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Glencore Xstrata Halts Work on Balaclava Coal Port in Australia

Glencore Xstrata Plc (GLEN), the world’s biggest shipper of thermal coal, halted work on the Balaclava Island export terminal in Australia’s Queensland state because of poor market conditions and overcapacity.

Specific shipping limitations and concerns about the industry’s medium-term outlook added to the decision to shelve the new terminal, the company said in an e-mailed statement today. The facility had a planned export capacity of 35 million tons a year, according to the Glencore Xstrata website. Spot coal prices have declined 4.4 percent this year to $86.65 a metric ton, data from IHS McCloskey show.

Glencore Xstrata is among companies that are shelving projects and reducing workers to cut costs amid falling prices and weakening demand. Power-station coal contracts were settled at the lowest since 2009 last month, according to two people with knowledge of the deal. Work on Balaclava Island, 40 kilometers (24 miles) north of Gladstone in Queensland, was stopped after a review following Glencore International Plc’s takeover of Xstrata Plc on May 2, the company said.

In the long-term, Australia will need to increase its coal-export capacity in an efficient and internationally competitive manner in response to a rise in demand in Asia, Glencore Xstrata said in the statement.

Coal at the Australian port of Newcastle, Asia’s benchmark price, rose 85 cents to $86.65 in the seven days ended May 3, the first gain in three weeks, data from IHS McCloskey show. Prices averaged $94.29 last year after slipping to a three-year low of $78.05 on Oct. 19.

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net;

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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