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Interview with Vinod Kumar Vanga, Executive Director, Griffin Coal Mining

Vinod talks to Coaltrans about the relationship between Japanese utilities and Australian coal producers and the future of the Japanese market for Australian coal

Coaltrans Conferences (CC): Coal markets globally are currently seeing large amounts of turmoil; what would you say are the central challenges for Australian thermal coal producers in meeting Japanese/Asian market requirements?

Vinod Kumar Vanga (VKV): Australian thermal coal producers are currently facing the key challenge of maintaining profit margins in the unprecedented low price of thermal coal globally. There is no magic wand to resolve the issue, requiring businesses to fundamentally restructure their operations. This involves addressing both the effective deployment of capital in order to optimise the associated capital charges, together with managing operating cash costs. There is focus on the operating costs throughout the entire supply chain process from pit through to port by improving efficiencies and productivity combined with reducing labour costs through restructuring of the workforce and the work practices. All stakeholders are recognising the need to implement these initiatives in order to maintain profit margins in this current environment. These challenges are providing the right opportunity for coal producers to also focus attention on debt reduction and investment in innovation.

Other challenges facing the Australian coal producers include:
- Environmental compliance and regulation
- Threat of alternate resources of energy
- Continued high Australian dollar

CC: Japanese utilities have traditionally favoured Australian coal due to its high quality; as the Japanese power market becomes more competitive under new deregulation laws, do you think that Australian coal producers will have to fight to maintain market share?

VKV: Under the current turbulent global market scenario, Australian miners are fastening their seat belts to navigate through not only satisfying the Japanese power market but also other major Asian coal markets, viz., China, India, Philippines, Vietnam etc.

As all of us are aware, Australian coal is internationally recognised and proven to be of high quality and consistently favoured by Japanese utilities. However, although there may not be a direct challenge to its supremacy in coal quality, the availability of cheap coal from other locations (though of a lesser quality and grade) may impact the export supply capacities of Australian miners.

The challenge continues to remain in how Australian coal producers can effectively reduce the overall cash costs to make their operations sustainable. I am confident that the majority of the Australian coal producers are on the path of achieving this desired outcome by way of innovation not only in technical knowhow but also through more effective and dynamic business strategies.  

CC: Major Japanese utilities such as JERA are currently overhauling their procurement strategies, looking to increase their trading activity and move towards more flexible supply chains. How will this affect Australian suppliers of thermal coal to Japan?

VKV: “A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so.” – Mahatma Gandhi
If a flexible supply chain is the requirement of the consumers then so be it. I strongly feel that the Australian coal suppliers are efficient and dynamic enough to adapt to this new requirement and will effectively be able to continue excelling in satisfying the Japanese customers. The coal producers will manage this transition by ensuring appropriate risk mitigation measures are implemented due to the uncertainty of supply that will arise as a result of increased trading activity. The Australian coal producers will have to ensure that an appropriate return remains for the large capital that has been invested across the entire supply chain.

CC: Coal is set to become the largest source of energy in Japan by 2019. Are you optimistic about the future of the Japanese market for Australian coal? How is it impacting your forecasts for coal demand in the next few years?

VKV: Global thermal coal demand by 2020 is not going to be very encouraging, compared to the recent growth in the previous decade. However, the expected growth in demand from the Japanese market would be a significant confidence booster and will be catalyst for continued investment in Australian coal sector.
The miners in Australia are positioning their businesses to be internationally competitive by restructuring the business through implementation of innovation & automation, co-operation and joint ventures with supply chain stake holders, including the equipment suppliers and manufacturers, with an ultimate aim to maintain sustainability and profitability with in the Australian coal sector.

You can hear more about the future of Australian coal in Japan at the 11th Coaltrans Australia on 25 - 26 August in Sydney.

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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