Home > Chemical News

Chemical News

Polish coking coal producer JSW increases Q2 output 68% on year

http://www.chemnet.com   Aug 31,2015 Platts
Europe's largest coking coal producer Jastrzebska Spolka Weglowa said late Thursday it produced 4.17 million mt of hard coal in the second quarter, up 68% year on year because of its acquisition of the Knurow-Szczyglowice mine.

Total hard coal sales grew 44% year on year to 3.938 million mt, also as a result of the acquisition of the mine in August last year. The deal expanded JSW's resource base by 65% and is expected to increase annual hard coal production to 18.5 million by 2019. The mine has production capacity of 3.8 million mt/year, of which 38% is coking coal and the remainder thermal coal.

Coking coal production in Q2 accounted for 73% of the company's total output and it increased 57% to 2.9 million mt, while thermal coal output doubled to 1.26 million mt, JSW said in a presentation of its Q2 results following the close of the market.

The acquisition of the Knurow-Szczyglowice mine offset the impact of a two-week strike in January-February that cut output by 751,000 mt, the company said.

Falling coal prices and demand meant the state-controlled company doubled the amount of hard coal it had stockpiled at the end of June to 1.22 million mt from a year earlier. Hard coal inventories were also up 23% quarter on quarter. Coking coal inventories were up 26% on the year and 25% on the quarter. Thermal coal stockpiles more than tripled on year and increased 22% on the quarter.

Coking coal sales increased 43% to 2.8 million mt and thermal coal sales rose 47% to 1.14 million mt. About half of the company's coking coal production is processed in the company's five coking plants into coke for the steel industry. Coking coal sales to external customers increased 51% to 1.47 million mt. In January-June hard coking coal accounted for 68% of external sales and 32% was semi-soft coking coal. In the first half of the year 75% of external sales were sold domestically and 25% were exported.

JSW achieved an average price of $105/mt for coking coal in the second quarter, down 22% year on year and 5% quarter on quarter due to lower benchmarks. The company achieved an average $62/mt for its thermal coal, down 30% year on year and 13% quarter on quarter due to a significant fall in prices on the Polish market.

The company's unit mining cost fell 28% year on year and 12% quarter on quarter to Zloty 306.22/mt ($81.44/mt) thanks to a cost cutting program.

JSW produced 1.07 mt of coke in its five coking plants, up 12% year on year. Coke sales to external customers dropped 0.3% to 981,600 mt. The company had coke inventories of 239,400 mt at the end of June, down 23% year on year, as the strike caused it to sell off its stockpiles. JSW achieved an average coke price in the quarter of $187/mt, down 21% year on year and 7% quarter on quarter due to to falling blast furnace coke prices in Europe.

JSW recorded a net loss of Zloty 426.8 million ($113.7 million) in the quarter, almost double the market consensus due to the challenging market environment. Sales revenues of Zloty 1.69 billion were up 9% year on year thanks to higher sales volumes but fell 7% quarter on quarter.

Low coking coal prices caused the company to implement a liquidity improvement program designed to stabilize the crisis. The company said it has achieved Zloty 1.1 billion in savings in the first half of the year.

JSW is also preparing an efficiency improvement program for the second half of this year to increase production of high-margin hard coking coal and optimize utilization of its coking plants while reducing costs. JSW plans to reduce its capex by 49% from Zloty 1.48 billion last year to Zloty 847 million this year.

"Our overriding objective while facing these extraordinarily unfavorable market conditions is to cut expenses permanently and focus on the most growth-oriented operating areas, meaning coking coal production. Our low cost base affords us an opportunity to take advantage of even a slight retracing of prices on the coking coal market," CFO Robert Kozlowski said in a statement.
 Print  |    add to Favorites  |    Close