Return of length to European propylene market allows exports: sources

Australia-listed miner South32 has lowered its production and sales guidance for its Australian Illawarra Metallurgical Coal operation for fiscal 2016-2017 (July-June) after production rates fell in July-September, the company said in its quarterly production results Thursday.

"Illawarra Metallurgical Coal saleable production decreased by 26% [or 646,000 mt] to 1.9 [million mt] in the September 2016 quarter as challenging geological conditions were encountered at the Appin Area 9 longwall and the step around at Appin Area 7 was extended by 22 days," South32 said.

Sales of metallurgical coal from the Illawarra operations totalled 1.72 million mt in July-September, down 24% from the April-June quarter and 13% from the corresponding quarter last year, the results showed.

Meanwhile, the small quantities of thermal coal sold from the mines, which are in the southern coal fields of the Australian state of New South Wales, rose 20% year on year and 31% from the June quarter to 470,000 mt in the three months to September, South32 said.

Illawarra Metallurgical Coal is 100% owned by South32 Limited and operates three underground metallurgical coal mines -- Appin, Dendrobium and West Cliff.

It also manages the Port Kembla Coal Terminal on behalf of a consortium of partners.

Metallurgical and thermal coal production at the operations in the September quarter was 1.44 million mt and 447,000 mt, down by 31% and up by 10% year on year, respectively.

"Illawarra Metallurgical Coal sales of 9.3 [million mt] are now expected in FY 2017 as the operation has recovered from challenging ground conditions at Appin and finished goods inventory has been reduced by 300,000 mt. Accordingly, FY 2017 production guidance is reduced to 9 [million mt], with the operation expected to attain the previously targeted 9.5 [million mt/year] rate across the remainder of the year," South32 said.

It had been expecting saleable coal production of 9.5 million mt for fiscal 2017.

The downward revision to the miner's production is driven by its metallurgical coal production which is now expected at 7.55 million mt for the fiscal year, down from a previously expected 8.15 million mt.

Thermal coal production guidance has been lifted to 1.45 million mt, from 1.38 million mt.

SOUTH AFRICAN PRODUCTION LIFTED BY STRONG DOMESTIC DEMAND

South32's sales of coal from its South African assets rose in the domestic market following stronger demand for the fuel, lifting its total production in the country, while maintenance work limited its exports to the seaborne market, the company said.

"South Africa Energy Coal saleable production increased by 2% [or 134,000 mt] to 7.7 [million mt] in the September quarter [compared with the June quarter], underpinned by a 9% increase in domestic sales," it said.

"The reduction in export sales coincided with Transnet's annual rail maintenance cycle," it added.

The production level was, however, down from the same period in 2015 by 7%.

Domestic sales totalled 4.45 million mt in July-September, up 5% from the same period a year earlier, and up by 9% from the June quarter.

Export sales dropped 30% year on year and 18% from the previous quarter to 2.90 million mt in the September quarter.

Saleable coal production guidance from the South African assets remains unchanged at 30.90 million mt, comprised of 17 million mt into the domestic market and 13.90 million mt into the seaborne market, South32 said.

The company's South African Energy Coal operations are located in the coal fields of Mpumalanga and consist of four primary operations -- the Khutala, Klipspruit, Middelburg and Wolvekrans collieries.

It is the third-largest coal producer in the country and second-largest supplier to Eskom for power generation.