10
|
World Coal
|
December 2015
Industry View
Industry View
T
here has been an enormous
amount of news articles and blogs
heralding the demise of the Australian
coal industry. Various arguments are
marshalled in support of this view from
the ousting of Tony Abbott as Prime
Minister and his replacement by Malcom
Turnbull (seen as less supportive of coal)
to the decline global demand, divestment
campaigns and coal being ‘history’ as an
energy fuel. But what are the facts? What
is the current reality of the Australian
coal industry and what is its future?
Meet the new leader
As Prime Minister, Tony Abbott was an
outspoken supporter of the Australian coal
industry with some assuming that this was
why he lost his job. His successor, Malcom
Turnbull, was seen as less supportive of the
industry. But in reality that has simply not
been the case. Indeed since Turnbull took
up the keys to The Lodge, there have been
a number of major decisions in favour of
the Australian coal industry, such as:
n
n
Adani’s Carmichael mine has been
re-approved.
n
n
Centennial Coal’s Springvale mine
expansion has been approved.
n
n
Rio Tinto’s Mount Thorley‑Warkworth
coal mine expansion has been
approved.
Turnbull certainly has a different way
of communicating than Tony Abbott;
however, the reality is that the Liberal
party’s policies and support of the coal
industry has not changed. Turnbull – and
Australia – need the coal industry to
continue to grow. To suggest that Australia
simply turn its back on one of its strongest
assets and highest export earners is sheer
economic suicide. Turnbull and the
Australian government understand this
and that is why their continued support
for the Australian coal industry will
not waver.
Looking to the future
The Australian coal industry’s future is
bright and long term. Globally there are
over 1000 coal-fired power plants under
construction or planned. Global
consumption and demand for coal will
continue to increase for the next 30 – 40 yr.
Even if China continues to reduce coal
imports, it will have little impact on the
export coal markets. India has already
substantially surpassed China in volume
of imported coal in the 1H15 fiscal year.
China’s coal demand reduction will be
replaced by other developing countries
very quickly.
Coal is also a key ingredient in
infrastructure, supporting the manufacture
of cement, steel, aluminum and glass. It is
used in the manufacturing of
pharmaceutical, medical, personal
hygiene, dyes, nylon and silicon metal
products, as well as to generate oil and
industrial gases. The future will also see
coal used as a mineral in new materials,
technologies and products.
The reality of the present and future
demand for coal is highlighted by
Australia’s current production and export
volumes. Despite being at the bottom of
the commodity cycle, the Australian coal
industry is setting new records for mine
production and exports. With additional
countries in Asia, Africa and the Gulf
turning to coal for power generation and
as an industrial and manufacturing
mineral, the future growth of coal is
clearly evident.
The ‘Lucky Country’
There have been significant changes to the
dynamics of the major coal export
countries. Indonesia and South Africa are
expected to reduce coal exports, while US
coal exports are expected to further decline
due to political pressure and limited access
to export infrastructure. In contrast,
Australian coal exports are expected to
increase on the back of its strong existing
(and planned expansion of) mining and
port infrastructure.
Australia has everything to provide a
competitive advantage over its
counterparts, including world-class
reserves in terms of quality and quantity,
low costs and increasing productivity. As
other countries falter, Australia has an
excellent chance to fill the voids created by
both restricted international exports and
the increasing demand for export coal.
This advantage was clearly displayed
in the recent sale of the 40% stake of
Rio Tinto’s Bengalla coal mine in the
Hunter Valley, New South Wales. The sale
price of AUS$865 million to
New Hope Corp. is certainly not a fire
sale; rather it represents a premium price
for the asset. Compared to recent coal
mine sales for no cash up front in the US,
the sale price for Bengalla showed the
strength and long-term viability of the
Australian coal industry.
Conclusion
Australia’s new Prime Minster,
Malcom Turnbull, is clearly a supporter of
the Australian coal industry. The
Australian coal industry also has a
significant advantage and is positioned to
capitalise on the world’s future growth in
the demand and use of coal. It is a strong
investment with long-term viability and a
bright future that will benefit the
Australian economy for decades to come.
About the author
Russell Taylor has over 20 yr of experience in the
coal mining industry as a mining engineer, project
director and mining executive. Most recently, he
was Executive Vice President and Project Director
at Reliance Coal Resources in India.
A BRIGHT FUTURE IN THE LUCKY COUNTRY
Russell Taylor
