Coronado Global Resources Inc
ASX:CRN
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Coronado Global Resources Inc
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Thank you for standing by, and welcome to the Coronado Global Resources Fourth Quarter Investor Call. [Operator Instructions] There will be a discussion of results from the CEO and the CFO, followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Mr. Gerry Spindler, Chief Executive Officer of Coronado. Please go ahead.
Thank you, operator, and thank you to all participants for joining Coronado's fourth quarter investor call. This morning, we released our fourth quarter report to the ASX and the SEC, in which we outlined our production and sales volumes for the quarter as well as other key information related to our safety and financial performance. A more detailed outline of our financial position and results will be released to the market on February 23 with our Form 10-K and full year's earnings release. We will convene another call then to outline in more depth our financial outcomes and our forward plans. During the fourth quarter, the Coronado community is deeply saddened by the tragic fatality at our Curragh mine. On the 21st of November, the operations were temporarily suspended when an employee, Mr. Clark Peadon, was fatally injured while working on the dragline operations. The company extends its deepest sympathies and sincere condolences to Mr. Peadon's family, friends and colleagues, and continues to provide counseling and support services. On November 24, Curragh resumed all non-dragline operations and a gradual and phased approach following directives from Resources Safety and Health Queensland Inspectors to isolate the accident site and suspend all dragline operations. On December 10, the inspectors lifted the directive to suspend all dragline operations, and Curragh recommenced dragline activities including return-to-work safety and training sessions before operational shifts restarting. Following the resumption of dragline operations, no ongoing directives or restrictions on the Curragh mine are in force. The investigation into this tragic event continues. Turning our attention to COVID-19. Coronado remains focused on the safety and well-being of all employees and contracting parties as we continue to execute action plans to manage the risks associated with COVID-19 and its variants. The threat of COVID-19 has been ever present throughout the year, and the Coronado COVID-19 Steering Committee has continued to remain vigilant in dealing with the Delta and Omicron variants and their impacts on our people, operations and customers. Sanitization processes; social distancing; mask-wearing, where safe to do so; vaccine advocacy; vaccine rollout; educational materials and regular pre-start communications continue to form the base level commitments by the company in tackling the virus and keeping our people informed. The U.S. segment Vaccine Incentive Program is having meaningful results with vaccination rates doubling during these quarters -- during this quarter. Two-thirds of our U.S. employees are now fully vaccinated, and these numbers are growing, underpinning greater workforce availability and fewer production interruptions in 2022. In Queensland, 90% of the population is fully vaccinated, and the company's efforts are now firmly behind the encouragement of booster shots to ensure prolonged protection. As far as general safety, the total recordable injury frequency rates in Australia and the U.S. continued to remain below relevant industry averages. In Australia, the 12 months' rolling average Total Reportable Injury Frequency Rate, as of December 31, was 3.07 compared to a rate of 9.40 at the end of December 2020, reflecting a 67% year-on-year improvement. In the U.S., the 12-month rolling average Total Reportable Incident Rate was 2.51 compared to a rate of 2.28 in the prior year. During the quarter, the Buchanan mine safely completed a longwall move. And pleasingly, the Logan operations ended the quarter with no reportable safety incidents. Turning to production. The group finished the year with run-of-mine production of 26.4 million tonnes and saleable production of 17.4 million tonnes, exceeding the revised guidance targets. U.S. operations led the way with annual saleable production of 6.3 million tonnes, which was 24% higher than prior year as the mines returned to normal operating capacity following a difficult 2020 when the mines were temporarily idled for 2 months. In the December quarter, the U.S. operations saleable production of 1.5 million tonnes was 11% lower than the September quarter due principally to the aforementioned Buchanan longwall move and lower person-hours at both Logan and Buchanan over the vacation period, traditionally between Christmas and New Year's, combined with the vacation period impacts of new COVID-19 variants on labor availability. Australia's saleable production levels of 2.6 million tonnes in the December quarter were impacted by the temporary suspension of activities at the Curragh mine following the safety incident and compounded by above-average rainfall across the Bowen Basin caused by the La Nina weather pattern. The town of Blackwater, the closest town to the Curragh mine, received 291 millimeters of rain in the December quarter, which was almost double the quarterly average and was the highest rainfall level since the March quarter of 2018. Despite the high levels of rain, Curragh's water management infrastructure and processes performed well. December quarter sales volumes of 2.8 million tonnes from Curragh were consistent with prior quarter. U.S. sales volumes of 1.5 million tonnes were impacted by, as we mentioned, the longwall move and some slippage into January. Full year sales volumes were 17.8 million tonnes, within the revised guidance targets. Curragh's focus for the first quarter of 2022 from a production perspective is to continue to drive operational performance and compliance to the mine plan. Under the One Curragh Plan, all contracting parties and employees are committed to a single mine plan understood by all and increasing the operational efficiencies to ensure adequate coal availability to meet current higher price environments. In addition, the Curragh main mining area will introduce a seventh fleet for 12 months, commencing in February, to enhance waste and coal mining activities. The U.S. operations will continue to optimize production levels to meet current strong demand and take advantage of the heightened price environment. Coronado maintains a competitive advantage compared to other met coal producers given its geographical diversification and ability to access the Chinese market from the U.S. while import restrictions on Australian-sourced coal continue. I'll now hand over to Gerhard to talk about our financial position and market outlook. Gerhard?
