Caterpillar has announced 1Q16 sales and revenues forecasts of US$9.3 – US$9.4 billion on the back of its continued weakness in its equipment sales and down from US$12.7 billion in 1Q15. Analysts had expected 1Q16 revenue of US$10.3 billion.
The company expects sales of its mining equipment to fall another 15 – 20% over the course of this year, Mike DeWalt, Vice President of Finance Services at Caterpillar told the Bank of America Merrill Lynch Industrials Conference, bringing down its mining revenue to around US$7 billion this year from a peak of around US$20 billion in 2012.
As an example of the weakness in the sector, DeWalt noted that sales of its large mining trucks – one of Caterpillar’s most important mining products – had fallen from a peak of about 1600 in 2012 to 150 this year.
Construction equipment sales are expected to fall about 5 – 10% and sales from its Energy & Transportation business are forecast to be down 10 – 15%.
In its three-month rolling retain sales statistics filing, the company reported sales from its Resource Industries business down in all geographical regions with Asia Pacific particularly hard hit – down 56% in February 2016 and 55% in January 2016.
However, DeWalt was keen to stress that the first quarter is usually a weaker selling period for the company and the revised guidance “is reasonably consistent with the normal seasonal selling pattern”.
The company kept its full-year guidance at US$40 – US$44 billion with DeWalt telling investors that Caterpillar was looking at sales and revenue at the mid-point of that range.
Edited by Jonathan Rowland.
Michigan’s largest utility company, Consumers Energy, has announced it is to close its seven oldest coal-fired power plants – collectively known as the Classic Seven. The plants have a combined generating capacity of 1000 MW.
The plants to be closed include unites 4 and 5 at the B.C. Cobb plant in Muskegon, units 7 and 8 at the J.C. Weadock plant in Hampton Township and units 1, 2 and 3 at the J.R. Whiting plant in Luna Pier.
“There plants have a long track record of running safely, productively and efficiently,” said Conumers’ Senior Vice President of Energy Resources, Dan Malone. “In fact, Whting’s unit 3 recently set a company record by operating continuously for 679 consecutive days, the sixth longest run for a US power plant.”
The company recently purchased the Jackson gas-fired power plant to replace the power from the Classic Seven, as well as continuing to invest in renewables generation.
“Shutting down the Classic Seven plants reduces our carbon footprint by 25%, reduces our air emissions by 40% and results in a water use reduction of 40%,” said Malone. “In addition to adding the Jackson plant, we’re exceeding the state’s requirements for adding Michigan-based renewables energy to serve customers.”
The company said it was working to place workers from the seven plants at other Consumer Energy sites. Consumer Energy supplies natural gas and electricity to 6.7 million Michigan residents and is the principle subsidiary of NYSE-listed CMS Energy.
According to the US Energy Information Administration, coal-fired power plants made up more than 80% of the 18 GW of capacity retired in the US last year. Overall, about 4.6% of US coal capacity was retired in 2015 with nearly half of this total located in just three states: Ohio, where 18% of the state’s coal capacity was retired last year, Georgia and Kentucky.
Edited by Jonathan Rowland.
BMI Research has substantially revised down its thermal coal price forecast on the back of weaker-than-anticipated multi-year demand.
The research firm now forecasts average prices of US$51 per tonne for 2016 and US$52 per tonne for 2017. This compares to a previous forecast of US$59 per tonne and US$60 per tonne for 2016 and 2017 respectively.
“The key change to our demand assumptions has been a downgrade to our China coal consumption forecasts,” the company said in a research note. “Specifically we believe coal-fired power generation will decline over 2016 and 2017 and then register only slight annual increases thereafter.”
The revised price estimates from BMI Research come it at slightly below the Bloomberg Consensus forecasts for thermal coal prices but ahead of the ICE futures curve, where coal prices are tracking a more bearish trajectory with January 2017 contracts trading at US$46.7 per tonne as of 10 March.
Weakness in Chinese demand will be fail to be offset by Indian demand, where near-term import growth is expected to be modest as a result of ample stockpiles at Indian power plants and surging domestic production.
“Persistently low prices will result in a major contraction in global production growth,” BMI concluded. “After a 3.9% contraction in 2015, we forecast production to shrink by 1.4% in 2016. Output will grow by an annual average of just 0.9% over 2017 – 2019. This compares to annual growth of 3.2% over 2012 – 2014.”
Coal production in China, Australia, Indonesia and the US – which together accounted for 68.4% of the total in 2014 – will be hit hardest by supply cuts, BMI Research concluded, while India will remain a bright spot, along with Colombia.
Further risk to coal prices is posed by a slowing of coal-fired power plant build in Asia on the back of growing local opposition, financial restriction on coal projects from international lenders and increasing environmental pressure on Asian countries.
Edited by Jonathan Rowland.
Four new market members have joined globalCOAL’s international trading community.
Based in Dubai, Ferrocadia DMCC is an international natural resources trading house. It has more than 20 yrs worth of experience in the trade of physical and financial commodities, with a focus on agriculture, metals, energy and raw materials.
Also headquartered in Dubai, Global Commodity Ventures FZC specialises in trading and shipping coal and related energy resources to large and medium sized industries across the Middle East and India.
Founded more than 65 yrs ago, German Norecom Limited finances, invests and trades in a wide range of commodities, such as flat and long steel products, raw materials and forest commodities.
South African Osho SA Coal Pty Ltd is focused on mining, trading, shipping and marketing of low-grade thermal coal. In addition to South African coal, the group also regularly trades cargoes originating from Australia, Indonesia, Mozambique and the US.
“With this announcement, we see that interest in coal trading spreads beyond the growth markets of Asia, right across more established geographies such as Europe,” said Tracy Vowel, Head of Front Office at globalCOAL. “It’s also interesting to see a new participant who is representative of the changing landscape in the South African coal market. We are delighted to welcome all four new Market Members to the globalCOAL trading community.”
Edited from press release by Harleigh Hobbs
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Gov. Kate Brown signed a bill on Friday making Oregon the first state to eliminate coal from its energy supply by legislation, which will happen in phases through 2030. The law also requires utilities to provide half of their customers’ power from renewable sources by 2040, which doubles the previous standard. Ms. Brown and her fellow Democrats said it was an important step in Oregon’s shift to clean energy. Republican lawmakers strongly opposed it, citing concerns about rising consumer costs and overstated environmental benefits.
By MICHAEL CORKERY
March 20, 2016
Tens of thousands of miners were on strike and coal prices were skyrocketing in October 1902. Afraid of unrest, President Theodore Roosevelt sought the help of John Pierpont Morgan.
The powerful banker, who held great sway over the coal industry, brokered a deal with the miners that ended the strike.
“My dear sir,” the president wrote to Mr. Morgan. “Let me thank you for the service you have rendered the whole people.”
America’s coal industry is now facing another dark hour, but this time there are few financiers willing to save it.
Mr. Morgan’s bank, now , announced two weeks ago that it would no longer finance new coal-fired power plants in the United States or other wealthy nations. The retreat follows similar announcements by , Citigroup and Morgan Stanley that they are, in one way or another, backing away from coal.
While coal has been declining over the last several years, Wall Street’s broad retreat is an ominous sign for the industry.
“There are always going to be periods of boom and bust,” said Chiza Vitta, a metals and mining analyst with the credit rating firm Standard & Poor’s. “But what is happening in coal is a downward shift that is permanent.”
On Wednesday the world’s largest private-sector coal company, , said that , following a path already taken by three of the nation’s other large coal companies.
Peabody has been trying to sell three of its mines in Colorado and New Mexico to raise cash. But the sale to Bowie Resource Partners appears to have stalled amid the difficult financing environment. Bowie did not comment. A Peabody spokesman said the company “stands ready to complete the sale of assets to Bowie.”
Coal, like railroads, steel and other engines of the nation’s industrial expansion in the 19th and early 20th centuries, helped drive Wall Street’s profits for generations. More than a century later, the coal industry is in a free fall and the banks are pulling away.
“Given the state of the coal industry today, I think Mr. Morgan himself might make the same decision,” said Jean Strouse, a biographer of the banker.
Some banks say they are trying to do their part to curtail climate change by moving away from coal projects and financing ventures that produce less carbon. But bankers also say there is a more basic reason for the shift: Lending to coal companies is too risky and could ultimately prove unprofitable.
