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What does the future hold for Australia’s coal sector?

Australia's coal investment bubble has burst with the number of new projects dwindling in comparison to the boom years, according to the chief executive of the Queensland Resources Council.

Speaking at the annual 33rd Coaltrans World Coal Conference in Berlin, Michael Roche, who heads the representative body for minerals and energy sector companies operating in the state, said that in early 2012 the Government’s Bureau of Resource and Energy Economics reported 21 advanced coal projects in New South Wales and Queensland – and 73 less-advanced coal projects in those regions.

But by April of this year, the Bureau was reporting that there had been only one new committed coal project over the previous 12 months. What’s more, compared to 12 months ago, there are now 8,000 fewer coal industry workers in Queensland alone.
"In Australia, the coal industry is staring down the barrel of the toughest operating environment in more than a decade," said Mr Roche.

"In global commodity trade there are a handful of things over which you have some control. Substantially outnumbering them are variables over which you have no control."

He said that as well as the global coal market rapidly becoming over-supplied, most of Queensland’s coal producing regions have experienced record floods since 2008.

In previous commodity price downturns, the impact on Australian coal producers had been cushioned to some extent by a comparable fall in the value of the Aussie dollar against the US dollar.

But Australia’s relative economic strength after the global financial crisis “ensured that the little Aussie dollar stuck doggedly to its above-parity position with the greenback for the rest of 2012 and well into 2013”. More recently, the Aussie-US dollar exchange rate has depreciated but it remains at historically high levels.

Mr Roche said that while a couple of new coal mines will open in Queensland over the next 12 months or so, they are the product of previous commitment periods.

However, despite its recent difficulties, Queensland is still the world’s largest seaborne exporter of metallurgical coal from the Bowen Basin and is also developing the country’s next major thermal coal province – the Galilee Basin.

This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

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