Global miner Glencore, the world's largest exporter of thermal coal, is considering closing some of its South African coal mines and laying off workers due to deteriorating market conditions and falling prices.
According to Reuters, analysts believe the move would not be enough to combat a global coal supply glut, but could herald the beginning of a production response to low prices.
The potential closures at Optimum Coal Mines would cut production of thermal coal by at least 5 million tpy and would put 1070 jobs at risk, the company said in a statement.
Optimum produces about 10 million tpy of coal, half of which is sold to power utility Eskom while the rest is exported.
European coal futures hit a nine-year low this week, extending a steady decline as demand has failed to keep pace with supply growth in the past few years and, more recently, imports into top consumer, China, have slowed following the introduction of trade targets.
"It could be the first of many of these," Colin Hamilton, head of commodities research at Macquarie, said, referring to the potential closures.
"It's taken these Chinese import restrictions to force the issue (of oversupply)," Hamilton added.
This month, Glencore restarted coal mining operations in Australia following a three-week suspension aimed at combating the supply glut. The suspension did little to turn coal prices around.
Glencore said its affected South African operations would be placed on care and maintenance and it would consider re-opening them if economic conditions improved. It said it had begun discussions with labour unions.
It also said it would not close its underground mines and would continue to supply coal to Eskom's Hendrina power plant.
Edited from various sources by Sam Dodson
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