Coal companies are being squeezed by competition from less expensive energy sources like natural gas and by stiffer regulations — pressures that show no signs of letting up.
As a result, even the most secure loans — like those made to companies emerging from bankruptcy, known as debtor-in-possession loans — are increasingly off limits for many banks, according to bankers and industry lawyers.
And it is not just big banks. Even many more daring investors like hedge funds and firms, which are usually eager to pounce on industries in distress, are shying away from coal because of deep uncertainty about its future.
It is a starkly different scene in the , where investors are raising hundreds of millions of dollars to snap up the debt and equity of troubled companies that are struggling with an oversupply of . Despite the immediate stress, many investors expect the oil glut will burn off by next year and prices will rebound.
But in the coal country of Appalachia, it is unclear whether many unprofitable mines can ever make money again.
“There is certainly no $40 billion titan looking to make a big play in coal right now,” said Marshall Huebner, co-leader of the insolvency and restructuring practice at Davis Polk & Wardwell who has represented several coal companies in recent bankruptcies.
Despite the challenges, the coal industry still powers roughly a third of the nation’s electricity. Industry officials say the business will eventually bounce back, once supplies burn off and demand for coal rebounds in places like China.
“Coal is part of our future, and I think the banks are taking a shortsighted view,” said Mike Duncan, president of the American Coalition for Clean Coal Electricity, an industry group. “They are ignoring a huge market and buying into rhetoric that just doesn’t work.”
Environmental groups, meanwhile, are hoping the banks’ reluctance will hasten the collapse of coal. Groups like the Rainforest Action Network have been pressuring banks for months to reduce coal lending.
“With much of the world committed to stabilizing the climate, we need the banks to follow quickly with measures to end coal financing altogether,” said Ben Collins, a senior campaigner at Rainforest Action Network.
But the banks’ retreat could inflict collateral damage on an industry that employs tens of thousands of workers and needs financing not only to keep operating, but also to clean up coal mines after they close. If coal companies are unable to pay for the mine reclamation, taxpayers could be on the hook for the cleanup costs.
As big American lenders pull back, a few foreign banks, like , have been willing to step in, industry officials say.
In its latest annual corporate responsibility report, said it was phasing out financing for projects that employ so-called mountaintop removal mining, which environmentalists say is particularly harmful. But the bank’s policy statement did not commit to the type of broad reduction in coal exposure that many American lenders have made in recent months.
In a statement, a bank spokeswoman said that Deutsche Bank is one of the “most prominent banks when it comes to clean energy financing.” She added that the bank “has very strict guidelines governing any financing decisions. We conduct a thorough and detailed analysis on a case-by-case approach, drawing on a deep understanding of wider socioeconomic and environmental trends.”
Even most American banks are not cutting off funding to the industry overnight, saying that for the moment coal remains a major source of energy, particularly outside the United States.
, for instance, is halting financing of new coal-fired plants in wealthy nations like the United States, but will continue to lend to such plants in the developing world, where in some places the coal market is still thriving. To receive financing, however, these plants need to use certain environmentally sound technologies, according the bank’s new policy.
Changes to the coal lending policy at Bank of America have created tension between senior leadership and rank-and-file bankers.
Senior leaders wanted the bank’s energy lending strategy to reflect “a transition from a high-carbon to a low-carbon economy,” said James Mahoney, who oversees public policy issues at the bank and worked on the new coal policy. It is part of Bank of America’s current effort at “responsible growth” — which entails not taking undue risks like lending to a troubled industry, Mr. Mahoney said.
But the shift has been uncomfortable for some of the bankers serving the coal industry.
“It put them in a difficult position to say to the companies they have worked with for years, ‘We are pulling back,’ ” Mr. Mahoney said. “It runs counter to everything we do as a client-focused company.”
Speaking at an environmental conference at the United Nations in January, Bank of America’s chief executive, Brian T. Moynihan, acknowledged the internal tensions around coal but said that the bank was trying to pull back gradually from the sector.
“When you have real clients involved, these decisions get difficult,” Mr. Moynihan said. “But I think the view of the people working on it is: We have to help people make the transition.”
That transition seemed to accelerate last week with the warning from Peabody that it would miss $71 million in interest payments.
One of Peabody’s best hopes for avoiding bankruptcy, analysts said, was the potential sale of three mines to Bowie Natural Resources.
Bowie is a rare breed of coal company. It has been expanding its operations, focusing largely on Utah, a state that still relies primarily on coal to generate electricity. Still, Bowie in recent weeks has apparently had trouble raising the full $650 million in debt to acquire the mines.
In many debt deals, banks would cover the shortfall. But Deutsche Bank and Citigroup agreed only to make their best effort to raise the debt for Bowie. The banks did not commit any of their own money, as a traditional underwriter might do.
Those best efforts might not be enough.
Pakistan has extended its offer of financial incentives to projects based in the coalfields of the Thar Desert in southeast Pakistan.
According to Oracle Coalfields, a UK-based developer of a lignite project in the Thar Desert, the provincial government will extend its offer of a US-dollar-based 20% Initial Rate of Return (IRR) to all coal mining projects based on Thar coal that achieve financial closed before the end of the year.
The incentive is a fixed 20% IRR in US dollar terms to be applied on a cost plus basis determination of coal price, explained the company in a press release.
“The extension of the 20% IRR (in US dollar terms) demonstrates the commitment of the Government of Sindh to the development of Thar coal,” said Shahrukh Khan, CEO of Oracle. “This is an attractive rate of return, designed to encourage foreign inward investment for the development of Thar. Oracle is committed to this project which will help to alleviate the country’s power shortfall.”
Oracle is developing a 1.4 billion t lignite resource in the Thar Desert with an associated 600 MW mine mouth power plant.
Edited by Jonathan Rowland.
Sandvik Mining has reported an operating profit of SEK2.585 billion last year from its continuing operations on total sales of SEK22.421 billion. This compares to an operating profit of SEK2.483 billion in 2014.
Coal accounted for 11% of the companies invoiced sales, making it the third largest market segment after gold (29%) and copper (24%). Africa/Middle East was the biggest market for the company’s equipment, accounting for 26% of invoiced sales, followed by Asia (20%) and North American (17%).
“The underlying market remained low in 2015 as mining companies maintained a cautious approach to investments, not least due to negative price trends for many raw materials,” the company said in its annual report.
“Mining Equipment posted favourable growth in order intake, primarily within underground drilling and load and haul,” the company continued. “Demand for aftermarket products and services remained largely stable, however, with a slight softening in the latter part of the year.”
Its Mining Systems business – which Sandvik has earmarked for divestment and supplies material handling equipment to mining projects – recorded a SEK1.208 billion loss on sales of 4.977 billion.
Overall, Sandvik Mining accounted for 30% of the companies invoiced sales and 19% of its operating profit in 2015, second to Sandvik Machining Solutions. Total invoiced sales were SEK91 billion.
Sandvik suppliers equipment, tools, service and technical solutions for exploration, excavation and processing of rock and minerals for both underground and opencast mines.
The company also continued to reorganise under new CEO, Björn Rosengren. This has seen a number of changes to the company’s executive management committee, including the appointed of Lars Engstrom as President of Sandvik Mining.
The company has also recently announced the merging of its construction and mining businesses into a new Sandvik Mining and Rock Technology business. Sandvik Construction recorded an operating profit of SEK28 million in 2015, compared to SEK45 million in 2014. Sales were down 9% to SEK8.551 billion.
Edited by Jonathan Rowland.
During a visit to Caterpillar’s global headquarters in Peoria, Illinois, Aurizon Managing Director & CEO Lance Hockridge signed a Memorandum of Understanding (MoU) with Progress Rail Service’s (part of Caterpillar’s global group of companies) President & Chief Executive Officer Billy Ainsworth.
Through a long-term maintenance and parts supply agreement with Progress Rail Services, Aurizon will deliver a new phase of cost reductions and efficiencies in its Engineering & Maintenance business.
The non-binding MoU is expected to be converted to finalised commercial agreements ahead of an expected implementation from 1 July 2016 to October 2024.
Under the arrangements, Aurizon aims to deliver a significant reduction in its operational and capital expenditure on non-core rolling stock maintenance through to 2024.
The initiative is part of Aurizon’s ongoing transformation program to reduce costs and achieve efficiency gains across the company, which targets $380 million of efficiency benefits for the period FY2015 – FY2018.
