A sustained rise or fall in coal shipments is a significant indicator that affects the stock value of coal producers (KOL) such as BHP Billiton, Peabody Energy (BTU), Alliance Resource Partners (ARLP), Arch Coal (ACI), and Cloud Peak Energy (CLD). BHP makes up 5.5% of the iShares Commodities Select Strategy ETF (COMT).
BHP Billiton’s metallurgical coal production increased by 1% to 42.8 million tons. Here are a few contributing factors:
- Flat production at Queensland coal as record production at five mines was offset by the completion of longwall mining at Crinum mines, which are now underdoing maintenance. A convergence event at Broadmeadow mine and adverse weather conditions also dragged the output down.
- Energy coal production for fiscal 2016 declined by 16% to 34 million tons.
Coal production guidance
BHP met its production guidance for metallurgical coal while it missed the guidance for energy coal by a slight margin. The guidance going forward includes:
- BHP expects Queensland Coal production to increase to 44 million tons in fiscal 2017. Higher wash-plant and truck hours are expected to more than offset the closure of Crinum leading to this improvement.
- The company expects energy coal production to decline to 32 million tons for fiscal 2017 from 34 million tons in fiscal 2016. The decline is mainly due to the divestment of New Mexico coal assets, which will be offset to an extent through productivity improvements at New South Wales energy coal.
- The company made the first shipment from the Haju mine in Indonesia during the March quarter. On June 7, 2016, BHP entered into an agreement to sell its 75% interest in IndoMet Coal to its equity partner PT Alam Tri Abadi.
Continue reading to find out how BHP Billiton’s copper production fared and its outlook for fiscal 2017.