Australian coal needs efficiency

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Fresh from its enviable position in LNG, where it is poised to soon become the world number one producer, Australia is now looking at becoming the world number one in coal production. According to research carried out by miningoilandgasjobs.com coal expert Laura Gibson, Australia could become the number one in coal production by the year 2018.

At present Australia is placed at number five at present however encouraging signs are on the horizon in terms of its export potential. In a recent interview Laura Gibson was quoted as saying “ Australia has a definite advantage geographically because of its proximity to Asia. And the increased centralization of population and the development of secondary industry will create an ongoing demand which Australia is poised to fill”.

She added “Talking specifically about China, while their imports of coal decreased by 15% last year, recent estimates indicate that there will be a lift in imports by more than 5% to possibly over 70 million tonnes.”

When questioned about the role of India in satisfying the Australian coal supply Laura Gibson said that India’s demand is on an upward trend with that country’s demand increasing by over 15% in 2014 to over 44 million tonnes and in future years this ongoing growth may exceed 50 million tonnes.

Laura Gibson predicted that the world market this year (2014) may well exceed 300 million tonnes
The Minerals Council of Australia was also bullish in the future of Australian coal and in a recent comment stated “Asia underpins the positive outlook for Australian coal with our metallurgical coal and thermal coal playing an integral role in meeting steel making demand and the provision of affordable and reliable base load energy”.

The looming question on the subject of Australian coal is the political effects on coal from the recently elected Queensland Labor government. Up to now Queensland has been pushing coal exports to record levels with over 200 million tonnes of exports in 2014 up from previous years productions of over 160 and 190 million tonnes in the 2012 and 2013 years.

The challenge for the Australian coal industry however is to become more efficient. With more coal mines coming on stream with greater production levels there will no doubt be downward pressure on coal prices. An clear indication of this possibility is the low coal futures prices which are about to drop below US$60. While prices last year were in excess of US$80 experts are predicting a fall to as low as US$70 per tonne
As a result the industry in general is reviewing coal mining operations which may not be delivering coal at cost levels which will be sustainable at the lower sale prices. Examples of this are Rio Tinto’s Hail Creek and Anglo American’s Callide and Dartbrook mines.

The industry appears to be taking an approach of reducing supply from coal mines and even closing mines where production is uneconomic. And so the efficiency drive continues
Aiding this drive is the weakening Australian dollar and the falling oil prices combined with the fact that Australian mines are in general already more cost effective than mines in other countries.

Laura Gibson commented that “The flexibility of the Australian market will ensure jobs are effectively renumerated to meet operational requirements and thereby deliver job creation”.