UPDATE 1-Glencore Xstrata scraps plans for Australia coal export terminal

Mon May 13, 2013 3:49am EDT

* Balaclava Island terminal abandoned due to poor market -Glencore

* Australian coal prices have tumbled in last 2 years

PERTH May 13 (Reuters) - Glencore Xstrata is stopping work on a planned 35 million tonnes per annum Australian coal export terminal as a result of poor market conditions, making it likely it will also scrap an associated coal mine.

The decision to halt work on the Balaclava Island export terminal in eastern Australia was made following a review of the project after Xstrata's merger with Glencore.

"This decision has been made as a result of the poor current market conditions in the Australian coal industry, excess port capacity in Queensland, specific shipping limitations and concerns about the industry's medium-term outlook," Glencore Xstrata said in a statement on Monday.

The move may also signal the fate of the company's Wandoan mine, a 30 million tonne per year mine in Queensland state, which Xstrata had planned prior to the merger. The Balaclava Island coal terminal was being considered as a port to export thermal coal from the Wandoan mine.

Analysts have long expected that Wandoan would be a challenging development to get off the ground, even more so given declining coal prices.

"It's further confirmation Wandoan's status as being well and truly on hold is certainly unchanged in the current environment," said Tom Sartos, an analyst with RBS in Brisbane.

Glencore Xstrata said it is currently waiting for a mining lease from Queensland state and expects to make a final investment decision on the project later this year.

Australian coal prices have fallen dramatically in the last two years from a record of around $130 per tonne in 2011 to under $90 per tonne, putting a number of Australian coal mine and port plans on the chopping block.