Coal to overtake oil by 2017: IEA

More than 8,000 jobs have been stripped from Australia’s coal sector in the past 6 months and heading into 2013 the industry continues to feel the pressure.

Australian coal companies are struggling to compete on the global stage, facing increasing competition from the United States, a drop in coal prices, a high Aussie dollar and rising operation costs.

However, some are hoping that India’s crippling energy problems and hunger for coal will bring Australia’s coal industry out of these dark days.

This sentiment is being backed by Wollongong’s coal mine NRE No. 1 Colliery. The mine’s Indian owner Arun Jagatramka has already taken steps to assure his employees that their premium coking coal will always be snapped up by the subcontinent, SBS reported.

According to the annual Medium-Term Coal Market Report (MCMR) commissioned by the International Energy Agency, coal’s share in the global energy mix is expected to continue to increase, predicted to close in on oil as the world’s top energy source by 2017.

Such growth is reliant on Indian and Chinese demand to continue and according to the IEA both countries are expected to lead the growth of coal consumption over the next five years.

China has already surpassed the likes of Japan to become the largest importer of coal in the world.

“Thanks to abundant supplies and insatiable demand for power from emerging markets, coal met nearly half of the rise in global energy demand during the first decade of the 21st Century,” IEA executive director Maria van der Hoeven said.

“This report sees that trend continuing. In fact, the world will burn around 1.2 billion more tonnes of coal per year by 2017 compared to today – equivalent to the current coal consumption of Russia and the United States combined. Coal’s share of the global energy mix continues to grow each year, and if no changes are made to current policies, coal will catch oil within a decade,” she said.

The rise of natural gas in the US has in turn seen a drop in the demand for coal and such an increase in the amount of coal that is being exported from the states to Europe and Asia, putting American coal in direct competition with Australian coal.

Late last year American coal conglomerate Alpha Natural Resources credited Australia's rising costs, driven by the carbon and mining taxes and Queensland's royalty hikes, for the US’ boost on the global coking coal market.

"The fact is that their cost inflation has been so rapid that it is actually improving the US's relative position in the global seaborne metallurgical market," the group’s vice-president of investor relations, Todd Allen, said at the time.

Allen said that recent cost inflations have far outstripped that of the US and Canada and attributed the rising costs to changes in federal and state government regulations and the inflated cost of labour.

"Queensland has just levied a new royalty on metallurgical coal that can increase the cost of production by several dollars per tonne.

"You've got the carbon tax and minerals resource rent tax,” he said.

Nikki Williams, CEO of the Australian Coal Association, recently told SBS that the Australian coal sector is at "a terrible junction where not only has the international market come off in terms of prices, but our costs and productivity have gone to a terrible place."

Williams added that until recently Australia was the world’s cheapest place to produce coal.

“And in just five years, we’re now the highest cost producer in the world at $176 a tonne compared to the rest of the world at $106,” she said.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.