By Rhiannon Hoyle
SYDNEY--A sharp pullback in the value of commodities like coal
and iron-ore in recent months was "a rude awakening" for
Australia's mining industry that's likely spur further production
cuts, Yancoal Australia Ltd. (YAL.AU) managing director Murray
Bailey said Friday.
The commodity price declines were somewhat inevitable after
stimulus measures rolled out in China in response to the financial
crisis of 2008 drove the value of raw materials to record levels,
Mr. Bailey said at a Sydney conference.
The price of thermal coal--which is used for power generation
across Asia and accounts for almost half of Yancoal's sales--has
fallen 21% so far this year. Hard coking coal, used in
steel-making, has fallen 29%.
It would be a "natural reaction" for mining companies to slow
their rate of production, contain costs, and boost productivity in
response to this, Mr. Bailey said.
Last month Chinese-backed Yancoal, which was formed through
Yanzhou Coal's recent takeover of Gloucester Coal and listed on the
Australian Securities Exchange in June, said it would review
expansion plans at all seven of its mines across the Queensland and
New South Wales states.
Other mining companies have also been curbing growth plans and
idling production at existing mines following the pullback in
prices. Earlier this week, BHP Billiton Ltd. (BHP) said it would
cease production at one of its jointly owned metallurgical coal
mines in northeastern Australia. Xstrata PLC (XTA.LN) recently
trimmed 600 jobs across its Australian coal operations.
- Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
