1. Latest News
  2. Submit Press Release
  1. PR Home
  2. Latest News
  3. Feeds
  4. Alerts
  5. Submit Free Press Release
  6. Journalist Account
  7. PRNewswire Distribution
Energy Publishing Asia Pacific Logo

Rising costs, uncertainty about new developments and a swipe at the carbon tax

This week Brisbane hosted the 8th Annual Coaltrans Australia conference and it is no surprise the mood was decidedly bearish.

 
 
Coal Reports | Coal Market News | Publications
Coal Reports | Coal Market News | Publications
PRLog - Aug. 27, 2012 - BRISBANE, Australia -- Energy Publishing’s weekly Australian Coal Report has compiled an overview of some of the main topics to come up for discussion at the conference including the prospects for new coking and thermal coal projects and what the biggest cost pressures on the coal industry are.

Mining Costs

The rise in mining costs and margin pressure were the main themes at the conference. As Energy Publishing has reported, contractor job losses have been rising in the Bowen Basin, with the Queensland Resource Council’s chief Michael Roche telling the conference the Queensland industry was already globally uncompetitive and that further job losses are a certainty.

Speaking on the conference sidelines, views on the industry among service providers ranged from fear about the current climate to confidence a turnaround was imminent.

An explosives supplier told Australian Coal Report his company is not seeing any reduction in demand, suggesting open-cut producers are not yet cutting back on production. The source did say demand for mobile blast equipment was unseasonably higher among some Bowen Basin coal mines as they try to get ahead of pre-stripping before the start of the wet season at the end of the year.

But to put that into context, one producer commented, “People still remember when explosive supplies were hard to come by a few years ago and don’t forget a lot of these supply deals are long-term take-or-pay contracts”.

What is different to the last downturn is the strength of the Australian dollar against the US dollar, a point made by several sources.

Galilee Basin can’t shake speculation

The theme of rising production costs and international competitiveness inevitably lead to speculation about the viability of the new provinces scheduled for development: the Galilee and Surat Basins.

Colin Randall, MD of Allegiance Coal, said he doubted many of the proposed mega mines (between 30-60Mtpa) in the Galilee would see the light of day, as the economies-of-scale method being employed to ensure viability of the mines was not realistic.  Randall, a veteran of the Australian mining industry, believes the implementation of mines so large is a feat too great for some of the proponents.

Not everyone is as sceptical of the basin’s potential however, with chairman of AustCoal Consulting Alliance Bede Boyle confident Galilee Basin aspirant GVK/Hancock Coal leads the way and will bring to fruition its planned 30Mtpa Alpha coal project - utilising the vertically integrated mine, port and rail design.

“The projects that will go ahead are those that are sitting in the first quartile of the low cost FOB international cost curve, and maybe on the cusp of the second quartile,” Boyle said. “If you are in the third and fourth quartile you can be sure the boards [of companies] are going to pop those projects on the backburner,” Boyle continued.

The associated infrastructure required to open up the Galilee Basin also created some lively debate among Coaltrans participants.

GVK/Hancock is proposing a standard gauge rail line to haul coal out of the Galilee Basin to Abbot Point export coal terminal, and has the backing of the Queensland government as the preferred rail option.  GVK/Hancock believes this option gives it a competitive advantage over other rail operators in the region.

However, Paul Scurrah, spokesperson for leading haulage operator QR National insists the company’s existing narrow gauge network is capable of hauling payloads of up to 20kt out of the basin without costly capital expenditure.

Not everyone agrees with this though, with one logistics consultant pointing out: “The current QR National payload is around 12kt on narrow gauge, so effectively QR needs to double this, which sounds ambitious”.

The delay of the Xstrata-owned Wandoan thermal coal mine in the Surat Basin was also touched on. MetroCoal chief Mike O’Brien said his company would need to work with other Surat Basin proponents to find an infrastructure solution if Wandoan was delayed beyond the development timeline of the neighbouring junior developers.

