Glencore announces national shutdown of its coal operations

 
  Sulla1 Chief Commissioner

Today's Australian is reporting Glencore's plans to shutdown its 17 Australian coal mines in September for "several weeks" due to depressed thermal and metalurgical export coal prices. Around 10,000 Glencore staff will be required to take extended leave during the proposed shutdown period. Glencore told the paper "the shutdown measures would allow it to align production levels with market demand while providing the flexibility to ramp back up as economies recover from the effects of Covid-19".

Glencore describes itself as one of the world's largest seabourne thermal coal exporters, with combined Australian production reaching 103-million tonnes in 2018/2019.

In Queensland the shut down will impact Aurizon's Newlands system, where the Collinsville and Newlands mines contribute about a third - 8.75-million tonnes - to the the total annual tonnage moved through to Abbot Point. Oaky Creek, Hail Creek and Clermont add 19.45-million tonnes to Aurizon's Goonyella System - around one fifth of the system's annual tonnage, and have been the source of traffic 1Rail's start-up operations in the region. The 15.177-million tonnes Rolleston mine feeds into Aurizon's Blackwater system and the Wiggins Island Coal Export Terminal, which is partly owned by Glencore.

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  Big J Deputy Commissioner

Location: In Paradise
That is big news. This will have serious ramifications for local, state and national economies.
  Galron Chief Commissioner

Location: Werribee, Vic
That is big news. This will have serious ramifications for local, state and national economies.
Big J
just adds to the rest of the problems covid is causing.
  Carnot Minister for Railways

The beginning of the end of coal.  This won't be the first big shutdowns.

Adani mine is dead too imo.
  allan Chief Commissioner

The beginning of the end of coal was the Clean Air Act 1956 of the British Parliament... It's a slow death.
  bevans Site Admin

Location: Melbourne, Australia
The beginning of the end of coal.  This won't be the first big shutdowns.

Adani mine is dead too imo.
Carnot

Yes I too think this is the start of a trend balanced with a lot more coal coming on stream from other countries. If we are to remain competitive then the coal cost needs to come down.
  Donald Chief Commissioner

Location: Donald. Duck country.
Maybe Aurizon was premature getting out of intermodal and putting all their eggs in the coal basket?
  bevans Site Admin

Location: Melbourne, Australia
Maybe Aurizon was premature getting out of intermodal and putting all their eggs in the coal basket?
Donald

There decisions over the past 5 years will come back to haunt their shareholders be sure of that.  

There is the investment of https://www.railpage.com.au/f-t11401130.htm which we are not yet aware of how this is going at RP and is it leading to volume?

Where does Aurizon go now for revenue maintenance and growth.  A large amount of their revenue is coming from coal.  How much of their coal business is Glencore?
  Nightfire Minister for Railways

Location: Gippsland
Maybe Aurizon was premature getting out of intermodal and putting all their eggs in the coal basket?

There decisions over the past 5 years will come back to haunt their shareholders be sure of that.  

bevans
You been told over and over again, the profits for rail operators are In bulk haulage of commodities that are not time sensitive, there Is very little profits to be made In Intermodal (competing with small trucking operators who will bend over backwards for their customer satiation)
  bevans Site Admin

Location: Melbourne, Australia
Maybe Aurizon was premature getting out of intermodal and putting all their eggs in the coal basket?

There decisions over the past 5 years will come back to haunt their shareholders be sure of that.  
You been told over and over again, the profits for rail operators are In bulk haulage of commodities that are not time sensitive, there Is very little profits to be made In Intermodal (competing with small trucking operators who will bend over backwards for their customer satiation)
Nightfire

So we should expect a serious decline in earnings and profits as the coal glut bites.
  YM-Mundrabilla Minister for Railways

Location: Mundrabilla but I'd rather be in Narvik
Today's Australian is reporting Glencore's plans to shutdown its 17 Australian coal mines in September for "several weeks" due to depressed thermal and metalurgical export coal prices. Around 10,000 Glencore staff will be required to take extended leave during the proposed shutdown period. Glencore told the paper "the shutdown measures would allow it to align production levels with market demand while providing the flexibility to ramp back up as economies recover from the effects of Covid-19".

Glencore describes itself as one of the world's largest seabourne thermal coal exporters, with combined Australian production reaching 103-million tonnes in 2018/2019.

