STRONG recent price rises for Hunter coal have pushed mining companies back into profit after years of confidence-sapping losses.
Prices for“spot” or one-off cargoes of Newcastle’s main export–thermal coal used in power stations–have risen by almost 30 per cent in two months, going from a mid-June low of$US53a tonneto last week’s price of$US68.
A stronger exchange ratehas taken some of that gain, cutting the price rise in Australian dollars to less than 25 per cent, risingfrom$72.50 a tonne in mid-Juneto $89.50 last week.
Even so, the price rises have been welcomed by mining companies reporting their results, including the Maules Creek operator Whitehaven Coal, which has gone from a $342 million loss in the 2015 financial year to a $20.5 million profit in the year to June 30.
Although BHP Billiton reported massive company-wide losses atits annual results last week, the details showed itexpects to extract19 million tonnes of coal fromits giantMount Arthur mine this financial year at a predicted costof $US38 a tonne (excludingroyalties and freight)–well below the export price of its coal.
Minerals Council of NSW chief executive Stephen Galileesaid things were looking up. He said that if theprice increases weresustained,the Hunter industry was“well positioned to maximise any further gains after a long and difficult period of bringing production costs down”.
But the industry’scritics say the price increases area temporary phenomenonthat will not change their belief in coal’sterminal decline.
Financial analystTim Buckley from the Institute for Energy Economics and Financial Analysis said on Sunday that the recent price increases did nothing to stop him believingthe coal industry was in structural decline.
Mr Buckley saidChina produced and consumed about half of the world’s coal, making it byfar the biggest influence on global coal markets.
He said China’sdemand for coal had fallen this year but its domestic coal production had fallen by a greater amount because the government was shutting mines.
This meant China needed to lift its exports to fill the gap–surprising the global market and lifting prices as a result.
Mr Buckley said India was another big influence, withEnergy MinisterPiyush Goya repeatedly stating his desireto have India stop importing thermal coalby the end of the decade.
He said the Indian government was signing lots of big long-term electricity supply contracts with solar and wind operators and was deadly serious about diversifying its energy sources and reducing its reliance on importedcoal.
NSW Greens energy and resources spokesman Jeremy Buckingham said the environmental arguments against the industry were as strong as ever, adding:“Only a fool would take a long-term bet on coal based on a short-term uptick in the coal price.”
Construction, Forestry, Mining and Energy Union district president Peter Jordan said it appeared that the Hunter coal industry had bottomed out and was starting to climb up the other side.
Mr Jordan said he welcomed the optimism starting to percolate through the industry, but said it was in stark contrast with the relentless attack on mineworkers’ conditions that BHP Billiton and other employers were pushing for.
“They’re attacking redundancy provisions and accident pay and they are trying to get casual employment into the black coal award, which is a clear attack on permanent mineworkers’ positions,” Mr Jordan said.
The rising coal prices have been reflected in the share prices of various coal companies, meaning that companies such as Whitehaven, Thailand’s Banpu–the owner of the Centennial mines–Glencore and Anglo American have all enjoyed substantial share price increases this year.
The International Energy Agency said in December that the era of strong demand growth for coal was“over” butMr Galilee said the agency was still expectingAustralian coal exports torise by 37 per cent by 2040.
He said a recent report by Morgan Stanley predicted stronger demand for the sort of high-quality, high-energy thermal coal produced in the Hunter Valley.