Structural decline in seaborne thermal coal may make the commodity a bad export investment choice, if companies continue to sell their operations.
A report from the Institute of Energy Economics and Financial Analysis (IEEFA) said plans for a number of coal asset sell-offs by companies such as Whitehaven Coal, Peabody Energy, Vale, Anglo-American and Sumitomo Corp, indicated the level of threat to investors.
Over the past two years each company has sold coal mines, tried to sell coal mines without success, or reported huge write-downs due to ongoing low commodity prices.
IEEFA director of energy finance studies Tim Buckley described the present Australian coal industry as a buyers’ market with no buyers.
“This is clearly reflected in the collapse in listed coal company share prices,” he said.
“Peabody Energy is down 85 per cent, Glencore is down 47 per cent and Whitehaven Coal is down 28 per cent, all in just the year-to-date 2015.
“Given almost every major coal mine owner in Australia is trying to sell coal assets, and most have excessive financial leverage and are incurring repeated net losses in recent times, IEEFA would question who has the deep pockets sufficient to fund multi-billion dollar greenfield coal projects.”
The IEEFA report continues the energy lobby’s PR battle against the Carmichael Coal project, which is believed to have lost the interest of domestic and international banks with the ending of relationships between Adani and the Commonwealth Bank, and also the London bank Standard Chartered.
Buckley said the first quarter report from Adani this year hinted that the Indian energy giant needed more accommodating policy from the Australian government, or it would shift focus to the domestic coal market in India.
“With progressive policy measures by the government, we believe that Adani Enterprises is better placed to tap the growth potential in domestic mining and renewable energy space,” the company said.
The Indian energy minister Piyush Goyal said earlier this year that the Indian Government wished to end thermal coal imports in 2017, spelling bad news for assertions made by Australian lobbyists that coal from the Carmichael project was necessary to reduce energy poverty in India.
Coal exports from Australia continue to increase, however, with Port Waratah Coal Services announcing a record day for coal loading last week, with 495,000 tonnes loaded onto ships on August 10.
Forward pricing for Newcastle coal exports has hit a new low this week, with Newcastle Coal Futures as low as US$53.05 per tonne in July 2016, and similar prices that continue through to 2021.
“When markets transition, companies and economies are best served by acknowledging and embracing the technology disruption, and looking for the inevitable opportunities that arise,” Buckley said.