In Queensland the shut down will impact Aurizon's Newlands system, where the Collinsville and Newlands mines contribute about a third - 8.75-million tonnes - to the the total annual tonnage moved through to Abbot Point. Oaky Creek, Hail Creek and Clermont add 19.45-million tonnes to Aurizon's Goonyella System - around one fifth of the system's annual tonnage, and have been the source of traffic 1Rail's start-up operations in the region. The 15.177-million tonnes Rolleston mine feeds into Aurizon's Blackwater system and the Wiggins Island Coal Export Terminal, which is partly owned by Glencore.
Sulla1
Thanks Sulla1.

This is one of the most lucid, balanced and informative posts that I have seen on RP recently. Well done!

Obviously, I don't know the content balance between your knowledge and/or research and how much came from the Australian article. This is of little importance as it is the end result that matters. Full marks for your efforts regardless. Like some others you could have just quoted a link that either doesn't work or leads to a dead end paywall.

The general standard of posts on RP has been declining for ages with typos, spelling, grammar and content all getting worse. Too often the seemingly inevitable unexplained acronym(s) are thrown in, perhaps in an attempt to add authenticity.

We need more 'thinking' posts of the standard set in your contribution above.

Smile
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
The beginning of the end of coal.  This won't be the first big shutdowns.

Adani mine is dead too imo.
Carnot

A short lived economic down turn does not = END of Coal as we know it. It happened 10.5 years ago, it will happen again. It is also not the only commodity going through the same pain.

Adani's customer is the 1.2B Indian's who want the same access to power as you do, so no Adani is unlikely dead at this time.
  Nightfire Minister for Railways

Location: Gippsland
Maybe Aurizon was premature getting out of intermodal and putting all their eggs in the coal basket?

There decisions over the past 5 years will come back to haunt their shareholders be sure of that.  
You been told over and over again, the profits for rail operators are In bulk haulage of commodities that are not time sensitive, there Is very little profits to be made In Intermodal (competing with small trucking operators who will bend over backwards for their customer satiation)

So we should expect a serious decline in earnings and profits as the coal glut bites.
bevans
Most likely

Remember Aurizon couldn't make Intermodal work for them.
  bevans Site Admin

Location: Melbourne, Australia

So we should expect a serious decline in earnings and profits as the coal glut bites.Most likely

Remember Aurizon couldn't make Intermodal work for them.
Nightfire

Is that the official word?

When coal goes south what will Aurizon turn to then?
  bingley hall Minister for Railways

Location: Last train to Skaville
Maybe Aurizon was premature getting out of intermodal and putting all their eggs in the coal basket?

There decisions over the past 5 years will come back to haunt their shareholders be sure of that.  
You been told over and over again, the profits for rail operators are In bulk haulage of commodities that are not time sensitive, there Is very little profits to be made In Intermodal (competing with small trucking operators who will bend over backwards for their customer satiation)
Nightfire

And you've been told over and over again - Bowmans Rail, Crawfords, Grainforce, Fletchers, QUBE, PN, Watco, SCT......

You must have been a government consultant in another life Razz

Aurizon's 'premature' withdrawal from intermodal was down to management incompetence and a failure to understand the market.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Maybe Aurizon was premature getting out of intermodal and putting all their eggs in the coal basket?

There decisions over the past 5 years will come back to haunt their shareholders be sure of that.  

There is the investment of https://www.railpage.com.au/f-t11401130.htm which we are not yet aware of how this is going at RP and is it leading to volume?

Where does Aurizon go now for revenue maintenance and growth.  A large amount of their revenue is coming from coal.  How much of their coal business is Glencore?
bevans

Aurizon's share holders (we are one) all know Aurizon's future is with coal. Should coal close and they get 100% of the remaining rail viable freight in the state, incomes will be reduced by around 95% with profits even lower.
  bevans Site Admin

Location: Melbourne, Australia

Aurizon's share holders (we are one) all know Aurizon's future is with coal. Should coal close and they get 100% of the remaining rail viable freight in the state, incomes will be reduced by around 95% with profits even lower.
RTT_Rules

A terrible way to run a business.
  freightgate Minister for Railways

Location: Albury, New South Wales
Aurizon has plenty of intermodal business on the SG how could have not mad any money doing it ?

They had a captive market in Queensland on the NG and existing customers where they could Offer a bigger network for delivery. You go from a infra state network to a national network for delivery and transit of freight.

