Australia’s coal sector hopeful

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A new report prepared by Commodity Insights for the Minerals Council of Australia forecasts that the demand for metallurgical coal to 2030 will grow by over 95Mt, from 275Mt in 2017 to 372Mt in 2030; this is a 2.3% growth or around 7.5Mt per annum.

Such a growth would be the equivalent of a large export mine being added to the market every year to 2030, the report states, and it represents approximately 56% of current Australian met coal exports.

The rise would be led by China and India, particularly because of the latter’s solid-to-strong economic growth, along with ongoing industrialisation and urbanisation, both of which drive demand for steel. China’s continued solid steel production will also push up the demand for coal, as well as the inability of its domestic production to keep pace with demand, something that will also happen in India.

“Even based on the conservative assumptions used in the Commodity Insights report, this demand growth represents a major opportunity for our world-class coal producers and the Australian economy,” Minerals Council of Australia CEO, Tania Constable, said in a media statement.

The Oceanian country is the world’s fifth largest producer of black coal, sitting behind China, India, the USA and Indonesia. Most of the production from Down Under is exported on the seaborne market, with 147Mt of metallurgical coal sold abroad in 2017. Despite being producers themselves, China and India are Australia’s largest markets for metallurgical coal, accounting for over 50% of volumes and followed by Japan, South Korea and Taiwan.

According to Commodity Insights, the reasons why the Australian black mineral is sought after are its quality, particularly when extracted from the Queensland’s Bowen Basin; the end-user mine equity; proximity to key Asian markets; and the key off-take market stability.

“The underlying demand stability from the key importers of Australian metallurgical coals (Japan, Korea and Taiwan), driven largely by significant steel production in these regions, provides substantial underlying support for production security. The significance of their dependency on Australian coals is further evidenced by their mine equity participation and/or ownership,” the research document reads.

For Tania Constable, this information should be seen as good news for all Australians who benefit from the royalties and company taxes paid by the country’s met coal producers.

But to be able to really reap the benefits of future developments in the global coal market, Australia has some homework to do. According to the report, the country needs to address issues such as the lengthy and costly approval processes of coal projects and the sheer volume of red and green tape that miners have to deal with. It also needs to add or expand mines and infrastructure – particularly rail – in a timely fashion.

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