26 September 2017

Coal Mining in Australia

Coal Mining in Australia Image Courtesy : http://lunar.thegamez

One-third of Australia’s coal mining operations are operating at a loss, according to internal estimates from mining major Glencore. Over the past 18 months the east coast coal sector has been closing mines, shedding jobs, and engaging in other cost cutting measures as it attempts to deal with the relentlessly high Aussie dollar and falling coal price.

In spite of the coal industry’s problems, Australian export volumes are likely to increase to 438 million tonnes by 2018-19, as mines built during the boom come on stream and replace less efficient ones, according to Australia’s Bureau of Resources and Energy Economics. BHP, Rio and Glencore say the medium- to long-term future for Australian coal is bright given rising demand in Asia. But attracting investors to finance new projects, including the A$30 billion coal mines planned for the Galilee Basin in Queensland, will be tough and smaller companies will struggle.

Latest Developments in Coal Mining in Australia

According to Daniel Morgan, an analyst at UBS, the smaller players rely on the share market for finance and there is little appetite from equity markets to invest in coal when the world is oversupplied. Indian companies Adani Enterprises and GVK, as well as Australian mining magnates Gina Rinehart and Clive Palmer, have proposed building huge coal mines in the Galilee Basin.

The projects are controversial because they require the expansion of Abbot Point port near the Great Barrier Reef. Conservationists say dredging and the dumping of mud within the reef marine park could harm the reef, which is protected by UNESCO. UNESCO is considering whether to place the reef on its list of world heritage sites in danger, though this week deferred a decision until next year.

More than 64% of the 551 Singleton residents who took part in a regional survey support the continuation of mining at Mount Thorley Warkworth. The 7% rise in support was accompanied by a 10% fall in opposition since a NSW Minerals Council survey in July 2013. A ReachTel survey of 2,206 residents across Singleton, Maitland, Cessnock and Muswellbrook LGAs found the majority expected that a failure to grant approvals to Mount Thorley Warkworth would have a negative impact on the local economy. The Mount Thorley Warkworth expansion plans are still to be finalized.

Future Trends

According to Jeremy Grant, with coal prices under downward pressure amid global oversupply and some of the biggest mining companies busy trying to offload unprofitable mines, the commodity is looking distinctly unloved. Coal miners have been dealing with the impacts of margin squeeze as the coal price continues to trend downwards, especially as more supply comes online from around the world, servicing Australia’s traditional export markets. The hard-coking coal price has dropped to $133 a tonne in the September contracts, which are currently the most active, while the thermal coal spot price has fallen to about $72 a tonne.

Waning demand could be a problem for Australia’s coal sector for now but for emerging economies– particularly in Asia– coal is one of the lowest cost fuel sources and if Australia’s coal miners can ride out the tough times unprofitable players will continue their exit and markets should re-balance.

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