PRODUCTION AND SUPPLY CHAIN COSTS OF COAL CCC/289

ABSTRACT

Between 2011 and 2016, the decline in international coal prices and weaker demand placed some export producers of coal under financial stress. This report discusses how mine operators worldwide have sought to reduce operating costs and adapt to an outlook of increased price uncertainty. Indonesia, South Africa and Colombia are the most competitive exporters of steam coal while Australia maintains its role as the leading exporter of metallurgical coking coal. Mining tends to account for the largest proportion of the cash operating costs of most coal exporting countries. Opencast mining techniques such as bucket wheel excavation, dragline mining, and truck and shovel are described. Underground mining processes including longwall mining and room and pillar are explained. Examples of the unique cost structures of different mines include Mount Arthur mine and Boggabri in Australia, Buchanan mine, USA, PT Adaro surface mines and PT Bumi in Indonesia and the Jan Karski mine in Poland. Opencast and underground mines have common cost components, for example labour which often accounts for the largest proportion of mine costs. Different mining methods however incur a plethora of different cost components based on the type of mechanisation that is employed. As product costs fall, the market price increases in late 2016 and 2017 are promising. It remains uncertain whether the price trends will spur further capital expenditure (Capex) required in the future, and examples of Capex for mines vary widely. Nonetheless, since late 2016 market conditions have lifted the coal export industry into greater profitability, while cost control and productivity are maintained.