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Thermal coal benchmark prices at Australia’s Newcastle port touched an all-time high of over $460 per tonne in September 2022, up from about $65 before Covid-19 impacted supply networks. These rising Australian coal prices come less than a year after the UN’s 26th Conference of the Parties (COP26) meeting where dozens of countries committed to phasing out coal production and reducing greenhouse emissions from the power sector.
However, Australia’s resource and energy export earnings are forecasted to reach A$450 bn (~$283 bn) in 2022–23, surpassing last year’s record of A$422 bn. Earnings are then forecasted to fall to A$375 bn in 2023–24 (still the third highest on record), as the world responds to high prices amidst a soft demand backdrop, as per Australia’s Office of Chief Economist.
How are Australian coal companies doing?
Whitehaven Coal, Yancoal and New Hope Group, the major Australian coal producers have been benefitting from the rally in global coal prices and as the world’s no. 2 coal exporter, Australia has been boosting supplies amid the ongoing Russia-Ukraine war. “Coal prices set a new record during the June quarter and continue to be well supported,” noted Paul Flynn, Managing Director and CEO of Whitehaven Coal in the latest quarterly report. “Improved operational performance combined with record high coal price will underpin our strongest ever full-year result,” says Flynn. Meanwhile, Yancoal was on track to achieve another record financial year and achieve a zero net debt position in July 2022 as per its Q2 production report.
However, Australia has a long history of extreme weather conditions, such as La Niña which brings heavy rains. A third consecutive La Niña is forecasted in late 2022 which would increase rainfall along the country’s east coast, according to Australia’s Bureau of Meteorology (BOM). Heavy rains during previous La Niña events in Australia’s New South Wales and Queensland states affected coal mines and railroads and caused an output drop of an estimated 20% to 30% in 2010 and 2011. “Any severe disruptions to Australian coal shipments could push the high-calorific value price even to fresh highs,” Morgan Stanley analysts said in a note.
On the other hand, an energy crisis has pushed several European nations to restart their coal power facilities as winters are looming over the continent. The resurgence of coal is a significant challenge to international attempts to keep global warming below 2 degrees Celsius from preindustrial levels and preferably close to 1.5 degrees by the end of the century.
Australia is in a tough spot as it recently legislated a 43% reduction in emissions by 2050 and its current emissions are around 30% larger than domestic emissions in Germany, which has three times Australia’s population.
“It is not credible in the eyes of the rest of the world, in the lead up to the November Climate Conference in Egypt, for Australia to claim to be reducing our greenhouse gas emissions while flooding the world with climate polluting fossil fuel,” University of New South Wales professor Jeremy Moss told a local publication. “Australia ought to lead the way on climate by calling ‘last drinks’ on its coal export industry.”
– reporting by Sakshi Dahiya, editing by Sumeet Gaikwad