Thank you, Gerry. And good day, everybody, and welcome to this investor call from our offices here in Brisbane. Let me start by reminding the participants on this call that all financial information stated in today's release is unaudited and is quoted in U.S. dollars. We will release our audited full year 2021 financial results on the 23rd of February. And at that time, it was the market of 2022 guidance metrics. Today, I'm pleased to announce that Coronado has met or exceeded all revised guidance targets for 2021. Saleable production was 17.4 million tonnes, exceeding revised guidance of between 17 million and 17.2 million tonnes. Sales volumes of 17.8 million tonnes was within the revised guidance range of 17.7 million and 17.9 million tonnes. Capital expenditure of $91 million, aligned with revised guidance of under $100 million. Mining costs per tonne finished the year at $65.7 per tonne, lower than revised guidance targets of between $66 and $68 per tonne. And Coronado completed the year with a net cash position of $123 million. Full year 2021 revenue was $2.1 billion, up 47% from the prior year as we saw pricing increased dramatically on the back of strong steel demand and tight market supply in the second half of this year. Coronado reported record quarter revenue of $775 million for the December quarter, reflecting a 35% improvement over the September quarter. Coronado's closing cash -- net cash position of $123 million is comprised of a record year-end closing cash balance of $438 million and a lower senior secured notes value of $315 million, following the 10% notes redemption during the quarter. Further enhancing cash flows in the quarter was the completion of the Amonate noncore asset sale for $30 million. Coronado has realized almost $15 million pretax gain from the sale, and we're now no longer incurring holding costs associated with this asset. In November, S&P Global Ratings raised its issuer credit rating to B from B- and confirmed a Stable Outlook for the company. In addition, S&P raised the issue-level rating on the company's senior secured notes to B+ from B. In relation to our costs, our full year mining cost per tonne or FOR costs of $65.7 per tonne were lower than revised guidance targets but up from $55.6 per tonne in the prior year. Mining costs per tonne are higher primarily due to the impact of lower Australian sales volumes and higher exchange rates. Coronado is impacted by the movements in FX as the majority of its customers in Australia are denominated in Australian dollars, but we report our results, of course, in U.S. dollars. In 2021, the average U.S.-Australian exchange rate was $0.75 compared to $0.69 in the prior year. We estimate that for every $0.01 movement in FX equates to $0.65 per tonne group cost variation. Therefore, we estimate that approximately $4 per tonne of the variance relates to exchange rate, with the balance associated with the lower Australian production volume in 2021 versus 2020. And while we'll release market guidance until February, we do expect Curragh production volumes in 2022 to be higher than 2021. On core markets, turning our attention to that aspect here. During the quarter, we saw average Australian and U.S. index benchmarks further increased, were increased almost by the day. Chasing records by the day at the moment. During the December quarter, the average premium low vol FOB Australian index had increased to $369 per tonne compared to the average in the prior quarter of $264 per tonne, an increase of 40%. The average low vol U.S. East Coast index product has seen a similar increase to $375 per tonne, up from an average of $280 per tonne in the prior quarter. The met coal prices for shipments from both the U.S. and Australian operations reached record levels during the quarter and remained elevated due to a continuation of a strong global demand and tight supply. Coronado's average realized met coal price for the December quarter was $214 per tonne, up nearly 50% compared to the September quarter of $144 per tonne. The average realized price reflects a mixture of FOB and FOR trade terms across all grades of met coal sold and also includes a lower 2021 U.S. domestic annual contract price. Coronado seaborne contracts typically realized an average 3 months lag in price compared to the index price of the day. In