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Is Australian coal finally having its “oh sh*t” moment?

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Last week, a senior energy analyst at the Union of Concerned Scientists wondered whether the reality of the clean energy transition had finally dawned on the American coal mining industry.

His question was prompted by events in the US; but a look at the headlines in Australia on Monday suggests a similar fossil fuel reality check could be happening here.

In Queensland, the state’s peak resources body issued an SOS on Monday, calling for taxpayer support – or government tax relief, or more subsidies – for the state’s coal mines, after a study revealed that one third of them were running at a loss.

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The report, commissioned by the Queensland Resources Council (QRC), also found that more than half of the mines producing thermal coal for power stations were losing money.

“We would like government to think about what we need to do to protect the remaining 60,000 jobs in the Queensland resources sector,” said QRC CEO Michael Roche. “These are some of the worst conditions they have faced in decades. Some companies are teetering on the brink.”

So, is this the first sign that the Australian fossil fuel industry – which has railed against subsidies for renewable energy, but now wants more subsidies of its own – is finally having its “oh sh*t” moment? The ACF certainly thinks so.

“This report, commissioned by the industry itself, shows the coal industry is finally realising the age of coal is over,” said the Australian Conservation Foundation CEO Kelly O’Shanassy.

“The coal industry employs only 0.4 per cent of the Australian workforce, but gets hundreds of millions of dollars every year in subsidies. Despite this special treatment, it appears the industry is not financially viable.”

O’Shanassy also suggests that “instead of continuing to shovel public money down the mine shaft” governments invest in industries with ongoing job opportunities, like renewable energy and tourism.

“This is no time to be contemplating opening new coal mines,” she says.

That message, coming from groups like the ACF, might easily be dismissed by industry, but when the same message comes from Indian coal giant Adani – as it did last week – it’s time to pay attention.

As we reported here on Thursday, Adani effectively put development of its massive $16 billion Carmichael coal mine in Queensland’s Galilee Basin on hold – just days after the Queensland government gave the controversial project environmental approval – saying that no capital expenditure was planned by the company for the project until there was “visibility” of a rebound in the coal price.

But the chances that this price “rebound” will happen any time soon are becoming increasingly slim, according to a new report from the Institute for Energy Economics and Financial Analysis

The report shows that Indian coal imports fell again in January 2016, talking them down 28.6 per cent on year and marking the largest three-month decline on record, following drops of 49 per cent in November and 34 per cent December.

“The rate of Indian coal import decline is increasing every month. Following five years of 20-30 per cent annual growth, this marks an historic turning point in energy market transformation,” said IEEFA director of energy finance studies, Tim Buckley.

Meanwhile, in China – the world’s largest consumer of coal – Beijing has revealed plans to cut as much as 17 per cent of the nation’s own coal production capacity, in an effort to reduce industrial overcapacity and use cleaner energy sources amid sliding demand for the fuel.

According to Bloomberg News, China aims to eliminate as much as 1 billion metric tonnes of output capacity in three to five years, with half of the cuts coming through mine closures and and the other half through company consolidations, the State Council said in a statement Friday.

“The global coal industry continues to reel under the inevitable twin pressures of excessive financial leverage combined with a technology driven transformation that is increasingly transferring pricing power from global fossil fuel conglomerates to energy consumers,” writes Buckley.

“The result is an acceleration of energy sector deflation across oil, liquid natural gas and coal.”

Australia’s gas industry, meanwhile, has had a similarly confronting week, capped by the withdrawal of the nation’s biggest energy utility, AGL, from gas exploration and production as part of a renewed focus on the “evolution” in the energy industry.

As we reported last Thursday, AGL will take a $795 million pre-tax write down from its withdrawal, and avoid around $1 billion in costs of drilling up to 300 coal seam gas wells. Given the fall in gas prices, it would probably not have made a profit on the venture.

In comments explaining the decision, AGL CEO Andrew Vesey said it reflected the volatile nature of commodity markets. Analysts also suggest it was a recognition that AGL’s gas assets were relatively high costs and were not premium quality in a market for low oil and gas prices.

This week, oil and gas industry peak body APPEA has issued its own SOS, calling on states to unlock gas reserves.


