Coal – things are looking up [opinion]

Over the last few years the downturn in coal prices has had an impact on the Hunter economy. In the Hunter, when mining hurts, the community hurts, through job losses and less economic activity that puts pressure on the social fabric of mining towns.

Despite the mining downturn, the Hunter economy has proven to be resilient. At the same time, the coal industry has also proven itself resilient in the face of tough market conditions.

It’s been a hard few years, but in recent months we’ve started to see some signs of improvement in market conditions for Hunter coal producers.

The thermal coal price is has incrementally increased in recent months, providing a welcome boost to our Hunter producers.

If this continues, and our currency rates remain relatively low, like all export industries, the Hunter’s coal mining operations are well positioned to maximise any further gains after a long and difficult period of bringing production costs down.

Demand for our coal also continues to be strong. The Hunter exported over 51m tonnes of coal this financial year to February, up from 48m in the same period during previous year –  a 7.7 per cent increase.

In the Hunter, coal export volumes through the Port of Newcastle are also up in 2016 compared to this time last year, and on current trends may even top the 150 million tonnes exported through the Port in 2015.

This is consistent with independent International Energy Agency (IEA) estimates that Australian coal exports will increase by 37 per cent by 2040.

In particular, the IEA has highlighted the likely growth in demand in our region, as electricity generation from coal-fired power across South East Asia will increase from 32 per cent to 50 per cent.

In the same report, the IEA highlighted that Australia is likely to significantly increase its share of the seaborne coal export market as a result of new power stations coming online across our region.

A recent report by investment bank Morgan Stanley has predicted an increase in demand in the medium term for the type of high-quality, high-energy thermal coal produced in the Hunter.

This high quality coal is needed to supply the large number of High Efficiency Low Emissions (HELE) coal-fired power plants being constructed across the ASEAN countries to our north. It’s yet more evidence that as the coal price cycle turns, our future prospects are positive.

If the Hunter is to get the most out of these exciting opportunities we need to ensure that we have the right policies in place from our State and Federal Governments. Doing so will mean jobs and investment that will boost our economy and strengthen the fabric of mining communities across the Hunter and across NSW.

 

This article appears courtesy of the NSW Minerals Council.