Australia, cargoes are traditionally negotiated on a quarterly basis with reference to the average prior 3-month index. In the U.S., cargoes are determined on a negotiated price in advance, sometimes up to 6 months in advance. Therefore, given the average benchmark index, prices were higher during the fourth quarter, and the U.S. segment will now start realizing the significantly higher priced 2022 domestic contracts for -- from January. Coronado expects that the average realized met coal price for operations in the first quarter of 2022 to be at least -- to least mirror the December quarter. Strong ex-China demand, combined with the continued supply tightness across the globe, continued to underpin met coal prices. Supply tightness has been driven by above-average rainfalls in Australia, logistics chain issues in North America and the ever-present threat of COVID-19. Demand growth ex-China is forecast to continue as government-sponsored growth projects continue to be approved to boost the economic growth. And in China, CFR met coal prices fell substantially in the quarter to more closely align with the Australian and U.S. FOB pricing indices. The price corrections resulted from the government moderating steel production and enhancing the production and use of domestic coal resources. As a result, cargoes into China slowed in the December quarter. And still, demand growth is being seen with China seeking Buchanan tonnages for January and February shipments while retaining the embargo, in general, on Australian-sourced coal. Looking forward, Coronado expects pricing to remain at elevated levels in the short term due to supply constraints. Looking beyond the near term, Coronado expects met coal prices to moderate in 2022 as supply recovers and lifts in response to the current high prices, but remain above average historical -- above historical averages for the balance of 2022. I now hand back to the operator to take any questions.
[Operator Instructions] Your first question comes from Paul Young at Goldman Sachs.
First question is on Curragh. Obviously, a pretty tough year for the mine, particularly in the second half with the tragic fatality, but also the weather, which is obviously ongoing at the moment in the barn. I'm just curious with the seventh fleet addition with the -- and the slight sort of reviewing the contractor strategy there, et cetera. When do you think, based on that and the weather, when you can get the stripping up at Curragh and actually you can start seeing a lift in run-of-mine coal volumes?
Partially against making any predictions, we're fortunate in having Doug Thompson, who I think is on mute right now, available for the call. Doug, as you know, is currently the manager and CEO of the Australian operations. And frankly, I'd like to direct this question to Doug. Are you available Doug?
Thanks, Gerry. In answering the question, we've put together a mine plan that supports immediate production focus and then longer-term investments like a midlife investment into the mine, et cetera, strike in for our draglines. We support draglines. We clearly see advantage of using those productive mills in the future with the mining operations. In the near term, investments in this extra dirt is doing exactly that. It's enhancing our dragline strike into the mine and creating space for productivities. But most important is consistent coal flows as we build input on and inventory stocks to get consistent flow to our prep plant.So as Gerry said, we don't forecast prematurely. But we have a solid plan that's being worked through and reviewed by external parties supporting the success in the plan that we've put in place. And the team is diligently setting about executing that plan at the moment, and I'm very pleased with the work that they've achieved to date through the back end of last year and the first start of this year.
Thank you, Doug. I can only add that I am pleased as well.
Great. Maybe a question to Gerhard on the market. Gerhard, what have you seen from China in the last sort of 3 months with the drop in steel volumes as far as demand from China? And at the moment, maybe around the grounds around the globe by mine, like where are you seeing the best sort of demand strength or resilience at the moment across the market by -- from steel mills, which regions?
