An explosion at the Grosvenor mine in the Bowen Basin region of Queensland, Australia, on 29 June led Anglo American to halt all operations and activities at the site. The miner stated that it could take several months to extinguish the fire and make the site safe for re-entry, raising concerns about potential supply disruptions in the coal market.
The impacts will not be immediate, as Anglo American, in a declaration to its customers, said that it had declared force majeure on fourth-quarter coking coal deliveries, as the miner draws from existing stockpiles to meet its Q3 obligations.
According to a press release by Anglo American, Grosvenor was initially expected to produce 3.5 million tonnes of coking coal in 2024, of which 1.2 million tonnes were to be produced during the second half of the year. In line with this, Anglo American lowered their 2024 coking coal production guidance by 1-1.5 million tonnes in their Q2 2024 production report, as they excluded Grosvenor’s production for the second half of the year.
The Grosvenor mine exports coking coal from the Dalrymple Bay Coal Terminal. Trade data shows that the top 4 importing countries for coking coal from Dalrymple Bay are Japan, India, South Korea, and China. These countries are estimated to have taken up more than half of all coking coal shipments from Dalrymple Bay in 2024 so far, suggesting that buyers from these countries will be more significantly impacted by the Grosvenor incident.
A deficit of 1.2 million tonnes of coking coal is a significant amount to replace, and may shift trade patterns for Capesize and Panamax vessels, on which these coking coal shipments are primarily shipped on. While the biggest coking coal supplier for these importing countries, after Australia, is Russia, we have heard that the supplies from mainly the U.S. and Canada are of a similar quality. Thus, if buyers wish to avoid changing up their blend ratios significantly, they may be forced to obtain their supplies much further afield.
To obtain supplies from Canada, vessels will need to traverse the entire length of the Pacific Ocean to source their coking coal from the ports of Vancouver and Prince Rupert, located on the western coast of Canada. Similarly, to obtain supplies from the U.S., buyers would need to source their coking coal from the ports of Newport News & Norfolk, located on the U.S. East Coast. This will undoubtedly increase ton-mile demand and tighten tonnage supply in the freight market.
Yet, the concerns noted above could be waived if countries simply sourced their coking coal from other suppliers along the Queensland coast, which may also be able to offer coking coal of similar qualities. AXS data shows that coking coal shipments from Dalrymple Bay remained stable, and even higher year-on-year following the closure of the Grosvenor mine. This aligns with earlier information that Anglo American has been meeting its obligations by drawing from its coal stockpiles, and could also be a sign of ample coking coal supplies from Australia to fill the supply gap.
Going forward into Q4, it will be critical to observe how buyers from the Far East and India respond to the supply disruptions, their decisions could herald significant changes in trade flows – potentially to the benefit of the dry bulk freight market.