Only a moron as a CEO would not make money and leverage that opportunity.
  Sulla1 Chief Commissioner

Maybe Aurizon was premature getting out of intermodal and putting all their eggs in the coal basket?

There decisions over the past 5 years will come back to haunt their shareholders be sure of that.  

There is the investment of https://www.railpage.com.au/f-t11401130.htm which we are not yet aware of how this is going at RP and is it leading to volume?

Where does Aurizon go now for revenue maintenance and growth.  A large amount of their revenue is coming from coal.  How much of their coal business is Glencore?
bevans

We've got to remember coal is many different things, and not all coal is created equal.

Aurizon's rail network carries the world's largest seabourne trade of metalurgical coal - 143-million tonnes in 2018. Metalurgical coal and its carbon content remain the only economic means of smelting iron ore into the carbon iron alloy known as steel. Most steel mills from India through to South Korea and Japan, and to a lesser extent China, rely on the metalurgical (coking) coal transported by Aurizon or on its network. By comparrison, NSW produces just over 25-million tonnes of metalurgical coal. Metalurgical coal is Aurizon's trump card and as long as iron ore is being turned into steel by conventional steel mills, Aurizon will have a coal business.

Glencore, more so than most other miners in Australia, is very heavily exposed to thermal coal pricing and demand. While BHP's coal production in Queensland is almost entirely metalurgical, 69% of Glencore's Queensland production is thermal coal. Its recently announced 20-million tonne thermal and coking coal Valeria project near Emerald is designed to increase Glencore's metalurgical coal production as well as allowing it to close more expensive to operate thermal coal mines. Glencore's coal business in Queensland represents around 19.5% of the tonnage moved on Aurizon's coal network by Aurizon, Pacific National, 1Rail and BMA (the later hauls BMA coking coal exclusively).
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE

Aurizon's share holders (we are one) all know Aurizon's future is with coal. Should coal close and they get 100% of the remaining rail viable freight in the state, incomes will be reduced by around 95% with profits even lower.
A terrible way to run a business.
bevans
Really, they have at least another generation of work competing for around 150 mtpa of coal haulage with an average distance of around 350km. Coal being one of the lowest unit cost commodities to move by rail.

Meanwhile the rest of the states non-ore type haulage task combined is lucky to be 20 mtpa. Even before PN, the NCL inter-modal was I think less than 10 mtpa.

When coal comes to an end, the rail industry on the east coast will contract significantly and there will significant job losses, although this will not happen over night rather a number of decades.
  bevans Site Admin

Location: Melbourne, Australia
I think a number of the new mines in Africa have been financed by the Chinese who have a stake.  I expect this to start to bite.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
I think a number of the new mines in Africa have been financed by the Chinese who have a stake.  I expect this to start to bite.
bevans
The Chinese are doing what makes sense and geographically diversifying their supply chain, we do the same at work. Also from a political position they need to ensure that should the poo hits the fan in their US relationship of which Australia is also a close friend, their supply of coal won't be fully interrupted.  

Africa's supply chain is notoriously unreliable, China knows this which is why its basically building and running most of it avoiding the use of locals as much as possible and quality wise Qld still has some of the best coking coal in the world and closer. Its unlikely Australia will see a reduction in coal sales for many years to come, but it will eventually start with thermal and as Sulla stated, coking coke will be still flowing down the rails for years to come.
  james.au Minister for Railways

Location: Sydney, NSW
Maybe Aurizon was premature getting out of intermodal and putting all their eggs in the coal basket?
Donald
There wouldn't be much stopping them getting back into the market....  The fixed costs are largely still there, ie locos and probably enough wagons.
  bevans Site Admin

Location: Melbourne, Australia
Maybe Aurizon was premature getting out of intermodal and putting all their eggs in the coal basket?
There wouldn't be much stopping them getting back into the market....  The fixed costs are largely still there, ie locos and probably enough wagons.
james.au

Agreed except what customers would risk their business again on this company?

Also their terminals have been sold.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE

Agreed except what customers would risk their business again on this company?

Also their terminals have been sold.
"bevans"


Talking long time in the future, for now Aurizon is focused on doing what it does best and gets the best return for its investment.

Should they choose to return to inter-modal market then the market will do what it always does, goes with the supplier who gives the best deal.  Terminals can be built as others have already shown this can happen.

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