Foreign buyers of Australian coal have deferred shipments over the past two months, adding to evidence of fading demand for several export commodities.
Peabody Energy said its financial performance had “materially” deteriorated since June 30 on the back of ”demand-driven deferrals” of coal shipments, slumping coal prices and a slower than expected return to production at Queensland’s Middlemount mine after safety incidents.
Peabody told AFR Weekend on Friday that its Australian coking coal and thermal coal exports were among those affected by the “demand-driven deferrals”.
The deferrals add to mounting evidence that the resources boom that has fuelled Australia’s strong recent trade performance is now in decline.
They come less than two weeks after South Australian miner OZ Minerals said it sold just 79 per cent of the copper concentrate it produced in the first half of 2019 after numerous customers deferred deliveries.
Several Australian lithium miners have also dramatically scaled back exports or idled mine production in 2019 because customers were either unwilling or unable to receive the shipments they were contractually obliged to take.
There was also speculation on Friday that ASX-listed miner Syrah Resources, which mines graphite in Mozambique, was considering scaling back or temporarily closing its Balama mine amid very weak demand and sliding prices for the commodity.
Export data for iron ore, Australia’s most lucrative export commodity, was striking a more positive note on Friday, with Port Hedland data suggesting exports were stronger in August than any previous August.
But iron ore stockpiles in China have risen by 9 per cent over the past eight weeks, and prices for iron ore were this week 27 per cent lower than they were in early July.
The multiple instances of weak demand come, ironically, just days after confirmation that Australia posted its first current account surplus in 44 years in the three months to June 30.
But global economic conditions have deteriorated since June 30 on the back of US President Donald Trump’s trade war against China, with US manufacturing data for August falling short of expectations.
Macquarie analysts said the “export orders” category of the August US manufacturing survey was the worst since the global financial crisis.
A Macquarie analysis of ”real” demand for base metals, calculated by comparing production, export and stockpile data, found a “significant slowing” of global growth over the first seven months of 2019.
”Macquarie’s economists are now expecting a double-dip in global industrial production and this does not augur well for metals demand in the second half of the year,” said the analysts in a note.
Prices for the type of hard coking coal Peabody exports from Queensland have slumped by 27 per cent since mid-May, while prices for the top quality thermal coal produced in New South Wales have almost halved over the past year.
Peabody said export volumes for the three months to September 30 would be lower than the previous quarter, but it hoped volumes would increase in the final three months of 2019.
Shaw and Partners analyst Peter O’Connor said Peabody’s disclosure was “disturbing” and was likely to be influenced by trade tensions and slowing global growth.
Signs of deteriorating demand come after BHP chief executive Andrew Mackenzie warned in August that trade tensions had already put a dent in copper and oil prices.
BHP chief financial officer Peter Beaven this week reiterated the view that a period of global economic strength appeared to be coming to an end.
”The business cycle which has been very strong around the world over the last few years is starting to show its age,” he said on Thursday.
”An inverted yield curve and so on, that is sure signs that the market is considering this, so we obviously are cognisant of that.
”Having said that, we continue to sell all the products that we produce.”
News Source: Financial Review