Yes. Look, China has been subdued, of course. And I think a lot of market participants link it to the Winter Olympics, and I've seen comments that steel production will ramp up after. So we might see a little bit of a change after the Winter Olympics. In fact, a lot of people are convinced that's going to happen. So subdued demand out of China, in general. That hasn't changed the fact that there is simply not a lot of spot in the market. And yet, there is a lot of demand in the market, and demand is driven by a number of things, amongst which stimulus packages is one. So we see basically the steel markets, ex-China has completely recovered and beyond. What is driving the current record-chasing prices is really a massive lack of spot in the market, which could become systemic, to be quite honest, after the rebalancing of the met coal supply chain after China -- Australian coal. There's a good chance that a lot of this coal has been contracted away. And therefore, also spot has been taken away out of the market. This whole situation is reflected in the indices. So you see now that the CFR China index is down to $405. Whereas the Australian benchmark, so-called benchmark, climbed to $430 per tonne, another record.
Yes. Okay. Thanks, Gerhard. It's obviously an interesting dynamic there. Just on your inventories, has your inventories finished? I'm sort of looking at, is there sort of a working cap unwind potentially in the next 2 or 3, 4 months?
We don't give specific guidance on that on this call, but I wouldn't expect too big of a difference.
Yes. Okay. Great. Last question for me. And again, another one for you, Gerhard. Just on dividend policy. Obviously, a Board decision, but with your guidance, you finished the net cash position, so the business is in good shape. How do you think about the current dividend policy of 60% to 100% of free cash flow payout? Is that still relevant? Or is there a switch to a minimum payout on earnings more relevant? How do you think about dividend policy in 2022?
Yes. At this stage, that remains in place at 60% to 100%. Of course, there's a big cash buildup, as you have seen. But important also that today on this call, we don't give any guidance on dividends.
Your next question comes from Sam McGovern at Credit Suisse.
Good quarter, and just following up on the question regarding the balance sheet. Given that you are now in a net cash position, can you give us a sense in terms of how you think about what you want the balance sheet to look like over the course of the cycle? How much debt on a gross basis do you feel like is appropriate? And then how much cash you want to keep there both from sort of a minimum liquidity standpoint but also from a strategic standpoint to keep optionality over to you guys?
Yes. Look, in general, all options are on the table here, but my view is that a strong cash position provides flexibility and preserves the company for all cycles. So I always said that I want to maintain some form of cash on the balance sheet. Of course, what we have right now, $438 million, that's quite a lot. And there are certain options, what we can do with it, which I want to outline here, but again, all options are open. But in the end, we want to have a healthy net debt position. It doesn't need to be net debt free, but it should be a healthy net debt position. I'll go back to probably what I said before, it could be anything between $100 million and $200 million.
Your next question comes from Glyn Lawcock at Barrenjoey.
Just wondering if you could talk a little bit about the U.S. business. I mean you've got Greenbrier idle. Been trying to sell it for a while. I mean the current market is probably the best you're going to see. Just what's the opportunity to maybe turn that back on while you do try and sell it? And then secondly, I think I read somewhere there was an issue at the port. There was an explosion. I know I don't think it was a terminal you ship through. But are there any logistics issues we need to consider if you want to try and increase your volume in '22 versus last year out of the U.S.?
Well, thank you for that. First of all, while it is possible to [ conjure ] profitable operations in this market at Greenbrier, the issue is that Greenbrier is not a large operation compared to the other things we have going on. It diverts a lot of management attention. It would involve some startup costs. And the market always -- I mean it's forecast to go down. It always is, and so there's a question about how long the market would support profitable operations at Greenbrier. In the short term, the market supports a sale, and we are hopeful that we will execute one that will keep us indifferent to whether -- to losing the opportunity to continue operating the property, and that would be the position we'd take right now. As of a week ago when we reviewed our shipping and operations, the railroads are performing as well as they have been reasonably well considering some of the issues that generally the CFR and others have been faced with. You're quite right, we're not impacted by the issue at the ports. We're still continuing to ship. Buchanan is receiving a standard level of training, and we're at least seeing -- we are not seeing transportation being an issue with either the Logan operations or at Buchanan currently.
Okay. And Gerry, if I could then turn back to Australia. I mean, obviously, we've opened up now, the border is open, and COVID seems to be running right up and down the east coast. What's it like in terms of absenteeism at Curragh? Are you experiencing COVID-related absenteeism? Or is it something we need to consider on the eastern seaboard? I mean, clearly, some industries are really suffering with 30%, 40% absenteeism. Just any comments you could make.
