Illawarra metallurgical coal 'performing well' in South32 results

In its half-year results presentation, diversified miner South32 reported a headline profit of $US685 million ($A990 million).

Read more: Plans to double Shoalhaven hydro at Kangaroo Valley shelved

The company's metallurgical coal operations - which includes mines at Mount Kembla and Appin, contributed to 30 per cent of the ASX-listed firm's earnings.

Last year, the company announced it would not open any new coal mines as it continued to move into metals such as cobalt, zinc and nickel which are critical for batteries and clean energy technology.

This announcement also foreshadowed the closure of Dendrobium in the 2030s, after the company elected not to continue with plans to expand the mine.

The future of the company's Appin mine is more secure, with the company outlying a significant investment in the transition to a single longwall and additional ventilation capacity to enable mining in the current Area 7 to continue to at least 2039.

South32 CEO Graham Kerr said he expects to see strong demand for metallurgical coal with no viable commercial alternative for steelmaking.

"We believe metallurgical coal is an important part of how the world develops through steelmaking over probably the next two to three decades. Ultimately, there will be some kind of replacement in my mind around green steel, but that's not today."

The move to a single longwall is expected to increase production volumes at Appin, and the company is also expecting production to increase once a new industrial agreement is agreed in the second quarter of the 2023 financial year.

In the first half of the 2023 financial year, the company produced 2753 kilotonnes of metallurgical coal and expects to up this to 3247kt in the second half of the year.

"From our perspective, Illawarra is performing well," Mr Kerr said. "We continue to invest money and metallurgical coal absolutely has a role to play."

While coal prices soared in the 2022 financial year, the company's production was hit by staff being off work due to COVID and ongoing wet weather reducing export coal volumes.

Unit costs in this financial year have increased by seven per cent from previous forecasts, partly due to a weaker Australian dollar.

While the company has made it clear that it does not see its future in the coal market, the re-opening of the Chinese market to Australian coal and the removal of the country's CoVID zero policies are expected to drive growth in demand for metallurgical coal in the future.

We've made it a whole lot easier for you to have your say. Our new comment platform requires only one log-in to access articles and to join the discussion on the Illawarra Mercury website. Find out how to register so you can enjoy civil, friendly and engaging discussions. Sign up for a subscription here.