Australia's coal sector enduring toughest operating environment

Aug. 13, 2013 at 10:56 AM
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BRISBANE, Australia, Aug. 13 (UPI) -- High costs in Australia are affecting the country's coal sector, say industry leaders.

Citing the country's high costs of production amid falling coal prices, Queensland Resources Council chief executive Michael Roche in a speech Monday at the 9th Coaltrans Australia Conference in Brisbane, said the country's coal industry "is staring down the barrel of the toughest operating environment in more than a decade."

In the state of Queensland -- the country's largest coal producer -- 8,000 jobs have been lost in the coal sector since May 2012, the council estimates.

Many coal companies operating in Queensland "are in flat-out survival mode," Roche said.

"The only good news for Queensland has been that the broader impact of the coal industry's tough times has been offset, to some extent, by the diversity of the state's resources sector," he said, citing in particular Queensland's flourishing gas sector.

"What we have to do now is adjust for the production phase and get our Australian industry in the best possible shape to compete for the next phase of investment," Roche said.

Wayne Calder, deputy executive director of Bureau of Resource and Energy Economics, based in Canberra, told the conference the cost of bringing new production capacity online in Australia has soared 188 percent in the past five years, reaching $176 for each measure of 1 million tons last year, up from $106 in 2008, Platts reported.

That compares with a rise to $73 per million tons from $61 for coal mines in other parts of the world during the same period.

Deutsche Bank in a recent report estimated the cost bases of mining giants BHP Billiton's and Rio Tinto's Australian coal operations had increased 320 percent since 2005.

In his speech at the Coaltrans Australia Conference, Sandeep Mehta, chief executive of the ports division of logistics and coal trading company Adani Group of India, said it has become "extremely expensive" to do business in Australia.

Adani is the single-largest importer of seaborne-traded thermal coal to India, accounting for half of the 80 million tons of product shipped to India last year.

The company plans to invest $13 billion in Australia to develop its port, rail and mine assets focused on Queensland's Galilee coal field. So far, it has spent $3 billion on its purchase of Abbot Point coal terminal.

Mehta said Australia's coal sector was guilty of "gold plating" on some mining projects, a term which refers to excessive or unnecessary costs on a project.

"There are high costs to enter this industry and we accept that, but the amount of time it is taking [to get project approvals] is immense," he said.

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