Currently, for us, it's not so much the absenteeism. We're putting on an additional fleet. We're making more demands -- or the mine plan, and the adherence to the mine plan is making more demands on the contractors. Turnover is higher than it has been, and there is some impact there. I wouldn't characterize it as absenteeism. It really should be viewed as some delay in our ability to put on the crews we need to get the fleet -- to get the additional fleet going and ramp the production up.
Your next question comes from Alex Ren at Credit Suisse.
Congratulations on a solid net cash position out of the year. Just a couple of questions. First one is I noticed like the comment in your release that March quarter pricing will be -- at least mirror the December quarter, and you mentioned the December average are indexed -- for Australia, jumped over 40% quarter-on-quarter and with a 3-month lag. So wouldn't this imply that this comment may be somewhat overconservative? Or are there other factors in the mix, such as like more off-spec sales in the quarter? I'll come back with other questions.
Gerhard, do you want to...
Yes, yes. No, look, let me respond to that. Look, without giving too much outlook, and I indicated that before, quarter 1 is probably looking very positive given these price lags and that every day we see the benchmark is chasing another record. So given that lag, it's probably fair to say that we can expect a very good quarter 1 from a pricing perspective.
Right. Understood. And just a follow-up question on the new fleet at Curragh. From memory, an additional 1.2 million tonnes run, is that a rough estimate?
Gerhard, you can -- you probably heard that better than I did. Do you want to...
I heard that better. We're not giving any guidance on fleets or anything for quarter 1.
Okay. Got it. And lastly, on cap management, on capital management. You're obviously in a solid net cash position, what's your, I guess, priority rank for cap management? Is dividend reinstatement the priority or searching for M&A? And is buyback on the table?
Yes. Let me respond again. Let me just elaborate a little bit. We'll announce our financial year '21 and some outlook for 2022 guidance in February when we release our Form 10-K. And at that time, we will give -- advise the market of our cash management plans for the year ahead. We are currently operating in, I have to say on everybody on the call, unprecedented markets with very strong demand for met coal. That is driven by a number of things, probably ESG as well and tight supply, a far cry from where pricing was at the beginning of 2021 and even in April, or even 1st May. Coal pricing today is at a record high. And it's chasing, as I said before, chasing every day. Just overnight, it picked up another AUD 10 per tonne in the Australian benchmark. But we have -- we added uncertainty around the potential impacts to production and supply chains from Omicron plus the threat of seasonal wet weather, Chinese boycotts and Australian coal and so on. In uncertain times, maintaining a prudent cash balance provides flexibility that I think we should attain. Furthermore, we are currently finalizing our financial year '22 budget as the impact of the tragic fatality in quarter 4 unfortunately pushed out the finalization of that budget until now. Once the budget is finalized, we will be in a position to advance the market of our plans at our next call end of February. I think it's reasonable that the market can expect capital expenditure to be higher in 2022 than in '21 as we reinvest in the business, and we're also seeing inflationary pressures on costs and particularly in the U.S. No secret, the U.S. is, in general, in face of between 7% and 8% at the moment. But in summary, all options are on the table here for us. And in general, a strong cash reserve provides flexibility and preserves also the company throughout all cycles.
[Operator Instructions] Your next question is from Paul Young at Goldman Sachs.
Yes, back again. Just a few small questions on the U.S. operations. The first one is domestic sales this year. You're guiding to sort of 1/3 of sales to domestic [ sales ]. Is that up a little bit on expectations in 2021? And then secondly, the Free on Rail versus FOB component, Gerhard, on the export sales, is there any way you can help us out with respect to what the split will be or how that's changing this year?
Go ahead, Gerhard.
I can help you out. Look, what you have to -- I think we talked about that before. What we have to do, if you take Buchanan -- hard to find an example. If you take Buchanan, you need to deduct essentially the discount from Tier 1 to Tier 2 quality. So let's take an example from the 7th of January, which was just about 2 weeks ago or less than 2 weeks ago, where the CFR China index price was $375 per tonne or so. You take a Tier 1 to Tier 2 discount of $50 per tonne, then you get Chinese hard coking for a mid-vol CFR price of $325 per tonne. You take ocean freight away, USD 60 per tonne, which is about 17% of the index. You take rail freight away, $30 per tonne. You take quality adjustment out, call it, 5%. You take a China tariff out, 3%. And it should take -- let's say, take -- let's say, traders margin out of $10, $15 per tonne. And you get to FOR sales price of $195 thereabout. So that did give you -- I mean this call is recorded. So if you work this backwards, it gives you a very clear view on how we calculate from FOB -- published FOB prices to realize FOR prices.
