Australia: Fire outbreak at Anglo American's Grosvenor mine likely to drive up met coal prices

Grosvenor contributes 30% of Anglo's total coking coal output

India is the third largest coking coal importer from Anglo American mines

Anglo American has temporarily ceased operations at its Grosvenor steelmaking coal mine in Queensland, Australia, due to an underground coal gas ignition on 29 June, 2024. The fire broke out in the mine and halted production.

A methane explosion on Saturday ignited a fire at the Grosvenor underground mine, which contributes roughly 30% of Anglo American's annual coking coal production in Queensland.

Efforts to extinguish the underground fire are ongoing, with the mine team working closely with the Queensland Mines Rescue Service and regulatory authorities. Assessing the situation and planning a safe re-entry into the mine is expected to take several months, given the probable damage underground.

What is the expected impact on supplies? In the first half of 2024, Anglo American's steelmaking coal division projects a production of approximately 8 mnt, with Grosvenor contributing around 2.3 mnt. Anglo's total production of met coal in 2023 was over 16 mnt.

For the full year, Grosvenor's contribution is expected to be about 3.5 mnt. Reduced output of 1.2 mnt in H2CY24 is expected due to a scheduled longwall move. The mine contributes 30% to Anglo's total met coal production.

Anglo American's total shipment of coking coal in H1CY24 was recorded at 3.6 mnt. Japan and South Korea were the leading importers followed by India, as per data maintained with BigMint.

What is the expected impact on prices? In discussion with market participants BigMint learned that Grosvenor is a prominent premium hard coking coal mine. The supply constraints expected to appear due to the fire outbreak will surely push up prices in the short term. Naturally, it will affect spot prices more than term contracts.

Premium low Vol prices have today risen by $11/t, to $245/t, Fob Australia.

Global seaborne metallurgical coal supply stands at 305 mnt, including 60% of hard coking coal not to forget PHCC, 22% of mix of semi-soft and semi-hard coking coals and other weaker grades. Hence, share of Grosvenor seems limited and any significant impact on prices is unlikely in the long term.