There 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:
- Adani’s Carmichael mine has been re-approved.
- Centennial Coal’s Springvale mine expansion has been approved.
- 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.
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.
Edited by Harleigh Hobbs. This article first appeared in the December issue of World Coal.
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.
Read the article online at: https://www.worldcoal.com/special-reports/07122015/a-bright-future-in-the-lucky-country-3242/