Under the MoU, a range of Aurizon’s non-core maintenance work is proposed to be undertaken at the current workshop facilities at the Redbank maintenance facility near Ipswich. This will enable the site, which was previously earmarked to close in June 2017, to continue operating under the new proposed arrangements.
Further, the companies have proposed that a majority of the current workforce transition with the service agreement, subject to consultation with employees. The impact of the transition is expected to be minimal because of the installed equipment and the skilled employee base.
In addition to cost savings, the deal will facilitate a long-term strategic partnership between Aurizon and a global locomotive OEM that supplies rail equipment and solutions to a range of international customers including the Class 1 North American railroads.
Aurizon and Progress Rail will also collaborate on development of more efficient, cost-effective supply chains for the delivery of parts and componentry for Aurizon’s national rolling stock fleet.
Aurizon VP Engineering and Maintenance, Patrick O’Donnell said a key part of Aurizon’s operational transformation was to delineate between core and non-core maintenance services, and drive value through outsourcing partnerships.
“We’re delighted to form a mutually-beneficial partnership with one of the world’s leading railroad equipment and services providers. This agreement will enable us to extract significant cost savings and productivity enhancements over the next decade as we continue to transform our operations.”
“The deal is also an exceptional outcome for the community of Ipswich, setting in motion a new era for the historic Redbank rail workshops,” he continued.
“We are excited at the potential to work with Aurizon and expand our quality service offerings and aftermarket parts availability to this region of the world,” said Marc Buncher, Senior Vice President of Aftermarket, Purchasing and Supply Chain Operations, at Progress Rail.
The non-core maintenance work includes locomotive overhauls of Aurizon’s narrow gauge fleet and components, such as traction motors, diesel engines and air conditioners. Those activities are currently being undertaken through a mix of inhouse activities or they are currently outsourced to specialist national and international providers.
Implementation is expected to occur around June 2016, in readiness for a proposed, formal commencement of work on 1 July.
Edited from press release by Harleigh Hobbs
NEPEAN®, an Australian engineering, mining services and industrial manufacturing organisation, has acquired another leading supplier of engineered bulk materials handling solutions: Ellton Conveyors.
The transaction is effective immediately and includes the business assets and intellectual property of Ellton along with the retention and transfer of the engineering team and key staff to NEPEAN Conveyors Pty Ltd.
The CEO of NEPEAN, Miles Fuller, said: “Our investment in Ellton Conveyors, and more importantly Elltons’ customers, is a commitment to the industry, and further strengthens NEPEAN as a highly trusted conveyor partner with deep skills and application knowledge. This is an exciting opportunity to bring together two of the industry’s leading businesses in conveyors and bulk materials handling and to deliver an unmatched service to the industry.”
NEPEAN has indicated that significant benefits can be delivered to the combined customer base. The opportunity to share and optimise product, technology and methods, expand capability and better service its customers’ needs will be key outcomes. According to the company. rationalisation of shared services, as well as general economies of scale in supply and project execution, will drive cost efficiencies being sought by our mining customers.
Ellton Conveyors’ customers will continue to receive ongoing technical support from staff who understand their operations’ needs and conveyor history. The transferring Ellton team will now gain access to NEPEAN’s management, engineering, financial, operational disciplines and resources to complete larger projects.“As privately owned companies who are driven to solve customer problems through their people, innovation and performance, this is a logical fit under the NEPEAN brand” Fuller stated.
NEPEAN has vertically integrated manufacturing and service facilities, and employees located close to customers in all major mining regions in Australia and South Africa. This acqusition will enable the company to provide bulk materials handling, from the mining face right through to the dispatch of processed minerals for truck, train or port applications.
NEPEAN Conveyors’ NSW, General Manager, Bill Munday, said: “This is a major milestone and credit to the NEPEAN conveyors team. Our highly passionate employees, technical strength, lean overheads, vertically integrated capabilities and the respect we have earned from the industry over 30 years positioned us for this exciting growth opportunity. We recently won major projects like Metropolitan, Cadia and Moolarben, which is a massive underground conveyor system. It is also proof of our strategy, and our relentless customer focus. I am extremely proud of the NEPEAN Conveyors team.”
“The acquisition of Ellton Conveyors comes in parallel with our continuous efforts to improve our customers operations, lower their operating costs and do so in the safest and most environmentally sustainable way”, Munday stated.
“This acquisition dovetails seamlessly with our vision to be the most trusted partner for innovative and sustainable solutions for the world’s mining, transport and construction businesses.” Fuller concluded.
Edited from press release by Harleigh Hobbs
Andy Eidson, Senior Vice President for Strategy and Business Development, will assume additional duties as the CFO of Alpha Natural Resources Inc.
Eidson, who has served in his current position since December 2015 and in other positions with Alpha since 2010, will join Alpha’s Management Committee in the expanded role of Executive Vice President and Chief Financial Officer.
Eidson will succeed Philip Cavatoni, who informed the company of his intention to resign his position as Chief Financial and Strategy Officer, effective 23 March, to pursue another employment opportunity outside of the coal industry. Eidson’s appointment will be effective on that date.
“Andy has excelled in his prior positions at Alpha and I’m confident his experience, energy and talent will ensure a smooth transition in his new role,” said Alpha’s Chairman and CEO Kevin Crutchfield. “As Alpha continues to navigate its restructuring process, emerging leaders like Andy will be vital in shaping the organisation’s future.”
Eidson previously served as Vice President, Mergers and Acquisitions at Alpha. Before joining the company in July 2010, he worked in several financial positions across industry sectors, including at PricewaterhouseCoopers LLP, Eastman Chemical Co., and most recently Penn Virginia Resource Partners, where he led mergers and acquisitions projects for the coal segment and managed the budgeting and planning process.
Cavatoni has been with the company since 2009 and previously served as Executive Vice President and Chief Strategy Officer, as well as Treasurer and Executive Vice President, Finance and Strategy, before assuming the CFO role in March 2015.
“Phil’s strategic thinking and financial acumen have been valuable assets to Alpha over the past seven years,” said Crutchfield. “We wish him much success in his next endeavour.”
Edited from press release by Harleigh Hobbs
Within one month of the successful commissioning of a 270 MW thermal generating unit in Punjab, Bharat Heavy Electricals Ltd (BHEL) has commissioned another 270 MW coal-based unit at the same site in the state.
The unit has been commissioned at the 2 x 270 MW Goindwal Sahib coal-fired thermal power project of GVK Power & Infra Limited (GVKPIL), located in the historic city of Goindwal Sahib in Tarn Taran district, near Amritsar in Punjab.
The first unit of the project was earlier commissioned by BHEL in February, 2016.
BHEL’s scope of work in the Goindwal Sahib project envisaged design, engineering, manufacture, supply, erection and commissioning of steam turbines, generators, boilers, associated auxiliaries and electricals, as well as state-of-the-art controls & instrumentation (C&I) and electrostatic precipitators (ESPs).
The equipment for the project was supplied by various manufacturing units of BHEL located at Trichy, Ranipet, Hyderabad, Bengaluru and Haridwar, while the construction work was carried out by BHEL’s Power Sector – Northern Region.
Thermal sets of 270 MW rating are an in-house improvisation of 210/250 MW sets supplied earlier by BHEL, which have been performing much above the national average as well as international benchmarks.
BHEL has so far contracted 35 sets of 270 MW rating, out of which 13 sets have now been commissioned. All of the operational sets of 210-270 MW class in the state of Punjab have been supplied, erected and commissioned by BHEL.
Edited from press release by Harleigh Hobbs
According to the US Energy Information Administration (EIA), the combination of slower electricity demand growth and policies that encourage renewables-sourced electricity generation is changing the type and the amount of generating capacity added each year.
Capacity additions since 2000 are being made under market conditions that differ significantly from those that existed for much of the 20th century.
Source: EIA.
On a net basis, the US added an average of 18.3 gigawatts of additional capacity each year from 1950 to 2015. Two time periods of above-average additions occurred during the oil price crisis of the 1970s and the natural gas-fired capacity buildout of the early 2000s.
As electricity demand growth slowed, new capacity additions also slowed. Lately, new capacity additions often compete with existing generators. The increase in renewable energy sources has also affected the amount of new capacity.
