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Thursday, 17 December 20
CHINA'S BAN IS LESS OF A THREAT TO AUSTRALIA'S COAL INDUSTRY THAN INTERNATIONAL CLIMATE AMBITION - IEEFA
 Australian coal exporters will survive this near-term political fight but there are longterm structural headwinds
The decision by China’s National Development and Reform Commission to formally and indefinitely block Australian coal imports is a key threat to Australia’s political and economic wellbeing. Australia can never expect to win a trade war with its biggest export partner, and it is sheer political and economic suicide to try to do so. But is it devastating for the Australian coal export industry? Not at all.
Far more strategically threatening in the long term for Australia and our coal industry is the pledge by China’s president Xi Jinping to reach net zero emissions by 2060, which was rapidly followed by net zero emissions by 2050 pledges from Japan’s prime minister Yoshihide Suga and South Korea’s president Moon Jae-in. This series of sudden and powerful pledges of increased climate ambition by world leaders is likely to be terminal for our coal exports if we look out a couple of decades.
Australia is caught in the geopolitical quandary of having China as our key trade partner and the United States as our key military ally. When US president Donald Trump started a trade war with China, it was never going to turn out well for Australia. And incoming president Joe Biden is unlikely to change tack too materially where China and trade and technology are concerned (whereas on climate, Biden’s arrival changes everything). But we in Australia are like a mouse caught in the middle of two sparring elephants.
In business, the best rule is that the customer is always right (even if they are not). Our coal exporters will however survive this near-term political fight, probably far better than our wine or lobster export industries, by comparison.
There are no coal ships destined for China being loaded in Australia now. For most industries, that would be devastating. For coal, not so much. In fact, a look at the share prices of Whitehaven Coal and New Hope Corporation would suggest quite the opposite. Since the September 2020 trough, and acknowledging the sharp price falls on Tuesday, Whitehaven shares have rallied 70% and New Hope are up almost 20%.
Why? Coal is coal, at least to a finance analyst like me, if not an engineer. Australia sells the vast majority of its coal to Japan, South Korea and Taiwan. And if China buys more Russian, South African and Indonesian coal to replace Australian coal, then we can, by and large, simply swap customers, maybe with a month’s disruption. Total demand doesn’t change, nor does supply – at least not in the near term. Sure, there are some boiler and blending constraints, but notwithstanding coal luddite claims that Australia’s coal is slightly less carbon polluting than someone else’s seaborne coal, the minute difference is irrelevant – all coal is almost 100% more carbon intensive than wind, solar, hydro, nuclear or energy efficiency. Or green ammonia, as Japan’s JERA is now thinking.
The coal industry is actually benefiting from a near-term relief rally. In September Australian coal exporters were losing money with every tonne of coal they exported. In December, the picture is very different. China’s key Shanxi province has just shut down coal production near term due to a spate of deadly accidents, just as winter heating demand has kicked in. Meanwhile the Chinese industrial economy is powering along. So the Chinese domestic thermal coal price has jumped 35% to 740/t yuan in the last three months. Seaborne thermal coal prices have rallied from a low of US$46/t to over US$70/t in the same timeframe. Even as total volume of Australian coal exports have dropped in the December quarter, the value has surged, and more importantly, the profitability much more so (notwithstanding the 10% rally in the Aus$/US$, lifted by the unprecedented rally in iron ore prices). Hence the Whitehaven Coal and New Hope increase in share price.
The coal export sector outlook seems profitable again – in the near term. But the 25% collapse in the Dalrymple Bay Coal Terminal share price since its initial public offering last week is a clearer perspective of the longterm structural headwinds Australia’s coal industry is facing. Far better for our Hunter Valley, La Trobe Valley and Bowen Basin communities that we as a nation acknowledge the science of climate change, prepare a national roadmap, ideally with a destination and time of arrival clearly acknowledged.
The investment, employment and export opportunities for Australia are enormous, and exciting. To steal a very good line from Ross Garnaut and Mike Cannon-Brookes – better we focus on building Australia as a renewable energy superpower.
This commentary first appeared in The Guardian.
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Tuesday, 15 March 22
CHINA'S COAL OUTPUT GROWS TO STABILIZE MARKET SUPPLY - XINHUA
China’s coal market has seen growth in output since late February amid the country’s efforts to stabilize production and ensure supply, ...