But as Fairfax’s Michael West notes, such appeals from the gas lobby will not save the industry from the global crash in energy prices, which “threatens the very survival of some of Australia’s largest resources companies, including Santos and Origin Energy.

“So dire is the outlook that one broker, JP Morgan, is valuing Santos at minus, yes minus, $1.51 per share,” West wrote on Monday.

“The mooted LNG export boom which was to have driven the next leg of Australia’s prosperity is no more.”  

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  • lin

    It would take an extraordinarily hypocritical government to shut down our car industry and its 200,000 jobs on a whim, and then increase tax breaks and subsidies to this dead-end industry because of “Jobs”. So we are pretty much guaranteed to have the government put their hands into our increasingly light wallets because some jobs are more important than others, and climate change is crap except for the CSIRO ocean and atmosphere scientists we don’t need because the science so settled we don’t need to look at it anymore?
    I suspect most coal and gas mining jobs in Australia in the future will be government funded remediation of contaminated sites and abandoned mines when these guys depart, having worked out how to dump their liabilities onto the taxpayer.

    • Megs

      you are right lin. They will leave their mess for others to endure, just like asbestos. Keep on “calling it”.

      It is now past time to demand an increase in land and resource tax and rent to finance government and end tax on real work and effort. Remediation plans and full secured financial guarantees should be demanded.

      • Michael

        Seig Heil! Seig Heil! Seig Heil!

        • nakedChimp

          It’s ‘Sieg’, not ‘Seig’.
          Blame the spelling of ‘i’ vs ‘e’..
          🙂

    • JeffJL

      News flash Lin. We have an “extraordinarily hypocritical government”.

    • john

      Well said sir

    • Michael

      Nonsense. The Australian car industry has been ludicrously subsidized for more than half a century. The subsidies lasted so long they ensured under-performance – second rate products at premium prices. The coal industry has, for most of its existence, been very profitable.
      As to your view of the future: get some perspective. Short-termism reigns in your bigoted and oh-so-politically biased mind.

      • Alastair Leith

        would you like to compare the extent of subsidies paid to FFs and car industry over the last 50 years, Micheal? We can get some figures together for you. So what if the coal industry was once profitable, they managed to avoid paying tax and most of the profits go offshore or a well off shareholders in Australia. And if so profitable why did they need such extensive subsidies? Hardly an sunrise industry is it, one of the oldest industries in Australia.

        The Car industry was subsidised because the industry was considered critical to keep a raft of tore manufacturing sectors viable, due to the expertise and capability in the sector because of the big auto makers. Yes they stuck to big gas gushing V8s and V6s for too long, and who knows why they didn’t develop a local EV, the skills were there. Oh yeah, the car industry tried to kill the EV because it’s less profitable and they are, sorry were, in cahoots with the oil industry.

      • lin

        “Short-termism reigns in your bigoted and oh-so-politically biased mind”
        Just Wow! Anyone would think I called your favourite child ugly and stupid. I am struggling to link a push towards renewable energy and away from FF as “short termism”. Let me hazard a guess that you don’t accept that humans are changing the climate through increasing CO2 in the atmosphere, and your investments are heavily weighted towards fossil fuels?

      • david_fta

        Do you reckon the Australian car industry would have needed subsidy had they started building the smaller, more efficient cars that people started buying from the 1980’s on?

        What happened was, US-owned car companies decided to meet growing Australian demand for smaller cars from their Asian (subsidised) operations, placing their Australian manufacturing operations on Death Row.

      • david_fta

        “Short-termism reigns in your bigoted and oh-so-politically biased mind”

        You mean, like the short-termism that is concerned about sea levels and climate in 1 or 2 centuries’ time?

      • Slartibartfast

        Every western nation that manufactures cars subsidises the industry. The American auto industry nicks taxpayers $256 pa, the British £110, the German €145. Hiw much did the Australian industry cost each taxpayer per year? $18, that’s how much.

  • johnnewton

    So yes, planning for redeployment/ new industries which should have begun years ago, better get going.

    • Jacob

      And an end to mass immigration so that Aussie voters get hired instead of illiterate peasants from the 3rd world.

      • johnnewton

        Almost not worth answering Jacob but…how did we all, except for the people who’ve been here for 50,000+ years, get here?

        • Jacob

          That is like saying the birth rate was 5 babies per female in the past so we should maintain that rate.

