Remarkable new signs keep emerging that the global coal industry is in structural decline: India’s Coal Secretary reports that coal imports have collapsed by 49% year-on-year in the month of November 2015 and are down 8.9% in the April-November 2015 period, following a similar pattern to the 30% decline in China coal imports so far during 2015; and new analysis by Wood Mackenzie reveals that two-thirds of world coal production is operating at a loss.
In addition, Anglo American will write off US$3.7 – 4.7 billion of shareholder wealth in its December 2015 half-year results, with the coal division contributing to a material but as yet undisclosed chunk of this wealth destruction.
Tim Buckley, IEEFA’s Director of Energy Finance Studies, Australasia, said: “The global coal industry is in dire straits. Indian coal imports have halved in the month of November 2015, and this comes against the backdrop of two-thirds of global coal production operating at a loss.”
A number of Anglo American’s South African and Australian coal mines are now placed up for sale. Wood Mackenzie estimates that around half of Australian mines operate at a loss.
“Anglo American’s coal assets are on the chopping block, if only they could find a buyer. With Rio Tinto, Vale, Peabody, Glencore, Whitehaven and most other coal companies globally trying to find equity investors to buy some coal bargains, the list of sellers of coal assets is an increasingly crowded space. Banks are now left holding around US$45bn of debt associated with US coal companies alone.” Buckley added.
Anglo American’s market value of equity is down 35% in a month and down 90% in the last five years. This month, Anglo American was again declined NSW Planning Assessment Commission approval for its proposed new Drayton South coal mine, ironically only weeks before the company puts all greenfield developments on hold because of growing financial distress. Anglo American’s final focus will be on diamonds, copper and platinum.