In general, renewable sources tend to have lower capacity factors than dispatchable generation technologies fueled by coal, natural gas, oil, or nuclear energy. Capacity factors reflect a generator’s output compared with its capacity, and they reflect how often a generator is actually used. This calculation is important when considering different types of new capacity. For instance, over the course of a year, a 10 MW generator operating at 20% capacity will provide about the same amount of electricity as a 3 MW generator operating at 67%.
Source: EIA.
In regions of the country with competitive wholesale power markets, slower demand growth, high levels of renewable generation capacity additions, and low natural gas prices tend to lower the wholesale prices available to traditional baseload generation technologies, such as coal-fired and nuclear power plants. In some instances, especially in regions of the country with significant amounts of wind generation, electricity prices may be low or even negative during off-peak periods because wind has no fuel cost, and wind generator owners receive tax credits for each kilowatthour of electricity sold. These factors make it profitable for wind generators to bid their units into the market at extremely low or even negative prices to ensure that they are selected for dispatch.
Source: EIA.
With increasing amounts of surplus generation, the EIA press release continued, competitively determined capacity payments in regions that have instituted capacity auctions may be reduced. Operators of some existing coal and nuclear power plants face growing challenges in covering their fixed costs, a situation that is exacerbated when their plants require new investment under such circumstances in order to continue operation.
Edited from press release by Angharad Lock
Coal project updates
- BC Anthracite has been awarded 36 coal licences in the Groundhog Coalfield in British Columbia, Canada.
- Adani has concluded the final landholder compensation agreement relating to its Carmichael coal project in Queensland, Australia.
- Aurizon has secured a long-term contract extension with BHP Billiton for its Mt Arthur coal mine in the Hunter Valley, Australia, to June 2028.
Mining and coal production
- Mining groups have criticised proposed laws that would limit the use of fly-in fly-out (FIFO) workers in Queensland.
- US coal production to register its largest percentage fall since 1958 in 2016, dropping 12% on low utility consumption, declining exports and high utility stockpiles.
- Continued weakness in global oil prices remains positive for the mining industry, reducing operating costs by 4 – 5% this year.
- Coal stockpiles at Indian power plants have hit record highs as domestic coal production continues to grow strongly.
Half year reports
- China Shenhua Energy Co., the listed arm of Chinese largest coal company, Shenhua Group, has recorded a 21.2% fall in sales in February.
- Canada-focused anthracite development company, Atrum, has posted a half-year loss as it continues to progress development of its Groundhog project.
- TerraCom posts a AUS$71.4 million loss in 2H15 on asset impairments and foreign currency exchange losses.
- Lower production at Kangala and a falling rand has hit Universal Coal’s half-year results.
- Australian Pacific Coal announces a US$2.1 million loss in 2H15 but continues to progress its acquisition of the Dartbrook coal mine.
- Australian mining contractor, Mastermyne, has reported improved half-year results for its mining division, but the going remains tough for its engineering and maintenance division.
- Coal of Africa had a busy six months between July and December 2015 as its progressed development at Makhado and bid for Universal Coal.
Rail news
Coal prices
- China thermal and metallurgical coal prices could rebound this year on the back of a government campaign to cut production.
- Thermal and metallurgical coal prices are expected to continue their downward slide this year with thermal coal facing significant potential challenge from global LNG glut.
US coal industry reacts to Clinton’s comments
- The US coal industry has hit back after Hillary Clinton said a lot of coal companies would be put out of business should she become president.
- Murray Energy Corp. responds to Hillary Clinton’s statement that “we’re gonna put a lot of coal miners and coal companies outta business.”
Not to be missed …
- Peabody looked to be on the brink of Chapter 11 bankruptcy as it delayed interested payments under a 30-day grace period.
- The decline in US metallurgical coal exports is presenting a challenge to steelmakers.
- The EIA’s Short-Term Energy Outlook is forecasting that 2016 will be the first year that natural gas-fired generation exceeds coal generation in the US on an annual basis.
Shipments of coal by rail fell by 34.1% y/y to 71 221 carloads in the week ending 12 March, according to figures from the Association of American Railroads, continuing the depressed levels of coal shipments seen through the first months of 2016.
Weekly coal carloads. Source: Association of American Railroads.
The weekly figure also marked a new 2016 low for coal carloads, beating the previous week’s record by 0.6%. Overall US rail shipments were 12.9% down on the same period last year at 2.44 million carloads.
Coal shipments have been hit by falling demand for coal, a result of mild winter weather and competition from natural gas, exacerbated by high stockpiles at US power plants. The US Energy Information Administration forecasts coal consumption in the electric power sector to fall 29 million short t in 2016 as natural gas overtakes coal as the primary fuel source in the US energy mix.
Edited by Jonathan Rowland.
Mechel OAO, a leading Russian mining and metals company, reports that Alexey Ivanushkin is leaving his post of Mechel OAO’s First Deputy Chief Executive Officer.
The post of the company’s First Deputy Chief Executive Officer will be discontinued and its functions redistributed among other management board members.
“Alexey Ivanushkin has been working for Mechel since its founding day. In different times, he was in charge of the most critical issues – preparing for IPO, running steel and ferroalloy assets, managing mergers and acquisitions. I am sincerely grateful to him for his immense contribution to Mechel’s development and I respect his decision to leave the company after completing the hardest part of negotiations with lender banks on our debt restructuring to pursue his own projects. Alexey Ivanushkin will continue working in the company’s Board of Directors for several months more to ensure smooth transition of managerial powers and credentials,” Mechel OAO’s Chief Executive Officer Oleg Korzhov noted.
Before working as Mechel OAO’s First Deputy Chief Executive Officer in 2014, Ivanushkin worked as the Chief Executive Officer of Oriel Resources Ltd (part of Mechel Group) from 2009 to 2014. He served as Mechel’s Chief Operating Officer from 2004 to 2009. From 2003 to 2004, Ivanushkin held the position of Mechel Steel Group OAO Chief Executive Officer. From 1999 to 2002, Ivanushkin served as the Chief Executive Officer of Chelyabinsk Metallurgical Plant. From 1993 to 1999, he was employed as the Director of the Department of Ferrous Metals and Ferroalloys in the Moscow office of Glencore International AG.
Edited from press release by Harleigh Hobbs
India’s use of coal could peak by 2040 if cleaner alternatives progress as expected, a new book has claimed, but coal remain the most critical fuel in the short term to provide energy and power economic growth.
The book Energizing India: Towards a Resilient and Equitable Energy System is authored by Suman Bery, Arunagha Ghosh, Ritu Mathur, Subrata Basu, Karthik Ganesan and Rhodri Owen-Jones and is the result of a three-year collaboration between the Council on Energy, Environment and Water (CEEW), the Energy Resources Institute (TERI) and Shell.
In welcoming its publication, Suresh Prabhu, India’s Minister for Railways, said that the book “will start a public debate towards development long-term sustainable policies to strengthen the Indian energy sector.”
“It is a challenging time for policy makers with fluctuating fuel prices globally,” the minister continued, adding that the entire value chain of the energy sector was in need of innovation.
Among its key findings, the book forecasts that fossil-fuel-based energy could increase by two to four times its current level over the short to medium term despite what the book calls a “massive renewable energy evolution in India” as convention fuels – including coal – are required to support new renewable generation.
“Energy security and an integrated approach should lie at the heart of India’s National Energy Policy,” said Dr Ghosh, CEO of CEEW and one of the lead authors of the book. “India should not be afraid of high import dependence, but it should intelligently evaluate the benefits and trade-offs from investing in domestic production versus imports over the next few decades in planning its fuel and technology transitions.”
India is currently aiming to dramatically increase its domestic production of coal in order to help meet its growing demand for energy. Government plans call for annual output to rise to 1.5 billion t by 2020 – and while many feel that may be optimistic, India’s coal production is likely to breach the 1 billion t mark by 2020, according to BMI Research.
Edited Jonathan Rowland.
Oracle Coalfields PLC, the UK energy developer of a combined lignite mineral resource and mine mouth power plant located in the Thar desert in the southeast of Sindh Province, Pakistan, has announced its audited results for the year ended 31 December 2015.
Oracle’s Chairman, Adrian Loader, has indicated that while the coal mining industry remains “gloomy” it has been a ”year of solid progress” for developing its Thar Coalfield Block VI in Pakistan.
The company resolved the lease issues with the authorities; placed £3.37 million of equity; its inclusion in the China – Pakistan Economic Corridor was confirmed; it formally registered its power plant project and received a No Objection letter for power evacuation; its coal price petition was admitted and agreement was reached with Shangdong Electric Power Construction Corp. (SEPCO) – its Chinese partners – that they take a minimum 10% equity stake in the power plant.