          I doubt the Aboriginals want more mass immigration.

          There were no hospitals in AUS before 1788.

          The schools and hospitals in AUS are overcrowded due to mass immigration of illiterate peasants from poor nations.

          • johnnewton

            Very offensive Jacob. If the schools and hospitals are overcrowded it is because of poor governance. I’m not going to engage on this any more – apart from anything else it’s way off topic

          • Jacob has been punted from this forum.

          • johnnewton

            I shouldn’t have encouraged him.

          • david_fta

            There is a point in what Jacob says – Australia would do well by its citizens to educate and train them so that they can get jobs, and make the Australian economy large enough to readily accept people who seek mercy from persecution.

            For example, Australia would do well to train its unemployed masses in Horticulture, so they can move in and rehabilitate abandoned coal mines – meanwhile the Crime Commission can search for the former mine operators in the world’s offshore tax havens.

            That said, there is a way to make such a point, but I’m not sure that Jacob chose that way.

  • john

    Australia has a problem.
    The country has put all its eggs into the resource export market.
    Currently every value of mined product is going down.
    Energy prices have done extremely badly.
    The outlook is bleak for the Australian budget.
    However there is a bright side because our dollar is tied to the price of resources it has also dropped and now we are much more valued as a destination as a traveller.
    Just remember for every person who comes to Australia the dollars spent is a real multiplier not like the resource sector where the money goes offshore and does nothing for the country.
    Yes I know my direction is to make us the place that supplies services to people who visit and that is or may be menial.
    However it is a lot more sustainable that a failing finite resource driven market economy which is showing its stipes where coal mines are being sold for $1 knowing the escape for a dollar is saving them millions in remediation.

  • Barri Mundee

    I could not care less about the fate of the coal mining companies, their CEO’s and their shareholders but I do care about their workers. What will become of them? I do not for one moment government believe that support is the answer for an industry whose best times are probably behind it but the real challenge for government is to foster a transitioning away from coal to renewables.

    I fear the transition will be ugly.

    • Jacob

      Obama is funding training to train soldiers in how to install solar panels.

      By the end of the training, apparently 100% of the students are given job offers from Solarcity.

      About time AUS does the same thing and excludes non-citizens from the funding.

    • john

      Actually the story of Coal Mining is that the price goes up they develop and invest the price goes down they lay off.
      They are waiting for the next cycle the question is this.
      Is there going to be a next cycle that is the question.
      If not then we have a huge problem with lots of mines with of lots of employees who are redundant let alone the cost to remediate the pits they have dug.
      Some have seen the problem and actually sold their mines for $1 to some new company.
      I see danger signals a mile off with this as the seller is walking away and leaving the new company who may go broke with no ability to remediate the land they have used.
      Guess who picks up the bill?
      Yes you and me the dumb taxpayer.
      It is possible the price may go up in a few years however it would be prudent to make sure the remediation reserves are in line with exploitation of the resource.

      • Jens Stubbe

        Coal prices are most likely continuing down as over supply grows and coal continues to move further and further away from grid parity.

        Only subsidies and market privileges is keeping coal on the market. Renewables could sweep the market clean from coal within the few years it takes to install the infrastructure and the power plants.

        The above statement rest on the assumption that the strangely high wind power cost in Australia will normalize once you start backing the industry with fair market access.

      • Michael

        In reality, global coal production and consumption is relatively stable. China has cut both production and consumption marginally – in the order of 2 to 3 % over the last two years.
        Meanwhile, both production and consumption of coal in the broader Asia Pacific area has increased, again marginally.

        • Alastair Leith

          as soon as carbon gets realistically priced or toxic emissions regulated on health impacts or climate impacts — or both then it’s fast days to the funeral for coal. that’s why it’s market capitalisation has tanked 90% in the last 5 years. Peabody Coal the worlds biggest purely coal only company is worth less than 2% of what it was five years ago. Tell me how stable the coal industry is again.

          You’re obviously that guy, Micheal, who could still see the canary flapping around in the mine when everyone else had seen it die. Maybe you’re just blindly optimistic, or maybe you’re incentivised to be this way.

    • david_fta

      “I do care about their workers. What will become of them?”

      Horticulture Cert II, then jobs rehabilitating mine sites?

