t and South Africa fifth at $27.53/t.

The US was in eighth position with average operating margins of just $10.78/t.

Key factors influencing cash costs and margins include labour costs, product quality and transportation costs.

Indonesia is the top thermal coal producing nation, with WoodMac estimating it will export 233 million tonnes in 2010, followed by Australia with 140.2Mt, Colombia 72.3Mt and South Africa with 71.3Mt.

Indonesia not only has plenty of open cut mines with low overburden stripping ratios, but can also cut costs in many cases through river barging.

But the country’s lower ranked thermal coal does not fetch the premiums received by Australian and Colombian operations.

Metallurgical coal

The best total cash costs for metallurgical coal came from South Africa, with its mines averaging $65.95/t.

Indonesia was in second place at $70.17/t, China third at $79.67/t, Vietnam fourth at $80.67/t and Australia in fifth place at $80.69/t.

The US was well behind in seventh place at $98.76/t, far behind the New Zealand average of $82.87/t, while Canada was in ninth position at $99.92/t even though it is the third-largest exporter of the commodity with 27.54Mt expected for 2010.

For average operating margins, minor coking coal exporter New Zealand was on top at a generous level of $115.4/t.

China, not known for dishing out high wages, took second place at $114.47/t while the US was ranked third in this regard at $94.35/t, ahead of fourth-placed Australia at $92.96/t.

Indonesia took the fifth place at $92.53/t while Canadian mines had an average operating margin of $90.99/t for met coal.

Australia continues to dominate met coal exports with WoodMac estimating 160.63Mt to be made in 2010.

The US came second with 47.47Mt of expected exports this calendar year.

The average total cash costs across the assessed 202 mines from eight countries was $86/t while the average cash operating margin was $93/t.

Australia’s success with met coal comes not only from the quality of the product, but also from its competitive transportation costs.

Meanwhile, WoodMac noted that North American met coal mines are held back by higher mining and transportation costs.

Australia’s thermal coal price assumption was $US98/t for the Japanese financial year which was scaled down to $91/t for the 2010 calendar year.

The Australian hard coking price assumed was $200/t for the Japanese financial year and $182.25/t for 2010.