Coal and iron ore: Miners benefit from plunging fuel costs and currency weakness

The collapse in oil prices and upheaval in commodity producer currencies is creating a welcome benefit for miners as coronavirus rages on. At US$30/bbl Brent and spot FX, unhedged thermal coal exporters across Russia, South Africa, Australia and Indonesia are seeing total cost savings of between US$8-12/tonne compared with Brent oil at US$68/bbl. Cost savings in metallurgical coal are higher at US$10-17/tonne for major exporters, except the US. Average savings for iron ore mines are US$7/tonne, which will lower industry costs by 15%. Bulk commodity (coal and iron ore) prices have remained resilient throughout the outbreak providing margin support for major miners. Demand weakness and the potential for further supply disruption will restrain tonnage in the seaborne market this year and limit miners ability to significantly increase cashflow. In this insight we explore diesel intensities and cost savings across open cut and underground operations across coal and iron ore.