My children often joke with me that they will buy me coal for Christmas because that is what I seem to like the most. Except this year I wish it had not been a joke because coal has never been more valuable.
This time last year, the benchmark thermal coal price was US$170 per tonne, well above its long term average. But over the past year the price has surged to an hitherto unthinkable level of $400 per tonne.
Coal is once again king. Over the past year coal has been Australia’s biggest export, earning $130 billion, even more than iron ore.
All of this despite the naysayers constantly predicting coal’s demise. Coal has had more obituaries than a cat yet it is still alive and kicking.
Those naysayers are now saying that coal prices are only high due to sanctions on Russia. But such an hypothesis would mean that the supply of coal has been restricted and that its use would be lower in 2022. That is also wrong. The International Energy Agency predicts that “Based on current trends, global coal demand is set to rise to 8 billion tonnes in 2022, the highest level ever seen, and to remain there through 2024.”
The 2022 coal boom has been dominated by both record prices and record consumption. This means that this boom is demand driven. Increased coal demand has been driven by the reopening from coronavirus, the continuing expansion of new coal fired power plants in China and India, and Europe’s turn back to coal as its reliance on unreliable renewable energy and Russian gas comes home to roost.
Like all demand driven commodity booms, this gives Australia the opportunity to respond with a supply boom and create more jobs and ongoing export dollars for us. That is what happened during the last big commodity boom in the early 2010s.
At the height of the last mining boom, more than $13 billion a year was being invested in coal in Australia. Over the past year, despite coal prices being much higher now, just $7 billion was invested in coal. This gap of $6 billion represents lost opportunities for us in Central Queensland now but even more of a problem for us in the future. If we do not invest when prices are high to build new mines, coal mining jobs will disappear when the current mines reach the end of their life.
Why is Australia not attracting more investment to boost coal supply given the increase in demand? Well, ten years ago a Federal Labor Government invested $580 million in the Hunter rail network. As Anthony Albanese said at the time this investment “will more than double the amount of coal that can be transported to port”.
Now Anthony Albanese is Prime Minister and he has called in the approval of 18 coal and gas projects at the behest of Environmental Justice Australia and is putting caps on coal and gas prices. And at the state level, a Labor government has jacked up taxes on the coal industry.
This extra red tape and tax deters the investment we need to keep our local economy strong in Central Queensland. It is only a decade since the Labor party used to support the coal industry and our local economy. But the Labor party have gone woke since then and that is a great threat to our economic future despite the record demand for our high quality Central Queensland produce.