Let me kind of -- let me comment a little bit on the domestic market. As we've always said, we use the domestic U.S. market as a hedge. Some years, you make money on that hedge. Some years, you don't. Last year, we did not because the market turns better towards the end of the year and the export opportunities would have been frankly more profitable than the domestic business we took that we knew. This year, frankly, we saw a big uplift, we've announced that prior, to the average price that we're now getting for our domestic business, and we had the opportunity to put to bid a large portion of that business. The price is higher than we expected and cover essentially all of the operating or nearly all of the operating costs of the U.S. operations, Buchanan and Logan combined. We took that opportunity. And I think that, that hedge will be in the money and remain in the money for the rest of the year. But we're in a position that if it doesn't and the export market continues to be so good, that, that hedge trends again to be out of the money, then we're going to enjoy an export price. In Australia, we'll see the benefit, and the leverage in Australia will provide the benefit that would make us any different in any case. So that's the way we look at it, and that's the way we think it will turn out this year.
Yes. And last question, just while we stay on, I guess, sales, et cetera. Just looking back to Curragh revenue, it was maybe a tad softer for the second half than maybe some thought. And I know you called out product mix and access to the met coal, it seems, is a lack of access. How does the product mix change or improve this half relative to what we've just seen?
I wouldn't give any outlook, Paul, at this stage. But you have seen an improvement so far quarter-on-quarter. So -- but there's no outlook for quarter 1 yet.
Your next question comes from Pawan Punjabi from The Hexagon Hedge Fund.
Am I audible? Yes, yes. I Just wanted to know the dividend policy. I just missed the first line of it. Can you please clarify on any plans on dividends?
Yes. I think I elaborated on that before. The dividend policy, as it is, stands. We're not changing it, and all options are on the table and more on this when we have our financial year-end update at the end of February when we release the 10-K.
Your next question comes from Jon Ogden from Eastern Value Ltd.
Can you hear me? Yes, yes. I've got a few. The first one is just on Xcoal, if you can just tell me if you're still using Xcoal as a distributor and what margin they're making. That's the first question. The second one is just on coal quality. If you can just tell me the quality at the various mines. I mean is Curragh actually at the benchmark hard coking coal, the Australian "good stuff"? Is it hatching at that level? Or is it a lower sort of semisoft or PCI product? So what I'm getting at is again just getting at the sort of discount or not that you have to the headline coking coal indices. And if you could also just expand that into the Australian products as well, that would be great. The other one is how high is your bar to do M&A? Are you thinking in this environment? You want to look at M&A? Or are you more of a mindset to really work these assets really well, and just in this environment become a sort of great cash cow and pass dividends back to shareholders? So I'm just trying to get the corporate DNA on that. And any other sort of color on the market situation in terms of supply, what you're seeing in Australia and America, if more supply response is coming on. So that's why I think Gerhard was being a bit more conservative about the second half of this year.
Gerhard, let me handle the first part. And the supply issue, I'll turn it over to you. The first point on Xcoal. Xcoal is not a distributor. They're a broker. So they take title to the coal, they sell it. Currently, most coal companies do not, because of the consolidation in the steel industry, run their own sales forces internationally. Most coal companies use brokers, and that's a fundamental requirement to get into China. Xcoal is still a broker we use going into China. We -- it's not the only broker we use. So there's a competitive arrangement between what Xcoal pays us for their business and what we can obtain from other brokers. And we always take, of course, the best price we can possibly get. So Xcoal competes on that basis. We have no insight into what their margins are. We have no insights into what any of the broker's margins are. We simply know that with all the broker opportunities we've got, Xcoal is competitive, and we use them only when they are. The second issue on the product mix in -- at Curragh, we published and have published results on what the percent -- average percent of realization to benchmark is. We sell a broad range of coals at Curragh. We sell PCI, we sell semisoft, we sell hard coking coals, and we get a discount on all of them. None of them come at the premium hard coking coal benchmark, and that's true for nearly all producers in any case. So we couldn't guide to what that would be this year, and there will be on the 22nd calculations for what it is. Last year, there are existing calculations for what it has been in prior years as well on a percentage of the benchmark. Gerhard, do you want to comment on the market?
