[Vincent Milner]

Glencore Xstrata will suspend operations at its Ravensworth underground coal mine in Australia following a plunge in coal prices.

The plunge is due to a supply glut.This move underscores the plight of coal miners operating in Australia, including AngloAmerican, BHP Billiton and Rio Tinto , which have closed mines and cut staff in recent months.

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[Pops]

So Vince I see that each of your post has a link to the same site, if are you here to contribute that's great but I'm getting the idea you're here to spam. Better to back of the links 'til we get to know you better.

[ROCKMAN]

Vince - And another idea: if you're knowledgeable of the Aussie coal situation it would be interesting to see your thoughts on how the oversupply/price dynamics/Chinese coal import is developing. I’m wondering if the fact that it’s an underground mine, which I think costs mush more to operate than a surface pit, is a bigger factor than the lower coal price.

[rollin]

Rockman has a good point. Historically, underground mines were always starting and stopping depending on current price. They wait for higher prices to restart a mine.

[peterjames]

The mine that has been suspended is indeed the underground mine, and there are open cuts in the area. Its nothing new in the coal sector in Australia, as they have closed down alot of the marginal mines in the last year or so. At the same time quite a few large mines that were planned many years ago, have come online recently, leading to quite an increase in production. The problem is that most of the mines have signed up to long term contracts with the railway and port operators to ensure they could get coal out during the boom times. If they dont ship the coal, they still have to pay for the contracted rail and port charges.

Whilst the miners know they need to take supply off the market to prevent drops in prices, they cant without suffering the penalty of still paying for port and rail charges. More coal going out, prices dropping, and no one wants to adjust production to match requirements.

If the US gets its exports ramped up out of the west coast, indonesia and mongolia production ramps up, and china limit coal fired power stations, then theres still alot of pain to come for the Australian coal industry.

[SeaGypsy]

Much of our coal industry was built on a contract price averaging just over 1/4 of today's price, which is down off it's 'boom' peak by about 1/4. Cost return ratios are still pretty comfortable for the majority of significant miners.

[Vincent Milner]

So Vince I see that each of your post has a link to the same site, if are you here to contribute that's great but I'm getting the idea you're here to spam. Better to back of the links 'til we get to know you better.

Hey Pops, don't know why you think that I am here to spam. Few of my posts do link to the same site as I follow a few set of websites in the oil & gas industry and share whatever important updates I find with everyone as I feel it is only ethical to mention the source from where we share a particular news.

[ROCKMAN]

Vincent - I get the sense that we're just seeing the normal feedback loop with commodities: demand increase – prices increase – production increases. And prices retreat: consumption decreases due to higher prices or production increases beyond demand. In either case prices fall due to increased completion amongst the producers. So regardless of the cause the less profitable production lines are suspended. And, in time, availability decreases so depending upon the demand side of the equation prices eventually rise.

Is that how you view the a situation at least in Australia?

[godq3]

Most Chinese coal mines are underground, which requires many workers. At the same time wages in China rise at about 10% per year. That means that without coal price increase, many Chinese mines are becoming unprofitable every year. Given that Chinese coal account for nearly half of world supply, this is a very big issue, that will lead to big price increases in the coming years.

[Tanada]

Most Chinese coal mines are underground, which requires many workers. At the same time wages in China rise at about 10% per year. That means that without coal price increase, many Chinese mines are becoming unprofitable every year. Given that Chinese coal account for nearly half of world supply, this is a very big issue, that will lead to big price increases in the coming years.

Based on what I have learned recently about Underground Coal Gasification the Chinese are looking to move their production in that direction in a big way. They are currently working with the UK which has a few projects under way now to develop the procedures they need to exploit deep seams in China with a very small workforce. They already have one of the largest chemical reformulation industries on Earth taking gasified coal and making Methanol out of it for use as ICE fuel for cars and trucks. The Chinese government requires all vehicles manufactured for domestic use be M-85 compliant, so setting up deep coal gasification to produce motor fuel is clearly in their interest.

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