Shahrukh Khan, Chief Executive Officer of Oracle, noted that the government is working towards eradicating the shortfall in electricity generation capacity in Pakistan and supporting indigenous fuel supplies.
Khan explained “Thar Electricity (Private) Ltd (TEPL), a subsidiary of Oracle Coalfields PLC, has registered the Thar Block VI power plant with [the Private Power and Infrastructure Board] (PPIB) for a plant up to 1200 MW capacity and has made the application to construct initially a 600 MW plant at the site. The Central Power Purchasing Agency issued a Letter of No Objection for the 600 MW power plant in November 2015 and NTDC also confirmed that power from the project will be accommodated within the planned high voltage transmission line.”
Khan indicated the next step is for “PPIB to issue a Letter of Intent for the project, which then requires the PPA application to be made along with the electricity tariff application.”
Oracle is working towards financial closure of the project, moving towards finalising a number of agreements and contracts, including the EPC term sheet and contracts with SEPCO for the coal mine and power plant, as well as finalising the environmental and social impact assessments and arrangements for resettlement of people affected by the project.
Khan reported the company is continuing to work with the relevant authorities in Pakistan and with its Chinese partners to bring the project to full implementation. The work in 2016 will concentrate on formalising agreements and contracts to bring the project to full implementation along with securing all the financing arrangements, including equity for funding.
Loader thanked his board and management colleagues for their hard work in 2015 and indicated that their continual work resulted in the preceding developments.
Edited from press release by Harleigh Hobbs
Rhino Resource Partners LP has announced that Royal Energy Resources, Inc. (Royal) has completed the acquisition of all of the issued and outstanding membership interests of Rhino GP LLC, the general partner of Rhino, as well as 9 455 252 issued and outstanding subordinated units from Wexford Capital LP (Wexford).
Royal has obtained majority ownership interest and control of the partnership with the completion of this transaction.
On 21 January 2016, Royal and Wexford completed a definitive agreement where Royal acquired 6 769 112 issued and outstanding common units of the partnership from Wexford. The definitive agreement also included the committed acquisition by Royal within sixty days from the date of the definitive agreement of all of the issued and outstanding membership interests of Rhino GP LLC as well as the subordinated units from Wexford.
Joe Funk, President and Chief Executive Officer of Rhino’s general partner, stated: “Royal’s completed acquisition of the controlling interests in the partnership allows us to commence with various steps to grow the Partnership from our existing asset platform. We look forward to utilising Royal’s insight and market strategies that will provide new relationships and business opportunities for Rhino to grow our cash flow in the future.”
Edited from press releases by Harleigh Hobbs
Mining groups have criticised proposed changes to laws governing the use of fly-in fly-out (FIFO) workers in Queensland’s mining industry. The proposed laws would ban 100% FIFO workforces at mines where a local workforce is available, as well as forcing mining companies to consider locals for jobs at existing operations.
Michael Roche, CEO of the Queensland Resources Council (QRC), called the measures “deeply concerning to the industry” and warned that they could “pose a serious threat to investor confidence in the state”.
“The QRC’s latest workforce survey reveals that better than four our of five employees would not change where they live or their accommodation arrangements even if they were given the opportunity,” continued Roche. “This really calls into question the need for any legislative amendment.”
The Australian Association of Mining Exploration Companies (AMEC) was similary critical, calling the proposed legislation “over the top”.
“Before the minister goes any further, the government should consult with the industry to ensure that any unintended consequences are fully considered, as well as the fact that employers and employees should be given the flexibility of choice of where they live and work,” said Simon Bennison, CEO of AMEC.
“The government will also need to ensure that regional communities have appropriate public infrastructure and services available to support a non-FIFO workforce, such as health, education and child care services.”
There are currently only two mines in Queensland that use a 100% FIFO workforce under an agreement put in place at a time when the mining industry faced an extremely tight labour market.
“We understand circumstances have changed since this time, but retrospective action is never welcome,” said the QRC’s Roche.
“QRC accepts that all parties in the Queensland parliament do not support future 100 percent mining operations where there are nearby towns that have a capable workforce; however we do not support any retrospective regulatory action against existing mines,” concluded Roche.
Edited by Jonathan Rowland.
Bharat Heavy Electricals Ltd (BHEL) has successfully synchronised the 110 MW Unit-7 at Barauni thermal power plant in Bihar following renovation and modernisation (R&M).
As a result of this R&M, the working life of the machine – first commissioned in May 1985 – has been extended by another 15 – 20 years.
With the successful commissioning of Unit-7 at Barauni TPS, BHEL has shown its ability in R&M and uprating old thermal power plants through in-house state-of-the-art technology, engineering capabilities and by incorporating the latest products/systems in renovated units.
The synchronisation of this unit comes close on the heels of the successful recommissioning of Muzaffarpur Units-1&2 (110 MW each), and uprating of Bhatinda Units-3&4 of PSPCL and Harduaganj Unit-7 of UPRVUNL from 110 MW to 120 MW.
Of the 218 utility sets of 110-210 MW rating supplied by BHEL in the country, about 142 have outlived their designed economic life of 25 years. Of these 142 sets, R&M of 38 sets has already been taken up by the respective utilities.
Edited from press release by Harleigh Hobbs
Coal sales at China Shenhua Energy Co., the listed arm of China’s largest coal company, Shenhua Group, fell 21.2% in February to 23.4 million t. Meanwhile, coal sales for the year to date were 7% down at 44.1 million t compared to 47.4 million t over the same period in 2015.
Exports totaled 0.1 million t from nothing last year and moved to 0.2 million for the year to date. This again made the company a net exporter of coal with coal imports continuing at zero through February.
Coal production rose, however, 6.8% in February to 21.9 million t from 20.5 million t last year. Total coal production for the year to date was up almost 1% at 46.6 million t.
On the power side, generation and dispatch remained fairly steady on last February at 14.18 billion kWhr and 13.26 billion kWhr respectively.
Shenhua’s transportation infrastructure showed significant increases, however, with its railway network recording a 41.7% increase in tonne km (t-km) for February and a 38.7% increase for the year to date.
Coal sales through Shenhua’s ports also jumped year on year. At Shenhu-owned Huanghua Port, the amount coal handled hit 11 million t in February – a 41% rise on last year. Sales through Shenhua Tianhjin Coal Dock fell, however, 17.5% to 3.3 million t.
Its coal-to-chemical business also recorded y/y growth with polyethelene sales up 10.7% at 268 000 t and polypropylene sales up 7.5% at 245 000 t.
Edited by Jonathan Rowland.
Jonathan Rowland
Last year saw the largest contraction in the seaborne metallurgical market since 2011, when flooding took out a significant chunk of Australian supply. Overall, the market shrunk by 5% to 280 million t according to figures from Macquarie Research. Australia accounted for 66% of the market supply – a number that could rise again this year to 68% according to Stephen Duck, Senior Consultant – Steel Raw Materials at CRU. Thereafter, forecasts diverge with Macquarie seeing Australia’s share rising to 70% by 2020, while CRU expects Australia to account for 64% as exports rise from other producers, including Mozambique, Russia and Indonesia.
Whatever the exact figure, however, Australia’s dominance of seaborne metallurgical coal supply will continue as its mines – particularly the BHP Billiton Mitsubishi Alliance mines – occupy most of the lower end of the cost curve. Only some Russian and Teck’s Canadian operations boast comparably low costs. In contrast, all US metallurgical production is cash negative at current prices, according to Macquarie.
This cost advantage has kept Australian exports rising despite falling demand from China, as Australian cargoes displaced US cargoes in markets such as Europe, where Australian coal took its highest share of imports since 2007. Australian exports to India (where they comprised 84% of total imports), Brazil and South Korea also rose. Meanwhile, US metallurgical coal exports were down to 38 million t in 2015 from 59 million t in 2012 and are expected to hit just 19 million t in 2020. Strengthening of the greenback against the Australian dollar, an uptick in mine closures as part of Chapter 11 bankruptcy proceedings or a weaker demand picture could see US exports shrink further.