Yes. Let me -- when I look at the market, I look at 3 or 4 input factors here. Let me go through them because it's quite interesting, of course, when prices are -- met coal prices are at record highs. So first is, of course, we look at the global economy, and we have seen that there's a rebalancing happening globally. Fair to say that the economy in 2021 was slower than in 2022. It was slower than in 2021. Omicron has threatened a little bit of demand recovery, but we are coming out of this Omicron cycle now. I think experts expect the peak happening in February or March. So certainly this quarter, so should be positive after that. And we should -- we could see a delay in tapering off government bond purchases by central banks that might actually keep, in general, commodity prices higher for a longer period. China could provide met coal demand upside after the Winter Olympics, as I said before. That's what the market believes, and that's kind of the paradigm we have seen coming out of China on a regular basis. And I think also the European energy crisis will keep thermal coal prices elevated, and we see now prices in thermal coal above $20. Not that we are in thermal coal, we are not. But of course, the thermal coal price is always a floor for met coal prices. So that's the first one, global economy. The second one is supply constraints. And disruption will remain, I guess, a feature this year in the met coal markets, at least in the first half. Seaborne supply over quarter 1 out of Australia, Canada, U.S., Mongolia, russia will be lower than 2019 and 2020 despite high seaborne prices and the availability of additional production capacity. We have seen Australia's La Nina impacts on prices and actually in production as well. We see that the strike at Warrior in the U.S. continues. And of course, Omicron remains a high risk to the supply chain. So that all gives sentiment for higher prices. And we see, in fact, I think in met coal industry and steel industry. India now a little bit on the back foot chasing -- they certainly need to chase more met coal tonnes and need to rebuild stock as they're probably betting on falling prices, and the opposite happened. So the third element I'll see is cost inflation to push up cost through margins. And so the cost inflation, particularly labor and energy costs, is a global issue. We are not so much impacted here in Australia, but certainly Europe and the U.S. It will continue to impact met coal mining, in general, in 2022. Ultimately, we'll see probably 90% hard coking for a marginal cost to grow from, I think, it was $130 per tonne per WoodMac in 2021 to probably $140 in 2022 with more risk on the upside. And then I think the fourth element always, which used to be my first element, was China. I always look at China. Lower met coal consumption could mean lower seaborne imports in a way. But then global supply issues translate into lower spot cargo availability, which has actually worsened by the China ban. As I said before, I've seen some major met coal producers have redirected and rebalanced their supply chain and pushed a lot of tonnes into long-term contracts. So a lot of spot has been taken out of the market. And I think, in general, for 2022, China will maintain the ban on Australian coal with no revenues for improvement in the relationship at the moment. So that hasn't hurt us. It has hurt us probably last year for 6, 9 months. But you see the impact now, it has elevated met coal prices. So overall, I see, at least in the first half of this year, a very positive, supportive met coal prices. And I think the market -- I don't give guidance too much, but the market sees that met coal prices over 2022 will not drop below $200 per tonne.
The last part of your question had to do with acquisitions. Look, we have grown through acquisitions. It's in our DNA. We couldn't help ourselves but to look at the opportunities. So if there's an opportunity out that's attractive, we'll look at it.
There are no further questions at this time. I will hand back to Gerry for any closing remarks.
Thank you, and thanks to everyone for participating in the call today. If you have any follow-up questions, please reach out to our Investor Relations team. A replay of this call will be available on our website shortly. And including, last but not least, I would like to thank all of the Coronado employees for their continued dedication to the company in what has been a particularly tough and busy year. The Board and executive management acknowledge the hard work performed by all the employees, all of you, to ensure our business remains a leading independent producer of steel-making coal. And the Board, particularly as I do, thank you extensively. Thank you. Operator?
Thank you. That does conclude our conference call today. Thank you all for participating. You may now disconnect your lines.