Miner BHP Billiton is banking on higher emerging markets steel growth and a global climate accord-led drive for higher quality coking coal in plans to supply 8% more of the raw material for steel from Queensland mines by 2017-18.
Resource-hungry India remains met coal's darling, while Chinese steel per capita consumption is set to rise toward European and US levels over the next two decades, according to BHP projections.
BHP expects strong steel production growth in India, according to a briefing Tuesday by Mike Henry, president of minerals operations for Australia.
Meanwhile, "China will continue to import seaborne metallurgical coal...with demand supported by coastal market access and requirement for consistent, quality product in larger blast furnaces," BHP said, adding a commitment to rationalise domestic supply remained a risk.
BHP's met coal portfolio, with partners Mitsubishi Corp. and Mitsui & Co., will allow for maximizing output and growth without major capital projects, it said. The resources' cash costs sit below 80% of global coking coal mining production, on its analysis.
"BHP Billiton can also grow its coal business by releasing low-cost, latent capacity as well as by exercising high quality growth options if market conditions call for it," Henry said in a statement.
The group's Caval Ridge Southern Circuit area can provide an additional 4 million mt/year with a conveyor and additional mining fleet. His presentation also highlighted the Goonyella Complex Optimisation and Wards Well underground development in growth options.
BHP plans to reduce cash costs to $52/mt in fiscal 2017 at its Queensland coal mines, down 20% from the fiscal year ended June 30, 2015. It wants to maximize its output from existing mines to 44 million mt in fiscal 2017 and 46 million mt in fiscal 2018, from the 42.5 million mt planned in fiscal 2016.
"Rather than waiting for higher prices, we have been deliberate in shaping a quality, focused portfolio that allows us to deliver value in challenging market conditions and positions us well for an expected longer-term improvement in coal market fundamentals," Henry said.
"Even in today's difficult environment, all of our operations remain cash positive." BHP said the coal business has delivered over $3 billion of productivity gains since 2012 and the company was targeting another $600 million by the end of its 2017 financial year.
BHP is now focused more than ever on Queensland met coal managed by BMA after asset restructuring via the South32 spin off and reaching an accord with Adaro to sell a controlling stake in Indomet Coal based on Kalimantan.
With a range of high CSR coals, BHP expects to be well placed for the possible introduction of more stringent regulations to reduce emissions hitting steel and pig iron production in particular.
This is "likely to increase value in use for quality metallurgical coal," the company said, with demand projections shown under a scenario of global targets to hold the increase in temperature to below 2 degrees centigrade above pre-industrial levels.
