MELBOURNE (Reuters) – Australian coal miners including Glencore must set aside thousands of tonnes of coal for use by domestic power generators for a period of 15 months under the New South Wales state government’s latest coal reservation policy.
Australia’s most-populous state detailed a requirement issued last month that coal miners must reserve a portion of their production for the domestic market, effective until June 2024, as part of a national move to limit soaring energy prices.
Coal sold under the policy will be capped at $125 a tonne – well below spot market rates and the price that some Australian miners have received for exported coal in the past year.
While the directive was initially aimed at coal minera that already supplied local power plants, NSW Treasurer Matt Kean said in January the state would expand the scheme to include coal miners that do not currently sell into the domestic market. The state is facing an election in late March.
“We don’t know how the NSW Treasurer can talk about levelling the playing field for coal companies,” Glencore said in an emailed statement.
“Under the updated directions Glencore, which produces about 30% of NSW’s thermal coal, is expected to provide up to 65% of the coal shortfall.”
Yancoal Australia and Whitehaven also said they would be impacted.
From April 2023 to June 2024, Yancoal will make up to 310,000 tonnes of coal available per quarter for domestic use, while Whitehaven will set aside either 200,000 tonnes or 5% of each of its mine’s thermal coal production per quarter, whichever is lower, the companies said on Thursday.
Shares in Whitehaven tumbled as much as 12.3% to hit a near six-month low before paring most gains to trade down 2.7%. Yancoal stock dropped 2.3%, while fellow coal miner New Hope Corp slipped 3.8%.
The NSW government during its talks with Yancoal on the latest policy told the company it would not be compensated for the difference between market rates and the price it receives selling volumes under the policy, the coal miner said.
Yancoal, however, said it could be eligible for a compensation in certain situations if costs incurred exceed the capped price of coal. Similarly, Whitehaven noted that an application could be made to raise the price cap under certain circumstances.
A notice published by the NSW government showed that mines owned by BHP Group and Peabody Energy will also have to comply with the legislation.
BHP has said the new policy could affect its plan to keep its Mt Arthur coal mine, the state’s largest single coal mine, open until 2030.
(Reporting by Melanie Burton in Melbourne Harish Sridharan and Sameer Manekar in Bengaluru; Editing by Subhranshu Sahu, Rashmi Aich and Michael Perry)