Limited investments, climate pledge to keep Australian thermal coal prices high – S&P Global
Highlights
Abandoned/withdrawn coal projects seen in Australia
Newcastle to average $120/mt in 2022
Australian thermal coal prices may remain relatively high until 2022-23, hit by a lack of investments on the back of recent climate commitments by several countries at the UN Climate Change Conference, a report by Australia’s Department of Industry, Science, Energy and Resources released Dec. 20 showed.
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“Recent commitments by a range of countries have added to uncertainties over coal investment. This is likely to discourage a number of major investors from responding to the recent price surge, and contribute to a likelihood that thermal coal prices will remain relatively high,” the report showed. “By deterring investment, it is likely that recent announcements could place coal prices on a higher footing.”
Additionally, some proposed coal projects have recently been withdrawn or abandoned, including proposed mines at Dendrobium and the Bylong Valley, the department said in its December quarterly report. The proposed expansion at New Acland continues to face legal objections, with its owners closing the site in response to the depletion of available resources.
“Shenhua’s Watermark project has also been shelved,” the report, which comes via the office of the chief economist, said.
While the report noted there are other potential projects like that of the GVK Group, Waratah Coal’s Alpha North and Galilee projects and AMCI’s South Galilee Coal Project, there has yet to be any commitment registered for these projects.
Stating that the recent announcements [at COP26] place additional pressure on long-term prospects for coal demand, the report added that China will now hold a more dominant share of the world’s remaining prospective coal plants, but informal import restrictions on Australian coal means that Australia is not well placed to capitalize.
China imposed an unofficial ban on Australian coal in November 2020 after the latter supported calls for an international investigation into China’s handling of the coronavirus outbreak earlier in the year.
However, the department estimated that Australia’s thermal coal exports will rise from 192 million mt in 2020-21 to 204 million mt in 2022-23 despite import restrictions from China. S&P Global Platts reported earlier that other Asian markets such as India, Japan, South Korea and Taiwan have witnessed sharp increases in inflow of Australian coal in 2021.
“Rapid global economic recovery and cold Northern Hemisphere winter has increased demand for power generation among significant thermal coal importers,” the report said, adding that surging prices are expected to push [Australia’s] export values to $35 billion …….