This decline in US metallurgical coal exports is posing several challenges to steelmakers. The inability to hedge against another extreme weather event taking out Queensland’s coal production is a worry. Macquarie noted that US exports to Asia were flat despite the lower general trend – a fact attributed to “Asian buyers still wanting some supply diversification away from Queensland as a hedge against any weather-related supply disruptions”. There is another more technical worry for steelmakers in the falling supply of US coal, as Duck explained to World Coal: “The fall in production from the US does reduce the availability of certain types of coal,” said Duck. “US coals are sought after by steelmakers for their properties, particularly their fluidity. Asian steelmakers are worried about the future supply of high-fluidity coals not just because US mines are closing but also because BHP Billiton’s Gregory mine is shutting this year. European and Brazilian steelmakers also buy US coal specifically for the fluidity.”
Average fluidity levels of about 800 – 1000 dial divisions per minute (ddpm) are widely seen as required to produce good-quality coke. Many Australian hard coking coals fall below that average, meaning mills have to blend in higher-fluidity coals to reach the required level. The tightening supply of such coals has already had some impact on pricing: last year, Platts reported the prices achieved for higher-fluidity coals were holding up better relative to other metallurgical coals.
“Changing coal supply is also problematic for steelmakers,” concluded Duck. “Coke quality is fundamental to blast furnace performance and targeted quality specifications for coke hinges on the delicate blend of various coal types, which mills are often reluctant to change. Consistency and continuity of coal quality and blending are key to blast furnace performance.”
Beyond Australia and the US, Mozambique metallurgical coal production is likely to ramp up to 2020, despite ongoing infrastructure challenges: “Development of the Nacala logistics corridor has been slow to-date,” commented Duck. “Workers at the mine also went on strike in mid-February and this raises more uncertainty over when exports will take of from here. We’re still expecting exports to rise this year, but there is significant risk around this forecast. By 2020, we forecast Mozambique to be exporting almost 20 million tpy, accounting for 7% of seaborne supply.”
That leaves Canadian and Russian coal competing with the Aussie juggernaut – but without the scale. According to Macquarie, Canadian supply into the global market will total 26 million t this year, down from 27 million t in 2015; Russia’s, just 13 million t, steady with last year. Australia’s contribution will be 183 million t, down from 185 million t in 2015.
“Australian producers’ strategies will continue to be focused on improving mining productivity, which is expected to sustain high output at operations,” concluded Duck. “However, we do not expect to see the same rate of productivity gains at mines that we’ve seen in the last couple of years. Therefore, the potential to squeeze out more tonnes at existing operations is limited. On the other hand, we expect production to ramp up at Anglo American’s Grosvenor mine and Whitehaven’s Maules Creek mine, which both came online last year.”
This article first appeared in the March 2016 issue of World Coal.
About the author: Jonathan Rowland is the Editor of World Coal.
Thermal coal prices will remain below current spot prices until at least 2021, according to Macquarie, and could face a wave of brutal competition from natural gas that threatens to depress prices even further.
According to a recent Macquarie report on the global LNG market, the world faces a surplus of LNG for the foreseeable future, rising to a peak of about 70 million tpy in 2019.
“This peak is a thermal coal equivalent of about 190 million tpy, or over 20% of the current seaborne market,” Macquarie said. “If a meaningful portion of this surplus LNG manages to displace coal in regions with spare capacity (mainly Europe), coal’s demise might [be] even more brutal than we currently anticipate.
Macquarie forecasts seaborne thermal coal demand of 828 million t by 2021 with India becoming the largest single buyer, importing 159 million t by 2021, followed by Japan and South Korea. Meanwhile Chinese imports tail off to just 49 million t from 102 million t in 2016.
Australian and South African spot prices for thermal coal are forecast to be US$48 per tonne this year – down from US$59 per tonne and US$58 per tonne, respectively, in 2015.
The news is more positive on the metallurgical coal side where Macquarie has recently revised its forecast for contract prices for hard coking coal up 6% for this and 4% next year with more significant upgrades to its semi-soft coking coal and PCI prices – although all remain under 2015 levels.
Macquarie now forecasts average price for hard coking coal of US$82 per tonne this year compared to US$102 per tonne last year.
Average annual prices for semi-soft coking coal price are forecast to be US$66 per tonne for this year compared to US$78 per tonne in 2015, while the PCI forecast stands at US$70 per tonne, down from US$84 per tonne last year.
“Supply displacement is finally materializing with exports from the US having dropped off sharply from 2H15,” Macquarie said. ‘The point of caution is that, since future supply displacement is reliant on further US cuts – and there are not really a function of whether the price is a couple of dollars high or lower by more-so the outcome of bankruptcy restructurings.”
As a result, Macquarie sees the potential for price uncertainty with swings possible either way depending on the demand, which is expected to 268 million t this year.
Edited by Jonathan Rowland.
Global mining giant, Glencore, has opened discussions over the sale of its Hunter Valley rail business, offering the buyer its nine trains and a guaranteed 40 million tpy coal haulage contract in the hopes of raising about US$1 billion.
According to the Australian Financial Review (AFR), which broke the story, Glencore exported about 51 million t of coal from its Hunter Valley operations – although there is some question over how much of that was carried by Glencore Train (GTrain).
Glencore is Australia’s largest thermal coal producer with annual output around 98 million t. It entered the rail business in 2010, along with rival BHP Billiton, after becoming frustrated with the incumbent freight operators.
Potential buyers include the two incumbents – Aurizon and Pacific National, which dominate coal haulage in Australia – as well as US-based Genesee & Wyoming, which owns GTrain’s British-based operator, Freightliner. Genesee and Wyoming bought Freightliner only last year for £492 million (about US$733 at current exchange rates).
Genesee & Wyoming already own and operate the rail line linking Adelaide to Darwin but attempts to increase its Australian presence have so far not been successful. The company also already hauls coal in North American, where it hauled 16 395 carloads of the fuel in February, and the UK, as well as metallic ores – including iron ore – and minerals in Australia.
Meanwhile, Glencore has committed to US$5 billion of asset sales to help reduce its mountain of debt, which stood at US$25.9 billion last September. The company reported a US$5 billion loss in 2015.
Edited by Jonathan Rowland.
Coal of Africa (CoAL) has released its review of operations for the six months ending December 2015, reporting no fatalities for the period and no lost time incidents (LTIs) at a number of its sites, including the Vele coal mine.
The company also reported a loss of US$14.3 million for the period including a net foreign exchange loss of US$9.4 million. As of 31 December, the company had cash and cash equivalents of US$30 million on hand compared to US$17.8 million at the end of June.
Operationally, the company reported regulatory progress at both the Vele coal mine and Makhado project, where water use licences have been approved.
The company also said it had signed a memorandum of understanding with a consortium comprising seven local communities to acquire a 20% stake in the project to help meet the legal requirement for 26% black economic empowerment ownership.
Perhaps the most significant news of the half-year period, however, was the announced takeover of Universal Coal as part of a plan to acquire a cash-generating asset to boost company cash flow during the construction of the Makhado project.
Currently shareholders representing 53.2% of Universal’s issued capital have so far approved the offer with the offer deadline extended to mid-April.
Edited by Jonathan Rowland.
Companies undertaking coal exploration in Queensland are to receive the same government relief as other mineral exploration, the state Minister for Natural Resources and Mines Dr Anthony Lynham has announced.
“This concession will provide up to a 50% reduction over 2016 and 2017 in the expenditure a coal explorer is required to commit under their exploration permit,” Dr Lynham said.
“For example, say there is a coal explorer in the Bowen Basin who holds multiple exploration permits with a combined committed expenditure of AUS$2 million for its milestone period within 2016/17. The concession means than up to AUS$1 million of reduced expenditure they don’t have to spend to meet their exploration permit conditions.”
According to Dr Lynham the concession could save the coal exploration industry up to AUS$114 million.
“Exploration is vital to discovering the resources that will drive the resources industry and sustain economic growth for Queensland and our communities,” Dr Lynham continued.
“We taken onboard what the industry […] is telling us and that is explorers are under stress with low commodity prices and difficulty attracting investment capital. This concession alleviates fiscal pressure and gives coal explorers more flexibility to respond to investment conditions and spend their exploration dollars on the ground where it is needed most.”
The move has been welcomed by the Association of Mining and Exploration Companies (AMEC). “Just as the mineral explorers rely heavily upon investors having faith in the future of the industry, coal explorers are also facing a number of challenges,” said Simon Bennison, AMEC’s CEO. “Equity markets have been difficult, anti-development and divestment campaigns have crippled many companies and destroyed opportunities for jobs in regional areas.”
