This story has been floating around since yesterday and I thought I had better address it:
AUSTRALIA’S coal industry is at “a tipping point” and will survive only if government gets off the back of miners, Anglo American chief Mark Cutifani has warned.
Mr Cutifani said 9000 mining jobs had been lost in Queensland and NSW over the past year and “those numbers look like they are about to rapidly increase”.
He also said high costs, declining productivity, higher royalty payments, red tape and the carbon and mining super-profits tax had dragged Australia behind the US, Canada, Indonesia and Colombia for competitiveness in coal.
“Let me be very clear, the Australian coal industry is at a tipping point for future growth and will only survive if governments want the sector to invest in the country,” Mr Cutifani said.
“Australia has done well as a result of the mining boom, but I believe this phase has run its course as we are confronted with new realities.”
His comments, made at a Minerals Council of Australia conference in Canberra, came as Aquila Resources announced it was delaying construction of its Eagle Downs coal project in Queensland.
Australian coal is not un-competitive at all and is no danger whatsoever of not surviving. Here is the cost curves for thermal coal and coking coal (the red line is the current spot price, contracts are higher):
As you can see, nearly all Australian production remains profitable (according to Wood Mackenzie). It is the US that’s in the firing line.
What we are seeing in coal job losses is the cancellation of higher cost expansion projects, as well as some of the fat coming out of the boom because prices are falling so fast. Coal companies have over-expanded and are now getting more efficient.
Looking at Anglo’s list of grievances, what can and should be done?
- High costs: stop inflating real estate prices and let mining wages fall as the market weakens (which is and will keep happening)
- declining productivity: government could support key infrastructure expansion to maximse output
- higher royalty payments: see cost curve above, no issue there
- red tape: always pleased to see less of that
- carbon and mining super-profits tax: on the former, it’s inevitable that carbon is payed for so get used to it, on the latter it only kicks when a commercial rate of return is reached so is irrelevent
So authorities can let labour markets ease and aim for efficiency in approvals and infrastructure. Always room for improvement there I’m sure. As well, they could get the dollar down. But these are standing goals of government not the source of any crisis.
