Whitehaven Coal has become the latest Australian miner to announce massive losses as the collapsing thermal coal price continued to wreak havoc on the industry.
In the six months to December, Whitehaven lost $94.4 million. It comes a day after BHP revealed it was writing down the value of its thermal coal assets by $US1.6 billion, while Anglo-Swiss miner Glencore – the biggest coal exporter in the world – lost more than $US500 million on it Australian thermal coal business, also thanks to write-downs.
The miners say losses were driven by a pandemic-induced drop in demand and China’s decision to ban Australian coal imports. That added to the global shift away from thermal coal towards low-emissions alternatives.
The COVID effect seemed to fall away towards the end of the year, and that pushed thermal coal prices back up. BHP put this down to a “pick-up in demand due to cold weather in North Asia and a bounce in Indian industrial activity”. But BHP warned China’s imports policy was a “key uncertainty”.
The uncertainty may also extend beyond China’s imports policy to its domestic energy policy. Earlier this month a team of inspectors from China’s environment ministry heavily criticised the National Energy Agency for failing to implement President Xi’s “thoughts on ecological civilisation” when approving new coal-fired power stations. The report suggests the central government is clamping down on new coal power developments, following a period of relaxation, as it ramps up its efforts to reduce emissions and meet its pledge to reach net zero by 2060.
As AGL’s half year results showed last week, Australian power generators are struggling to make any money at all out of coal-generated electricity thanks to the rapid rise of renewable capacity, and that is also driving the push away from thermal coal. It’s a global trend which is moving rapidly in one direction.
With Australia’s other key export markets – Japan and South Korea in particular – also ramping up their emissions reduction plans, diversified miners are aggressively switching away from coal. BHP has effectively given up on thermal coal, and is in the process of ditching the high-carbon commodity in favour of minerals needed in renewable energy and electrification – in BHP’s case iron ore, copper and nickel. Whitehaven, though, remains totally dependent on coal.
Just as markets are threatening to dry up, so is investor capital. A long list of major lenders and institutional investors – including all of the big four banks – are one by one announcing they will no longer lend to or invest in pure play thermal coal companies. Insurers are also refusing to insure them.
The prognosis for pure play coal miners like Whitehaven couldn’t me much grimmer, especially since 85 per cent of the coal it exports is thermal, and only 15 per cent is metallurgical. But in a pre-recorded speech, Whitehaven’s CEO Paul Flynn tried to remain upbeat, insisting the price of coal would recover as the COVID-induced downturn ends.
“In the latter part of the half there was a strong rebound in prices, and we are increasingly optimistic that underlying market dynamics are supported by robust demand,” he said.
He made no mention of the rapid global shift away from coal as a source of power. There was also no mention of either climate change or emissions in any of the material the company published on Wednesday.
In Whitehaven’s 2020 annual report, released late last year, the company made some basic comments on climate change. Last year the company did release a 74-page sustainability report. In that, its main argument was that its coal is higher quality than thermal coal from other parts of the world, and could therefore help coal dependent countries reduce their emissions somewhat.
James Fernyhough is a reporter at RenewEconomy. He has worked at The Australian Financial Review and the Financial Times, and is interested in all things related to climate change and the transition to a low-carbon economy.