“If this program can preserve over AU$100 million in company funds to be used for exploration activities, as the government suggests, it will be a positive outcome and underlines the importance of a vibrant resources sector in Queensland,” concluded Bennison.
Edited by Jonathan Rowland.
Peabody Energy, the largest US coal producer, has moved on step further to filing for Chapter 11 bankruptcy protection, admitting that it exercised the 30-day grace period on interest payments of US$71.1 million due on 15 March.
It also noted that its independent auditors have warned that, without significant improvements, asset sales and/or other favourable changes, the business may not be sustainable over the course of the year.
The auditor’s opinion, which was included in the company’s Form 10-K annual report, is likely to accelerate the company’s obligations to repay its massive debt pile, which stands at about US$6.3 billion after the company’s US$5.1 billion acquisition of Australian coal company, Macarthur Coal, at the height of the mining boom in 2011.
Peabody’s rivals, Arch Coal and Alpha Natural Resources, have already been forced into bankruptcy as a result of their own significant debt loads from large acquisitions of metallurgical coal assets at a time when metallurgical coal was fetching over three times its current price.
Peabody had been hoping that the sale of two mines in Colorado and New Mexico to Bowie Resources would provide some respite but the sale is yet to be completed.
Peabody’s announcement will not come as a surprise to the market, said Doyle Trading Consultants’ Jack Chidester, noting that the company drew down the balance of its US$1.65 billion revolving credit facility in 4Q15 and had admitted that one if its first-line debt holders had expressed concern that restructuring talks were not happening in bankruptcy court.
“Today’s news does not guarantee Peabody will file for bankruptcy [but] we believe a Chapter 11 restructuring is the likely course of action, particularly amid pressure from senior creditors,” said Chidester.
Exacerbating the pain for US coal miners, the Energy Information Administration recently released analysis forecasting that natural gas would overtake coal on an annual basis in the US energy mix in 2016. According to the EIA, natural gas will supply 32% of US electricity generation, while coal will supply just 31%.
Edited by Jonathan Rowland.
The new Cat® C2 Series articulated dump truck range includes the 314 hp (234 kW) 725C2 and the 367 hp (274 kW) 730C2 and 730C2 EJ with ejector-type body. Rated payloads are 26.5 t for the 725C2 and 31 t for the two larger models. Standard automatic traction control ensures efficient operation of the new models, which advance the design of predecessor models with increased productivity, lower operating costs, and added rimpull/retarding capability, while retaining the long-term durability, high availability, high resale value, and optimum rental margins of previous models.
Powertrain
Engines in all three models are available that meet or are equivalent to world emission standards: US EPA Tier 2/EU Stage II, Tier 3/Stage IIIA, or Tier 4 Final/Stage IV. A diesel particulate filter and selective catalytic reduction system provide exhaust aftertreatment for Tier 4 Final/Stage IV models.
The Cat 6F/1R power-shift transmission electronically modulates clutch engagement pressures for smooth, positive shifts and incorporates the Caterpillar Advanced Productivity Electronic Control Strategy (APECS) system. The APECS system improves acceleration, maintains torque converter lock-up (and ground speed) during shifts, provides automatic speed holding, and modifies shift points to match operating conditions. Net benefits include high productivity, optimum control, and increased fuel economy.
For controlling downhill speed, the 730C2 and 730C2 EJ employ an engine-compression brake that provides 60% more retarding force than previous models. The 725C2 uses a fluid retarder with four operating modes. Both systems effectively manage speed and minimise service brake application for extended brake life.
All three new C2 Series models feature full-time, six-wheel drive and are equipped with wet disc clutch locks in the cross axle and inter-axle differentials. Automatic, on the go application of the locks is fully proportional, engaging only the required amount of lockup to maintain traction in adverse conditions — with no input from the operator. Also, new for the C2 range is all-axle wet brakes. The sealed system prevents the ingress of debris and extends brake life.
A global innovator of bulk handling accessories and flow aids, Martin Engineering, has introduced a wear-resistant fused alloy plate that can withstand more abrasion than other protective metal linings. With a bi-metallic design, Martin® Arcoplate™ combines a smooth and dense chromium carbide-rich metal alloy face plate with a hard steel back plate to resist gouging, erosion, temperature extremes and material buildup. Installing it on surfaces exposed to abrasive conditions increases protection for longer equipment life with less frequent maintenance.
“Materials with a large amount of silica can be very abrasive, accelerating wear on metal surfaces,” commented Andrey Leonardo Ribeiro de Miranda, Application Engineer at Martin Engineering. “Applications in which materials are extremely abrasive or hot also damage equipment, chutes and containers. When an unprotected metal surface structure is reduced in thickness over time, it runs the risk of sudden breakage or buckling. Over the long run, clients have found that prevention is far more cost effective than constant maintenance and replacement.”
Engineered to withstand the harsh conditions of mining applications, yet versatile enough for a wide range of industries, Arcoplate offers a solution to both excessive wear and material accumulation issues for chutes, hoppers, dump truck beds, excavator buckets, front loader shovels and other bulk material equipment in need of protection. The bi-layer construction is tailored to the thickness, composition, shape and polish specifications of the application. Very low residual stresses enable it to withstand severe impact forces and bending.
Made with a chemical composition of iron, carbon, chromium, manganese and silicon, Arcoplate is currently available in three grades: Alloy 1600 is designed for high abrasion and high impact applications; Alloy 1040 is engineered for moderate impact and cyclic temperatures up to 500°C (932°F); while Alloy 8668 is suitable for extreme temperature applications – cycles up to 700°C (1,292°F). Each derives its high abrasion resistance from the very hard M7C3 carbides (1500 – 1800 Hv), with an average of 60% carbide dispersed through a softer, tougher matrix.
“Greater hardness does not always mean greater abrasion resistance or longer wearlife,” Ribeiro de Miranda pointed out. “Bulk hardness tests, like Rockwell or Brinell, measure the average hardness of both the carbide and matrix together. Conducted over a relatively large area, test results can show the same hardness rating as conventional metals, but performance tests show that a carbide-containing surfacing alloy has substantially better wear resistance.”
According to manufacturer Alloy Steel International – based in Malaga, Australia – the top layer leads the industry in having the highest percentage of evenly dispersed hard carbides, resulting in the best resistance to low-stress and high-stress abrasion. However, when determining which alloy grade to use for specific applications, company experts say that high bulk hardness ratings are not the only determining factor.
Abrasion resistance depends on a combination of both hardness and the metallurgical microstructure of the alloy. Normal hardness is determined in three tests, the vickers test (Hv), the rockwell scale (Rc) and the brinell scale (BHN). Although hardness is one factor in determining wear life of the plate, thickness factors into an extended operational life, as well.
As the only wear plate available with a total overlay thickness greater than 14 mm, the alloy top layer is manufactured 4 mm – 20 mm thick (0.16 in. – 0.79 in.), and the steel base plate 7 mm – 11 mm (0.27 in. – 0.43 in.). Proper thickness is determined based on the material being handled, weight allowance and spatial restrictions of the application. Moulded with computer precision, each plate thickness and shape is adapted to the equipment form with no weld beads to interrupt material flow, minimising turbulence and abrasion.
Surface smoothness, uniform hardness and carbide distribution are critical to overall wear plate performance and its ability to avoid buildup that could lead to clogging and excessive weight. When faced with consistent abrasion, a rough surface finish will experience erosion 200 – 600% faster than a smooth surface of the same alloy structure and hardness. All grades of Arcoplate can be manufactured with finishes rated standard, polished or ultra non-abrasive to avoid material hang-up and carryback. The grain can be fitted in any direction to match material flow.
“Laboratory and field tests confirm that our specially engineered alloy will outlast quenched and tempered wear plates by a factor of up to 6:1 and conventional welded overlay plate by 2:1,” Ribeiro de Miranda said. “Clients who have installed Arcoplate have experienced less buildup and slower surface erosion, leading to better structural integrity and longer equipment life. Some have also lowered labour costs since workers spend fewer hours removing stuck material and servicing damaged components.”
Edited from press release by Harleigh Hobbs
Rio Tinto Chief Executive Sam Walsh will retire on 1 July 2016 and will be succeeded by Copper & Coal chief executive Jean-Sébastien Jacques. To ensure a smooth transition, Jean-Sébastien, will join the board and become Deputy Chief Executive with immediate effect.
