On Friday, Western Australia’s Premier, Colin Barnett, attended the The Australian and Deutsche Bank Business Leaders Forum in Perth, where he delivered an especially sobering outlook for Australia’s second biggest export commodity: coal. From the Australian:
“The change in the coal price is beyond cyclical: it is a structural change… And while coal remains the world’s most used fuel for power generation and other purposes, the world is making policy decisions which mean that coal usage, in my view, will progressively decline. It’s a long-term structural change and that should not be dismissed as something that is purely cyclical”
In a seperate article, The Australian also reported that coal-related industries have shed roughly 10% of their combined workforce – around 13,000 jobs – over the past 18 months as both thermal and coking prices collapsed from an average of US$120 and $US288 a tonne respectively in 2011 to under $US80 and $US145 a tonne currently (thermal coal price shown below).
Premier Barnett was also fairly downbeat on the prospects facing iron ore – Australia’s biggest export commodity – noting both demand and price risks:
Mr Barnett said the days of rapid growth in Chinese steel production had finished, and he believed there would be no major expansion in the Pilbara iron ore industry once the present rounds by BHP Billiton, Rio Tinto and Fortescue Metals were completed.
Western Australian mining capital expenditures have fallen sharply over the past three quarters, which looks set to continue, based on Barnett’s testimony (see next chart).
Finally, as noted in the video report from The Australian, the overall sombre mood at this year’s forum was in sharp contrast to the bullish sentiment expressed at the 2011 and 2012 conferences, reflecting just how much times have changed.
