* Oversupply likely to weigh on coal market for some time
* BHP coal chief optimistic on long-term coal demand
* BHP does not rule out selling more coal assets
(Adds BHP coal chief comments)
BRISBANE, April 2 Top global miner BHP Billiton
sees little improvement in coal prices in the
near term as the market is likely to remain oversupplied for
some time, its coal chief said on Wednesday.
Prices for metallurgical coal have slumped to around $105 a
tonne from more than $300 in 2009, while thermal coal prices
have dropped to $75 from highs around $130 in 2011, which has
led producers to shut some mines, axe jobs and shelve projects.
At the same time, miners have boosted output at some mines,
looking to lower production costs per tonne, while BHP itself
opened a new mine a year ago and has another due to start
producing this year, exacerbating the glut.
"It's tough out there. It's hard to see any relief in the
short-term, certainly when you've got such strong supply," BHP
Billiton coal president Dean Dalla Valle told reporters after a
Producers in Indonesia, the world's biggest exporter of
thermal coal used in power stations, have been ramping up
volumes to offset the drop in prices, and Dalla Valle said that
output would probably increase further.
Nevertheless BHP remains optimistic about long-term demand
for coal, even in the face of global efforts to cut coal use to
combat climate change and China's efforts to curb pollution in
its biggest cities.
"All we can say is the long-term fundamentals for the
products are there. But at the moment we have actually
short-term overhangs of supply. So the industry will have to
shake itself out, as it will, one way or another," Dalla Valle
His focus was to improve returns from the business from a
poor 7 percent by cutting costs and boosting productivity, not
just by wringing more from BHP's coal workers but also from the
Dalla Valle did not rule out selling some coal mines, such
as mines in South Africa and its stake in the Cerrejon mine in
Colombia, an issue raised as BHP said this week it is looking to
streamline further to focus on its biggest and best assets.
"When you look at these things, you have to look at the
commodity, the mine and the jurisdiction it's in," he said,
adding that the company would also take into account "the carbon
In face of investment banks, academics and green groups
warning that coal assets could eventually lose value as a result
of global efforts to drive down coal demand, BHP still sees coal
demand growing, pointing to International Energy Agency
estimates of 2.4 percent a year growth to 2030.
The company argues that cheap coal is an essential source of
energy for bringing people out of poverty, while at the same
time saying that industry and governments should find ways to
reduce carbon emissions.
Carbon capture and storage solutions for power plants would
be one path that could meet both those goals. A large coal-fired
plant opening this year in Canada, Saskatchewan Power's
Boundary Dam plant, will be closely watched, Dalla
Boundary Dam will be the world's first commercial power plant
to use carbon capture and storage technology.
(Reporting By Sonali Paul; Editing by Richard Pullin)