Infrastructure costs

Coal miners developing projects in Queensland’s Galilee Basin are estimated to face rail costs in the low $20/t to have coal delivered to the Port of Abbot Point.  Rail and port infrastructure costs will represent a far greater proportion of coal miners’ overall FOB costs in 10 year time, PwC head of resources Christopher Williams said.

“The capital charges associated with port capacity are expected to rise to somewhere between A$8.50 and $13/t instead of the current $3 to $4/t,” he said. “On top of that you also have management or operating charges.”

CEO and managing director of coal developer Bandanna Energy Michael Gray said developing export infrastructure was a complex regulatory and time consuming process which will continue to hinder the development of these projects. Bandanna is a shareholder in the Wiggins Island Coal Export Terminal (WICET) at Gladstone which expects to export first coal in the second half of 2014.

Smaller coal developers, in particular, will find it hard to obtain allocation at these export facilities because of the access costs.

“For smaller exporters and wannabe producers to obtain contracts is going to be a significant cost in terms of guarantees and equity which will often be far greater than the market cap of those companies,” Gray said. “The cost to smaller producers to access capacity is a major challenge.”

QR National’s Paul Scurrah said with the short term softening of coal demand and the fall in price, “what you are left with are the genuine projects and tonnes”.

He said QR National had committed expansion projects to add an additional 71Mtpa to Central Queensland coal rail networks over the next three years which increases the total capacity of the networks to more than 300Mtpa by 2015.

“The opening up of the Galilee Basin and the second stage of Wiggins Island will be key contenders for future rail instruction investment,” he said.

“We have no less willingness to do the projects but there has been a capital contraction and that means in our view brownfield investments come back into play because that is a very strong way we can support mines at the lower end of the cost curve.”

Despite the completion of the $1.1B Goonyella to Abbot Point Expansion (GAPE) project at the end of last year very little coal is being railed from the Goonyella system through the so-called “missing link” to Abbot Point Coal Terminal. Scurrah blames this on a lack of demand for coal.

Even so, QR National is committed to a 25Mt upgrade of the GAPE project to increase its capacity to 75Mtpa. “We believe that corridor has the potential for more than 200Mtpa,” Scurrah said.

The Carbon Tax

While it was not at the top of everybody’s list of talking points, the carbon tax did come in for some scrutiny on the first day of the conference with chairman of the World Coal Association Frederick Palmer calling it “the biggest issue we have as an industry”.

Palmer was scathing in his assessment of the tax which came into effect on July 1. The senior vice president with Peabody said the carbon tax would fail in its aim to deliver any environmental benefit while proving to be “adverse to human health and welfare”.

Palmer said Australia’s carbon tax will slow the country’s GDP by 2% by the year 2020 (equivalent to A$180B) and would see the loss of 95,000 jobs in Australia’s manufacturing sector. Household electricity prices would, he said be hit with a 30% increase by 2013-14 because of the tax making them the highest in the OECD.

Describing access to electricity as the “path out of poverty”, Palmer said the Australian government’s carbon tax not only risked making electricity unaffordable, it would also have a flow-on effect on industry and households, in turn adversely impacting the provision of basic services including health care.

To continue reading this article, please visit http://www.coalportal.com

Photo:
http://www.prlog.org/11960223/1

--- End ---

Click to Share

Contact Email:
***@energypublishing.biz Email Verified
Source:Energy Publishing Australia
Phone:+61 (0) 7 3020 4000
Zip:4001
City/Town:Brisbane - Queensland - Australia
Industry:Business, Energy
Tags:Coal, carbon, tax
Last Updated:Aug 28, 2012
Shortcut:prlog.org/11960223
Disclaimer:   Issuers of the press releases are solely responsible for the content of their press releases. PRLog can't be held liable for the content posted by others.   Report Abuse

Latest Press Releases By “

More...

Trending News...



  1. SiteMap
  2. Privacy Policy
  3. Terms of Service
  4. Copyright Notice
  5. About
  6. Advertise
Like PRLog?
9K2K1K
Click to Share