  • Phil

    Didn’t the previous Gov in Australia do something similar in effect by pumping $2 billion of subsidies into the very dirty coal burning Victorian Power stations less than 5 years ago ? I seem to remember someone called Julia proudly announcing that .

    That money would have bought a lot of retraining , green energy jobs and energy saving programs employing just as many. That Money (if spent) has been squandered on that black stuff no one wants. I mean blind Freddy can see that powerhouse Asia is realising that cheap energy used to mean dirty air . Now cheap energy can mean clean air with renewables.

    I’ve gone off grid so i can be in control of MY energy costs.. The coal industry has had a “heads up” for 10 years on this and a “this is really happening ” for 5 years .

    Where is the due diligence , commonsense , critical thinking , community minded outcomes as a corporate citizen , basic efficiency even ? . All there is is wrong , wrong , wrong , wrong and more wrong

    Meanwhile my off grid system is Right , Right , Right and More Right. And getting more right as each day passes it seems reading articles like this

    • Peter Campbell

      “The coal industry has had a “heads up” for 10 years on this and a “this is really happening ” for 5 years .”

      It has been obvious to anyone paying attention for longer than 10 years, including the coal industry. They just pretended to not notice for as long as they could get away with it!

      • Alastair Leith

        So they can blithely stick their hands out for a golden parachute, well at least for the executives any how.

  • Bill Ellerton

    Let’s not forget that coal is not just used for energy production. There is no doubt that the use of coal and other fossil fuels will decline over coming years and decades as more efficient energy production such as nuclear and renewables are introduced.
    There will however be an ongoing demand for coal in the production of a number of other goods and services that our society simply can’t live without such as coal tar and other derivatives. Most significant is the production of steel. Most people seem to think that the only use of coal in the production of steel is as an energy source, but this is not true. It is the carbon in coal that is use to help turn ordinary steel into products like stainless steel. A great way to lock up carbon for a long time.

    • nakedChimp

      If the carbon content of steel is higher than ~2% is get’s too brittle and is no good for anything, most steels have less than 0.5% carbon in them.. they remove carbon by burning it with oxygen when they make steel from raw iron.

      And stainless steel exists thanks to chromium and molybdenum.. not so much to do with carbon per se

      • Alastair Leith

        yeah the metallurgical coal is mostly there for the heat generation not the actual carbon delivery, right?

    • Michael

      POSCO is moving into production of a new steel formed from a mix of steel and aluminium. Said to be as strong as titanium and just as light, this new steel could make a lot of high tech products, such as aircraft, quite a bit cheaper.
      http://www.sciencealert.com/new-super-steel-alloy-is-as-strong-as-titanium-but-10-times-cheaper

    • juxx0r

      The carbon goes up the chimney as CO2. Locked up. lol that’s a good one.

    • Alastair Leith

      Google “Green Steel” there are many alternative processes with arc furnaces, liquid anodes and so on. One research has said if the world shifted to green steel production entirely it could actually end up cheaper than current processes once it scales up and the surplus of renewable energy is available.

    • Bill Ellerton

      There are many steel based alloys, with all sorts of other elements used to make them, but carbon from coal is an essential ingredient of steel. It doesn’t go up the chimney in the form of CO2, it is one if the ingredients used to give steel its particular characteristics. Would be a good idea for some of those who have commented here who clearly have no understanding of the steel making process to book a tour of their nearest smelter or visit their local library or google steel making.

      • juxx0r

        Hi Bill. Lets look at the equations then:

        Iron ore reduction:
        Fe2O3 + 3CO -> 2Fe + 3CO2

        Steel:
        50Fe + C -> steel

        So right there you have 75 CO2 going up the chimney for every C that goes into high carbon steel.

        • Norman Heckscher

          75 to one? Seriously? Steel making sure does generate a lot of CO2, however, the ratio is much closer to 1:1 than it is to 75:1.

          Being able to drop a few chemical equations on a random internet site does not give you credibility as a chemist, process engineer or metallurgist.

          #facepalm #fail

          • juxx0r

            Re-read Bill’s claim that Steel is a good way to lock up carbon, then calculate how much you can lock up in steel, then see how much CO2 you use to make the iron for said steel, then see if I need to get a refund on my metallurgy degree.

