Coal report says Australian exports have peaked and are in 'terminal long-term decline'
The Australian coal export industry has peaked and entered a “terminal long-term decline”, says a new report that argues high prices have pushed global energy markets more quickly towards cheaper and cleaner alternatives.
The Institute for Energy Economics and Financial Analysis report, which focuses on the outlook for the New South Wales coal industry, argues record export profits for coalminers do not indicate a strong and growing industry.
The report said export volumes from the port of Newcastle, the world’s largest coal export harbour, peaked in 2016 and have begun a permanent decline. The conclusion is based on long-term trade forecasts for thermal coal and an analysis of Asian energy markets, where investment in coal-fired power is slowing.
Australia’s four biggest export markets for coal, Japan, South Korea, China and Taiwan, have scaled back their planned pipeline for new coal-fired projects and actively closed some power plants.
The report’s authors, Tim Buckley and Simon Nicholas, assessed coal industry claims that emerging markets in south Asia and south-east Asia have the capacity to pick up the shortfall.
“Imported thermal coal is now entirely uncompetitive, and possible new markets such as India and Vietnam are pursuing cheaper, more sustainable renewable energy options,” said Buckley, the institute’s director of energy finance studies.
Buckley said renewables were now about half the cost of imported coal in India.
“If there’s any growth in coal consumption across south-east Asia, it will not be enough to compensate for declining consumption in NSW’s four major export markets,” he said. “NSW is facing a terminal threat to its thermal coal export market over coming decades.
“It doesn’t matter what we do [in Australia] because we’re the supplier. If the customers move, then demand will dry up. And at the moment it’s not a matter of if they start to move, it’s how quickly they will accelerate their existing trends.”
The report said high coal prices were not the result of a strong and growing industry. “In fact, they can be seen as an indication of just the opposite, heralding growing concerns over the industry’s medium to long-term viability.”
Nicholas, an energy finance analyst, said investment in new coalmines was declining because banks are increasingly unwilling to finance fossil fuel projects.
“The magnitude and speed of change in energy sector technology is staggering,” Nicholas said. “Major global investors, corporates and financial institutions are turning away from thermal coal investment at an accelerating rate. Japan’s Marubeni Corporation and UK’s Standard Chartered are the most recent examples.
“Higher coal prices indicate growing concerns over the long-term viability of the industry, leading to lower investment in new coal mining capacity.”
The port of Newcastle is the main shipping destination for NSW coal, most extracted from large thermal coalmines in the Hunter Valley. Last year the port corporation’s chair, Roy Green, said there was an urgent need for the port and the regional economy to diversity.
Newcastle has this year shelved the “Terminal 4” expansion that had been in planning for almost a decade, in anticipation it will not be needed.
The IEEFA report says the state must urgently start a transition plan for workers, businesses and communities supported by coalmining. The institute is a thinktank that specialises in energy policy, which says its mission is to “accelerate the transition to a diverse, sustainable and profitable energy economy”.
Buckley said record profits also translated to record royalties for governments, and they had a responsibility not to squander them in the face of a global energy transition.