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Anyone reading the weekend papers cannot have missed the great coal whinge that was led by The Australian:

THE world’s biggest miners have united in sounding the alarm that Australia’s $60 billion coal sector is under extreme pressure, with global giant Rio Tinto warning the industry is “staring down the barrel”.

Harry Kenyon-Slaney, chief executive of Rio Tinto’s energy product group, says the sector is facing a wide range of challenges: lower prices, the strong Australian dollar, high taxes, increasing regulations, delays in gov­­ern­ment approvals and community opposition to mining.

…Mr Kenyon-Slaney said that while Rio had already reduced its unit cost of coal production in Australia by about 25 per cent in the past 12 months, the company was not done with its cost-cutting efforts.

…The chief executive of Anglo American’s coal business, Seamus French, said the industry was in the toughest cycle he had seen in the past 10 years, with about 60 per cent of Australian production losing money.

…“The market is over-supplied and Australia is at the top end of the cost curve,” he said.

Well, yes, it is over-supplied. But no, Australia is not at the top end of the cost curve for thermal. We’re mostly in the middle:

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The Australian moaned on in a separate article:

AUSTRALIA’S coal sector is fighting a battle it is struggling to win, and father of two Rod Vaughan is hoping he isn’t the next casualty of a downturn that has seen 12,000 jobs cut in two years.

While some have little sympathy for the major miners being hit, it is the workers at the coalface who are bearing the brunt of this dip.

Mr Vaughan turned to coalmining in regional NSW for a change of lifestyle, wanting to raise his two children in a country area, but he now fears they will have to uproot their lives and relocate because his job is at risk.

NSW Minerals Council chief executive Stephen Galilee said his members were telling him the downturn in the sector had created the toughest trading conditions for the industry in more than 20 years.

That must be because they’ve had is so good for so long them. If it’s so bad then why is Rio still trying to massively expand its Hunter region Warkworth mine? From the SMH:

On Monday, the court unanimously dismissed an appeal by the NSW government and Warkworth Mining Ltd (owned by Rio Tinto) against a decision by the NSW Land and Environment Court last year to reject a proposed expansion of Rio’s huge Mount Thorley Warkworth open-cut coalmine in the Hunter Valley.

Rio Tinto had been relying on what is known as an ”input-output model” to show why thousands of jobs would be created if its mine could be expanded. Its model predicted 44,675 full-time jobs would be created, an embarrassingly large and precise figure. It also assumed that a highly skilled ”ghost workforce” was lying around, unused, and that Rio would be able to draw on this pool of workers whenever its demand for labour increased.

But, in April last year, the Land and Environment Court found that economic modelling was deficient in many ways, including its methodology that overestimated the benefits of the mine, so it overturned the approval.

More specifically, it found the economic benefits of the proposed mine expansion did not outweigh the ”significant impacts” on local residents and the destruction of rare forests containing endangered plant and animal species.

Rio Tinto complained that the decision created a lack of ”certainty” for the industry. It also appealed the decision, along with the NSW government. But the government also moved to amend the State Environmental Planning Policy in response – placing economic interests above others – because it didn’t want economic concerns to be overrun again by frivolous environmental ones.

That might offer some insight into at least one motive for the great whinge. Perhaps the challenge is coking coal? Here’s the cost curve:

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Nope, we’re going even better there. Which is why employment has been expanding rapidly with volumes. From Westpac:

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Yes, coal mining employment is booming again on supply expansions.

What has happened in the coal bust is that prices have fallen a lot, supply is ramping up and marginal projects have been canned. There’s been a global shakeout in both coals for the better part of two years but we’re mostly winning. The miner’s current whinge is simply a push to remove environmental, labour cost and other impediments to profit, not some new and terrible crisis.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.