            Because the equations were to show how much could be locked up and at what cost to demonstrate that sequestering carbon in steel is a punchline to a joke not a serious endeavour.

            It was not intended to show the CO2 intensity of iron ore reduction.

          • Peter Campbell

            I am a biochemist not a metallurgist but I can’t see what is wrong with those equations. Coal is reduced carbon. Iron ore is oxidised iron. You want the iron to be reduced so the carbon has to get oxidised. Stoichiometry has to be obeyed. Oxidised carbon is CO2.

    • Jens Stubbe

      You need carbon for steel not coal. There is plenty excess carbon every where so forget about coal for steel processing.

      Coal is fast becoming as useful for society as bikes for fish – not because it is not technically possible to use coal but simply because coal is becoming too expensive to use.

      Also the cost avalanche will bury nuclear as well in the forms that are presently used and the new nuclear technologies are also facing a window of opportunity that is shutting fast.

  • Chris Fraser

    These ‘traditional’ energy companies … they don’t seem able to look after themselves very well. In Australia, they should be banned from further fossil fuel investment, unless the CCA says they can. This is the means by which we, as taxpayers, can divest from them, and send the subsidies somewhere else.

  • Rob G

    A perfect storm indeed. We have a coal loving government with no money and big coal helplessly haemorrhaging. Even if they wanted to ‘save’ them they simply can’t. I like the justice that is unfolding.

  • Leigh Ryan

    It’s only coal in the energy production area that is in trouble i believe that is about 5% of the coal industry in Australia, so we are not talking about the loss of 60,000 jobs more like 3 to 5000 and yet no one sees that the responsible thing to do is develop renewable energy projects that would bring more than 30,000 jobs to Queensland alone, that’s a lot of unemployed off the government dole queue, that’s a lot of cheap energy, that’s a recipe for re-election, the rest of the coal industry is in a downturn as it would have been anyway due entirely to China and India’s manufacturing sector, they will grow again and the coal price will go back up again unless of course there is something new on the horizon to change that something like the Fusion reactor currently being developed, it is not renewables that threaten the future of coal it is the small minded men & women in government and the industry that lack vision and basic commonsense and live only for profit today, tomorrow does not enter their minds better watch out as technology advances at an unprecedented race the whole world and everything in it will change dramatically over the next few decades and anyone not prepared for that is a dinosaur walking into the tar pits.

    • Alastair Leith

      where did you get the 5% figure? and even if domestic coal consumption was 5% of mined ore, it doesn’t make sense to extrapolate that to employment, because there’s more down-stream employment in generation than there is in shipping the stuff to China. Having said that jobs in renewables are higher than in coal per MW and jobs in gas are lower per MW than in coal.

    • Jens Stubbe

      Coal is doomed. No one is going to use coal in 2030. Coal is already now too expensive to buy and transport to a power plant in USA because you can get electricity on 20 year contracts cheaper than you can even procure the coal. In ten years time that price will decline by at least 40% (much faster if wind power keep up the current cost decline trend, 6% from 2013 to 2014 and 65% from 2009 to 2013). What sensible planners should do was to shut down coal operations in a timely way. In USA the entire coal value chain is now stranded assets and by the way the same is true for US oil and Fracking gas. None of the fossil value chains can carry on without extra subsidies and financial restructure. Looming in the horizon is the next energy revolution where electricity and excess CO2 is turned into Synfuels. This technology has recently been publicized that claim 79% Methanol conversion efficiency. http://pubs.acs.org/doi/abs/10.1021/jacs.5b12354

      Electricity from renewables and excess CO2 is fast becoming the cheaper for the petrochemical industry than coal, crude oil and gas.

  • Miles Harding

    Aren’t these the same toads that undermined the MRRT such that it ended up a useless shell and wound up the LNP to declare its absolute love of all things black and lumpy?

    Like the dinosaurs before them, the Coal industry has woken up to it’s own mertorite impact event.
    The destiny is extinction; but whose?
    If king coal wins, we all die in a trashed world, so it’s imperative that king coal must die and die soon.

  • patb2009

    About two years ago I said Coal was in it’s death throes, now it’s plain old done.
    The corpse will keep kicking for a bit but it’s in terminal decline now.

    Whales used to be hunted for lamp oil, the electric light ended that business.