16
|
World Coal
|
August 2015
AUSTRALIAN
Anthony Fensom
reports on the current challenges
and future prospects facing the Australian coal industry.
A
ustralia is on track to usurp Indonesia as the world’s top coal exporter by the end of
the decade. Yet despite the positive outlook for theAUS$70 billion industry, aided by
growing demand from India, falling prices due to oversupply have sparked job and
output cuts, with environmental activism adding to recent pressures.
Responding to claims of coal’s reported demise, Adani Australia’s Samir Vora told the
Australian Financial Review
: “Coal is definitely the main source of energy – you can’t deny it. It is
growing every year no matter what anyone says. India is investing in new generation technology
to make coal more efficient to bring down the carbon footprint. There is a balance for everything
[such as renewables] but coal will undoubtedly remain the main source of fuel for decades.”
The Indian energy giant has remained bullish on the prospects for its US$16 billion
Carmichael mine in Queensland’s emerging Galilee Basin. Despite opposition from activists, the
‘mega-mine’ is set to becomeAustralia’s biggest new coal project should it receive the final
go‑ahead, anticipated later in 2015.
Yet despiteAdani’s optimism, Australian coal miners have struggled to slash costs fast
enough to cope with falling prices. Frommore than US$300/t in 2011, prices for metallurgical
coal dipped to US$90 in early July, while thermal coal prices have halved to US$60, amid slowing
demand fromChina, the world’s biggest coal consumer.
“Volumes and being the largest exporter are not really impressive. What impresses me is
profit margins and returns on invested capital,” Morningstar Senior Resources Analyst,
MathewHodge, said.
“I don’t see any reason to be excited about coal right now, other than it’s cheap and returns
are low. That can’t go on forever, but I think we’re in for an extended period of pain.”
Job cuts
Announcing in June the axing of 70 workers from its Curragh coal mine in central Queensland,
Wesfarmers said: “pricing does not support investment in newmine capacity,” although the
long‑term outlook remained solid.
The move by the diversified conglomerate to cut workers followed the loss of 210 jobs at
Peabody Energy’s North Goonyella mine in the same month along with a 1.5 million t
production cut, with another 80 jobs slashed fromGlencore’s Collinsville mine inMay.
“The whole commodity space is quite depressed and, in the coal industry, all producers,
whether you’re large or small, are facing a lot of pressure because of the amount the price has
reduced,” Yancoal CEO, Reinhold Schmidt, told the
Australian Financial Review
.
Australia’s largest coal exporter, Glencore announced plans to cut coal production inAustralia
by 20% in 2015, equating to a cut of 15 million t.
Brazil’s Vale wrote down the value of its Australian coal mines by 71% during 2014, while
Rio Tinto’s coal boss, Jean‑Sebastien Jacques, said it would take up to four years before “a light
at the end of the tunnel” appeared for thermal coal prices.
INDIAN
COAL SEEKS
PAIN RELIEF
