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UPDATE 1-Australia's New Hope sees Asia coal market bottoming out

Published 22/03/2016, 01:52 pm
UPDATE 1-Australia's New Hope sees Asia coal market bottoming out
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* Says growth in Australia coal supply has tapered

* Cites growing Newcastle ship queues as positive signal

* Reports 56 pct slide in half-year net profit (Adds comment from New Hope CEO, analyst)

By Sonali Paul

MELBOURNE, March 22 (Reuters) - New Hope Corp NHC.AX , Australia's top independent coal producer, sees signs the Asian thermal coal market has bottomed out, with prices expected to creep up over the medium term.

New Hope said growing ship queues at the port of Newcastle were a positive signal, showing demand remained firm for Australian coal from power stations in Japan, South Korea and Taiwan.

Managing Director Shane Stephan said that at the same time, growth in Australian thermal coal supply had tapered following a ramp-up over the past few years, when miners sought to maximise output to cut their costs per tonne as prices slumped.

That has helped keep benchmark coal prices at Newcastle GCLNWCWIDX in the low $50-a-tonne level for the past six to eight months, following a 60 percent slide since 2011.

"It seems to have found - one hates to say a floor - but it seems to have stabilised around that level. We still believe in the medium term there will be some price improvement, but it is likely to be moderate," Stephan told Reuters in an interview on Tuesday.

He said prices could rise "towards" $60 a tonne, but declined to predict anything beyond that.

UBS analysts said they saw little chance of Japanese thermal coal contract prices improving for the 2016-17 contract year, in face of ample supply and waning Chinese demand.

"There is a wash of coal. China is retreating from the trade and their import level is dropping by over 30 percent per annum," UBS analyst Glyn Lawcock said at a briefing in Sydney.

New Hope, which also produces oil, on Tuesday reported a 56 percent slide in net profit before one-offs to A$15.0 million ($11 million) for the six months to January from A$34.2 million a year earlier, hit by weaker coal and oil prices.

It is counting on cost cuts and expansion, with its recent A$850 million acquisition of Rio Tinto's RIO.AX RIO.L 40 percent stake in the Bengalla coal mine in the Hunter Valley, to spur growth.

Stephan said the company was unlikely to chase further acquisitions for now, while it beds down the Bengalla purchase and fights green groups to secure a mining lease by September to keep its New Acland mine in Queensland open.

"I'd never say no, but I think the focus of the company has now shifted very much to our existing operations and our joint venture interest in Bengalla," he said.

($1 = 1.3187 Australian dollars)

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