Tuesday, 08 March 22
RUSSIA-UKRAINE CONFLICT ADDS IMPETUS TO ASIA'S ENERGY TRANSITION - IEEFA
Clean energy alternatives are a crucial hedge against future disruptions in global commodity markets
Russia’s invasion of Ukra ...
Tuesday, 08 March 22
THE HIGH COST OF INDONESIA’S DOWNSTREAM COAL PROJECTS IS UNDERESTIMATED - IEEFA
Three Indonesian ministries have come up with a DME purchase price of US$378/tonne fixed for 20 years compared to IEEFA’s US$601/tonne estima ...
Wednesday, 02 March 22
SHIPPING MARKET INSIGHT - INTERMODAL
The escalating confrontation between Russia and Ukraine has the potential to disrupt global order and set the world back a few decades. While count ...
Tuesday, 22 February 22
THE DRY BULK MARKET HAS MOVED ON A POSITIVE TRACK - ALLIED
The dry bulk market has moved on a positive track as of the past couple of weeks or so. Following the typical softening in freight conditions durin ...
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- Rio Tinto Coal - Australia
- Banpu Public Company Limited - Thailand
- Australian Commodity Traders Exchange
- Standard Chartered Bank - UAE
- Goldman Sachs - Singapore
- Bhushan Steel Limited - India
- Global Green Power PLC Corporation, Philippines
- Wilmar Investment Holdings
- Vedanta Resources Plc - India
- Coal and Oil Company - UAE
- Merrill Lynch Commodities Europe
- Minerals Council of Australia
- Antam Resourcindo - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Energy Development Corp, Philippines
- Tamil Nadu electricity Board
- Grasim Industreis Ltd - India
- Sical Logistics Limited - India
- Global Business Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- Port Waratah Coal Services - Australia
- Parry Sugars Refinery, India
- Ceylon Electricity Board - Sri Lanka
- SMG Consultants - Indonesia
- Interocean Group of Companies - India
- Sarangani Energy Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Essar Steel Hazira Ltd - India
- Vizag Seaport Private Limited - India
- Sakthi Sugars Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- OPG Power Generation Pvt Ltd - India
- Attock Cement Pakistan Limited
- South Luzon Thermal Energy Corporation
- Alfred C Toepfer International GmbH - Germany
- Romanian Commodities Exchange
- Orica Australia Pty. Ltd.
- Maheswari Brothers Coal Limited - India
- Kaltim Prima Coal - Indonesia
- Ambuja Cements Ltd - India
- Samtan Co., Ltd - South Korea
- Kalimantan Lumbung Energi - Indonesia
- Posco Energy - South Korea
- Aditya Birla Group - India
- Iligan Light & Power Inc, Philippines
- McConnell Dowell - Australia
- Chettinad Cement Corporation Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Bhatia International Limited - India
- Oldendorff Carriers - Singapore
- PTC India Limited - India
- Ministry of Transport, Egypt
- Medco Energi Mining Internasional
- Thiess Contractors Indonesia
- Aboitiz Power Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Energy Link Ltd, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Globalindo Alam Lestari - Indonesia
- Borneo Indobara - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Simpson Spence & Young - Indonesia
- Indogreen Group - Indonesia
- Malabar Cements Ltd - India
- Sree Jayajothi Cements Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Central Java Power - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Electricity Authority, New Zealand
- GAC Shipping (India) Pvt Ltd
- Siam City Cement PLC, Thailand
- TeaM Sual Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Star Paper Mills Limited - India
- Xindia Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Bahari Cakrawala Sebuku - Indonesia
- ICICI Bank Limited - India
- Marubeni Corporation - India
- Karaikal Port Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Wood Mackenzie - Singapore
- Baramulti Group, Indonesia
- Siam City Cement - Thailand
- Australian Coal Association
- Anglo American - United Kingdom
- Salva Resources Pvt Ltd - India
- Indian Energy Exchange, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Tata Chemicals Ltd - India
- Sindya Power Generating Company Private Ltd
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Sidhee Cement - India
- Miang Besar Coal Terminal - Indonesia
