High-ash thermal coal: demand pull or supply push? Report

Insight 27 October 2016

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Report summary

The production of high ash thermal coal has increased in Australia largely due to Chinese coastal demand and producers looking to maximise the value of their product portfolios. However, in the current market producers may be incentivised to switch from high-ash too more low-ash production as the discount outweighs the cost savings for producing the high-ash product. Processing capacity constraints may restrict a mine's ability to switch between a high-ash and low-ash product. The decision is whether to invest in the development of mine infrastructure and processing plants to produce more washed low-ash coal, or proceed with business as-usual.

Executive summary
The rise of high-ash thermal coal
Why produce high-ash coal?
Conclusion
Annex 1: Australian 2016 seaborne thermal coal cost and margin curves

Tables and charts

This report includes the following images and tables:

High-ash thermal coal production by country, Mt
High-ash coal marketable reserves as of 2016, Bt
Specifications of Australian benchmark high-ash coal

Production, change in NPV (2011-15) due to inclusion of high-ash product and breakeven high-ash coal discount by mine
Actual and breakeven high-ash coal discounts by mine
Factors influencing high-ash thermal coal production in Australia
Mines position on cost curve with high-ash production*
High-ash thermal coal: demand pull or supply push?: Image 7
Mines position on margin curve with high-ash production*
High-ash thermal coal: demand pull or supply push?: Image 9