Rio Tinto Energy CEO, Harry Kenyon-Slaney, has said the coal industry is showing the first signs of a comeback, following a dire period of more than two years, which saw prices of coal crash to near rock-bottom prices.
Kenyon-Slaney pointed to the thermal coal market – in which prices are at six-year lows of about US$62/t – for signs of green shoots emerging after a barren run.
"We are seeing the beginnings of the stabilisation of the market, particularly in respect of price," the Rio boss said. "You've started to see a correction in the supply imbalance, in that you've seen supply being taken out of operation. I'm under no illusions – the tough times are going to continue for some time yet. But the cycle will turn."
As for Rio Tinto’s place in the coal industry, Kenyon-Slaney said that an aggressive two years of cost cutting has allowed the mining giant to “keep our head above the water”. The firm has stripped almost US$30/t from costs across its thermal coal business. Despite this, the CEO said he expects at least one more year of pain for the Australian coal industry as the market shakes itself out.
Kenyon-Slaney said about 200 million t of coal production had been wiped off the market, while predicting there would be further casualties. "It takes time for the supertanker to turn. But you are seeing signs, I think, of a rational response," he said. "My view is that that has started to provide some stability to what has been a really difficult couple of years."
Issuing advice for all miners, Kenyon-Slaney said it was prudent to ensure each individual minesite was cash flow positive. If an operation slips into the red, “serious reviews” are needed.
"You've seen casualties all round the world. We have to make sure that our operations remain cash flow positive," he said.
Edited from various sources by Sam Dodson
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