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Some of the world's biggest miners are running Australian mines at a loss because the fixed costs of their rail contracts mean it would cost more to close them.
Several coalmines in Queensland are understood to be operating under such a scenario, because of long-term ''take-or-pay'' rail access contracts that miners struck when commodity prices were high.
Several coking coalmines run by global miner Anglo American are understood to be affected in this way and one source said he was confident that Anglo was not ''Robinson Crusoe'' in that regard.
Australia's coal sector is already facing multi-year lows for both thermal coal and coking coal prices, and the fixed-rail contracts highlight the multitude of challenges facing the local industry.
When asked to confirm the situation in Queensland an Anglo spokeswoman said the company would not comment on ''matters of this nature''. But Anglo is known to have take-or-pay contracts in place with Aurizon for rail access, and Anglo chief executive Mark Cutifani referred to the problems it was causing during the company's annual results in February.
''Unfortunately in the industry there is still a lot of sticky production with take-or-pay contracts on the rail lines in both the US and Australia. Some of that capacity is shaking out, but it might be more than a year before we see the sorts of numbers that are going to be needed to improve the pricing focus,'' he said.
''If we have to make some tough decisions on reducing our capacity we will go there, but certainly I think the improvement programs are making a big difference.''
Unfortunately for Anglo, some of those contracts were struck during the absolute peak of coal prices around February 2011, when Queensland coking coal was fetching more than $US300 a tonne.
The bulk commodity was circling $US110 a tonne this week, having folded under the dramatic rise in exports from producers in North America and Queensland.
The likes of Glencore Xstrata, BHP Billiton, Peabody Energy and Rio Tinto also have rail contracts with Aurizon for their Queensland mines, while take-or-pay contracts are also used by rival rail providers Asciano and Pacific National.
Many of the miners are also tied to long-term take-or-pay contracts for port capacity.
An Aurizon spokesman defended the rail providers, saying they had to invest significant amounts in rail infrastructure to provide a transport solution. ''Given the scale, capital intensity and 25-year-plus life of investments, contracts seek commitments from customers to long-term use of the assets,'' he said.
This article first appeared on www.smh.com.au
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