- Formosa Plastics Group - Taiwan
- SMC Global Power, Philippines
- Coalindo Energy - Indonesia
- Central Electricity Authority - India
- Bukit Makmur.PT - Indonesia
- Eastern Energy - Thailand
- IEA Clean Coal Centre - UK
- The Treasury - Australian Government
- Petron Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- Gujarat Electricity Regulatory Commission - India
- Trasteel International SA, Italy
- Uttam Galva Steels Limited - India
- Planning Commission, India
- Gujarat Mineral Development Corp Ltd - India
- Leighton Contractors Pty Ltd - Australia
- PNOC Exploration Corporation - Philippines
- White Energy Company Limited
- Videocon Industries ltd - India
- Chamber of Mines of South Africa
- Kumho Petrochemical, South Korea
- GN Power Mariveles Coal Plant, Philippines
- Thai Mozambique Logistica
- The University of Queensland
- Semirara Mining Corp, Philippines
- Power Finance Corporation Ltd., India
- Singapore Mercantile Exchange
- SN Aboitiz Power Inc, Philippines
- Mintek Dendrill Indonesia
- Dalmia Cement Bharat India
- Bank of Tokyo Mitsubishi UFJ Ltd
- European Bulk Services B.V. - Netherlands
- Binh Thuan Hamico - Vietnam
- Global Coal Blending Company Limited - Australia
- Maharashtra Electricity Regulatory Commission - India
- CNBM International Corporation - China
- Parliament of New Zealand
- Deloitte Consulting - India
- MS Steel International - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Carbofer General Trading SA - India
- Bukit Baiduri Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Toyota Tsusho Corporation, Japan
- CIMB Investment Bank - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meenaskhi Energy Private Limited - India
- Krishnapatnam Port Company Ltd. - India
- Economic Council, Georgia
- Cement Manufacturers Association - India
- Ind-Barath Power Infra Limited - India
- New Zealand Coal & Carbon
- Africa Commodities Group - South Africa
- Commonwealth Bank - Australia
- Directorate Of Revenue Intelligence - India
- Timah Investasi Mineral - Indoneisa
- Bulk Trading Sa - Switzerland
- Independent Power Producers Association of India
- Kideco Jaya Agung - Indonesia
- London Commodity Brokers - England
- Larsen & Toubro Limited - India
- ASAPP Information Group - India
- Pendopo Energi Batubara - Indonesia
- Bharathi Cement Corporation - India
- VISA Power Limited - India
- Intertek Mineral Services - Indonesia
- Makarim & Taira - Indonesia
- Coastal Gujarat Power Limited - India
- Barasentosa Lestari - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Mines - Canada
- Billiton Holdings Pty Ltd - Australia
- PowerSource Philippines DevCo
- Orica Mining Services - Indonesia
- Lanco Infratech Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Meralco Power Generation, Philippines
- Eastern Coal Council - USA
- Latin American Coal - Colombia
- Straits Asia Resources Limited - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Mjunction Services Limited - India
- IHS Mccloskey Coal Group - USA
- Kartika Selabumi Mining - Indonesia
- Savvy Resources Ltd - HongKong
- Agrawal Coal Company - India
- The State Trading Corporation of India Ltd
- San Jose City I Power Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- Heidelberg Cement - Germany
- International Coal Ventures Pvt Ltd - India
- Indonesian Coal Mining Association
- Sojitz Corporation - Japan
- Ministry of Finance - Indonesia
- Indian Oil Corporation Limited
- Renaissance Capital - South Africa
- Kobexindo Tractors - Indoneisa
- Kepco SPC Power Corporation, Philippines
- Bangladesh Power Developement Board
- Price Waterhouse Coopers - Russia
- GVK Power & Infra Limited - India
- Mercuria Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Riau Bara Harum - Indonesia
- India Bulls Power Limited - India
- Metalloyd Limited - United Kingdom
- Madhucon Powers Ltd - India
- Bhoruka Overseas - Indonesia
- Georgia Ports Authority, United States
- Electricity Generating Authority of Thailand
- Kohat Cement Company Ltd. - Pakistan
- GMR Energy Limited - India
- Jindal Steel & Power Ltd - India
- Edison Trading Spa - Italy
- Bayan Resources Tbk. - Indonesia
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