China is bringing in new regulations to raise the quality threshold for imported coal, and many are predicting that this may be one of the final nails in the coffin of coal – hardly.
This move by China was not entirely unexpected, as it seeks to improve its failing coal industry, and may even work to Australia’s advantage.
Currently more than two thirds of Chinese coal mining companies are operating at a loss, according to China’s own Coal Industry Association, with its chair Wang Xianzheng stating that this is only likely to increase.
On top of that around half are even struggling to pay their own workers.
Their industry is much worse shape than ours and in the midst of massive crackdown of domestic quality, banning coal with a net calorific value of 4540 kilocalories per kilogram or less, as well as putting plans in place to shut down 2000 coal mines by 2015.
This leaves a massive gap in China’s market.
And even with the proposals to dramatically slash coal consumption nationally China still needs energy and much of this energy will be produced by coal fired power station as demand, and industry, continues to grow.
According to the International Energy Agency coal will continue to dominate China’s energy mix to 2035 and the growth in coal demand in China through to 2020 actually exceeds the growth in the rest of the world combined.
Put simply: There’s still going to be a market for Australian coal.
So where does the newly signalled ban, which will limit the use of imported coal with more than 40 per cent ash and three per cent sulphur, leave Australian miners?
Not as in the lurch as many in the media are suggesting.
In fact it may even work to Australia’s favour as lower quality export hubs such as Indonesia are hit harder by the quality threshold levels.
"Australia is in the fortunate position of exporting higher calorific, low to medium ash, low sulphur content coal. Our coal burns cleaner and that means less pollution and higher energy efficiency," NSW legislative member Scot MacDonald said.
Australian thermal coal exports are of extremely high quality, with NSW and Queensland black thermal coal exports generally reporting an energy content above 5500 Kcal/kg, which compares favourably to Indonesian coal which has an estimated range of between 4200 and 5200.
Basically, this is high quality coal, which according to Platts is actually some of the highest quality coal found anywhere in the world.
The Minerals Council of Australia’s head of coal Greg Evans summed it by saying: “There is nothing in the information [released by the Chinese Government] which suggests that Australia coal exporters will be disadvantaged and we are confident that we can meet the proposed specifications.”
The new regulations will mainly hit much lower quality brown coal, which in Australia is only mined in Victoria and only used for domestic power generation, and as such is a non-issue.
“To the extent that it impacts imports of black coal destined for northern cities this relates to small scale coal use, not large scale power plants or other industrial users,” Evans explained.
A source close to the situation told Australian Mining that power utilities themselves may even be excluded from these import standards as they contain emissions reduction technology, which negates, to a degree, the issue.
As the Newcastle Herald’s main industrial journalist Ian Kirkwood himself says, this new higher quality threshold may even play to Australia’s advantage as poorer quality coals are edged out of the market.
But, it all comes down to the ash levels, which is interesting – why is the focus on the ash level and not the coal’s energy content?
Even with this focus on ash and sulphur content alone Australia still edges through with fairly low ash levels, which coupled with efficient coal washing technology and the blending of poor quality coal with higher quality output, gets many miners over the line.
Virtually all of their coal.
Speaking to the major thermal coal miners in the Hunter and Illawarra they generally seemed unworried by the new changes, and even support China’s push to become somewhat cleaner.
BHP’s head of coal Dean Dalla Valle stated that “we support efforts to improve environmental standards. We expect to be capable of meeting the proposed NDRC regulations, which stipulate a range of quality limits for both domestic and imported coal, should they be finalised and implemented, and do not anticipate a material impact to our business.”
This doesn’t sound like the words of a company too worried about the new regulations.
And with a number of months still to go before these regulations are enforced this will give miners plenty of time to adapt…if need be.
What's your opinion?