This new role for Jacques is a reflection of his dedication and more than three years work on Rio Tinto’s executive committee.Rio has indicated he brought greater focus to the copper and the coal businesses. He delivered a step-change in both safety and cash performance while significantly reducing costs.
Before joining Rio Tinto, Jacques worked for more than 15 years across Europe, Southeast Asia, India and the US in a wide range of operational and functional positions in the aluminium, bauxite and steel industries. He served as group strategy director for Tata Steel Group from 2007 to 2011.
Rio Tinto Cchairman Jan du Plessis commented: “Jean-Sébastien is a very experienced executive with a demonstrated track record and brings a unique blend of strategic and operational expertise. He has run complex operations and projects across five commodities and five continents. J-S is a highly-regarded leader who shares Rio Tinto’s strong values and has embraced its culture.”
He continued: “Today’s announcement is the culmination of a comprehensive and deliberate executive succession process. The board has decided that J-S is the right person to lead Rio Tinto in an increasingly complex world filled with both challenges and opportunities for our industry.”
Jean-Sébastien Jacques said: “Rio Tinto is a world-class company with some of the best tier one assets and people in the industry. It is an honour and a great privilege to be given the opportunity to lead the company as we continue to develop the business and pursue the delivery of value for shareholders. The safety of all of our people across the world will remain a key focus and, together with Sam, I will take every opportunity over the next few months, to meet and listen to our shareholders, customers, employees and stakeholders, all of whom play an integral role in making this great company so successful.”
On 1 July 2016, Walsh will also retire as a Director after almost seven years on the Rio Tinto board.
Jan du Plessis said: “The board appointed Sam as Chief Executive at a challenging time for our company and I am very grateful for his tremendous leadership during the past three years. Against the backdrop of a volatile economic environment, Sam and his team have transformed the business, removing more than AUS$6 billion of costs, strengthening the balance sheet and returning more than AUS$13 billion to shareholders. Sam leaves Rio Tinto as a much stronger company, with a bright future.”
Commenting on his step down, Sam Walsh said: “I have been seriously fortunate to lead one of the world’s best companies. After 25 great and enjoyable years with Rio Tinto, now is the right time to pass the reins on to Jean-Sébastien. In his time at Rio Tinto, J-S has proven to be a standout performer as a leader in our business.”
“I am very proud to have played my part, together with all of our employees around the world, in returning Rio Tinto to a position of industry leadership and strength. I have always wanted to make a difference and I believe we have achieved that. I look forward to working with J-S, the board and executive team during the transition,” Walsh continued.
Chris Salisbury is appointed acting Chief Executive of the Copper & Coal product group and will attend the Rio Tinto Executive Committee in this capacity. The rest of the executive team remains unchanged.
Edited from press release by Harleigh Hobbs
Sandvik will merge its operations Sandvik Mining and Sandvik Construction into one business area: Sandvik Mining and Rock Technology.
Sandvik Mining and Rock Technology operations will be organised in a decentralised business model with separate product areas based on the product offering. Each product area will have full responsibility and accountability for its respective business.
The new structure will be effective as from 1 July 2016.
“Products developed for the customer segments mining and construction are based on common technologies with a similar aftermarket offering. In addition, manufacturing units are already largely shared with to some extent shared front line resources. By joining the operations into one business area, we achieve a leaner and more efficient structure. The decentralised business model enables an even clearer focus and faster response to our customers”, commented Björn Rosengren, Sandvik´s President and CEO.
Lars Engström, currently President of Sandvik Mining has been appointed President of the new business area, Sandvik Mining and Rock Technology. Dinggui Gao, President of Sandvik Construction will leave the company as of 1 July 2016.
“I would like to take the opportunity to thank Dinggui Gao for his dedicated work in supporting the merger of the new organisation. I would like to express my appreciation for his work to drive Sandvik Construction, resulting in documented improvements. I wish him all the best in his future career”, said Björn Rosengren.
Edited from press release by Harleigh Hobbs
For decades, coal has been the dominant energy source for generating electricity in the US. The Energy Information Administration’s (EIA) Short-Term Energy Outlook (STEO) is now forecasting that 2016 will be the first year that natural gas-fired generation exceeds coal generation in the US on an annual basis. Natural gas generation first surpassed coal generation on a monthly basis in April 2015, and the generation shares for coal and natural gas were nearly identical in 2015, each providing about one-third of all electricity generation.
Source: EIA (http://www.eia.gov/todayinenergy/detail.cfm?id=25392)
The mix of fuels used for electricity generation has evolved over time. The recent decline in the generation share of coal, and the concurrent rise in the share of natural gas, was mainly a market-driven response to lower natural gas prices that have made natural gas generation more economically attractive. Between 2000 and 2008, coal was significantly less expensive than natural gas, and coal supplied about 50% of total US generation. However, beginning in 2009, the gap between coal and natural gas prices narrowed, as large amounts of natural gas produced from shale formations changed the balance between supply and demand in US natural gas markets.
Coal and natural gas generation shares over the past decade have been responsive to changes in relative fuel prices. For example, particularly low natural gas prices throughout much of 2012 following an extremely mild 2011 – 2012 winter led to a significant rise in the natural gas generation share between 2011 and 2012, often displacing coal-fired generation. With higher natural gas prices in 2013 and 2014, coal regained some of its generation share. However, with a return to lower natural gas prices in 2015 favouring increased natural gas-fired generation, coal’s generation share dropped again.
Source: EIA (http://www.eia.gov/todayinenergy/detail.cfm?id=25392)
Environmental regulations affecting power plants have played a secondary role in driving coal’s declining generation share over the past decade, although plant owners in some states have made investments to shift generation toward natural gas at least partly for environmental reasons. Looking forward, environmental regulations may play a larger role in conjunction with market forces. Owners of some coal plants will face decisions to either retire units or reduce their utilisation rate to comply with requirements to reduce carbon dioxide emissions from existing fossil fuel-fired power plants under the Clean Power Plan, which is scheduled to take effect in 2022 but has recently been stayed by the Supreme Court pending the outcome of ongoing litigation.
Beyond the growing market share for natural gas-fired generation over the past decade, coal’s generation share has also been reduced by the growing market share of renewables other than hydroelectric power, especially wind and solar. Unlike the growth of natural gas-fired generation, which has largely been market-driven, increased use of nonhydro renewables has largely been driven by a combination of state and federal policies. The use of renewable energy sources, such as wind and solar, has also grown rapidly in recent years so that generation from these types of renewables is now surpassing generation from hydropower.
The March 2016 STEO expects that the combination of market forces and government policies will continue to stimulate the use of natural gas and nonhydro renewables for power generation. In the EIA’s forecast, natural gas provides 33% of generation in 2016 while coal’s share falls to 32%. The expected share of nonhydro renewables increases to 8% in 2016, with hydropower’s share at 6%.
Edited by Harleigh Hobbs
Robert E. Murray, Chairman, President, and Chief Executive Officer of Murray Energy Corp. has responded to Hillary Clinton’s statement that “we’re gonna put a lot of coal miners and coal companies outta business.” He said: “Her statement is an affront to the coal miners of the United States, and their families, as well as the up to eleven working families whose livelihoods depend on each of our direct mining jobs.”
“While such a threat to our lives from a Presidential candidate is beyond strange, it does confirm what the national Democrat party has been accomplishing for the past eight years,” he added.
Murray pointed out that “nearly two hundred thousand of America’s coal miners have lost their jobs, and 49 American coal companies have filed for bankruptcy, as a result of the policies of the Obama Administration and the increased use of natural gas to generate electricity.”
“Mrs Clinton has now promised to further this destruction.”
Murray explained this would raise electricity costs for the US and “destroy the reliability of our country’s electric power grid.”
“In promoting her wind and solar power, she does not say that it is unreliable and that it costs 22¢/KWh (plus a 4¢ per kilowatt subsidy from our taxpayers) compared to 4¢/KWh for electricity from coal,” he added.
“Her statements demonstrate her absolute incompetence on matters of energy policy and her contempt for coal mining families in this Country,” Murray concluded.
Murray Energy is one of the largest employers in the US coal industry, employing approximately 5300 people in six states. This has been forced down from 8400 jobs in May 2015 due to Federal policies and the increased use of natural gas.
Edited from press release by Harleigh Hobbs
