Coronavirus threat to coal exports, industry viability

Daily Mercury, 6th March 2020 - REPORTS this week indicate that air pollution in China has declined to a record low. Far less coal, gas and oil is being burned after travel restrictions and factory shutdowns as a result of the coronavirus epidemic.

China is the world’s second largest economy. A downturn in economic activity in China has flow-on effects around the globe, particularly for countries that supply China with the resources it needs.

Australia is a big exporter of coal and China is Australia’s second largest customer. However, according to the Federal Government’s Office of the Chief Economist, even before the coronavirus epidemic, global demand for coal was falling.

In 2019 thermal coal demand around the world fell by 3 per cent. India, which Australian mining companies have pinned their hopes on as an emerging market, witnessed a 2 per cent decline in thermal coal use in 2019.

As a result, coal prices have fallen significantly for over a year. Thermal coal, used for boiling water to produce electricity, was selling for US$120 in mid-2018. Now the price is about US$70.

Even though Queensland’s coal mines are producing record quantities for export, economists refer to it as ‘profitless productivity’. With such low prices, mining companies are struggling to meet the costs of production.

To take one example, the Blair Athol mine at Clermont was sold by Rio Tinto to the mining minnow, Terracom, for just $1 back in 2016.

The purchase price included a drag line and other equipment on site. Terracom has few establishment costs to finance yet the company made a loss last financial year. In the first half of this financial year, Terracom lost a further $9.3 million.

Coronavirus has not yet been declared a pandemic but it is affecting a growing list of countries. One of the consequences will be less demand for Queensland’s largest export. We really do need to plan for a future that isn’t reliant upon coal.

– Peter McCallum, Mackay Conservation Group