Energy in Australia 2009
published by
abare.gov.au
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produced for:
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Coal production and trade
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Coal is Australia’s largest commodity export, earning around $24 billion in 2007-08. Australia’s success in world coal markets has been based on reliable and competitive supplies of high quality metallurgical and thermal coal.

Coal is also a significant component of domestic energy needs comprising 84 per cent of fuel used for electricity generation in 2006-07.
 
18 Australian coal production by state a
 
2003-04
2004-05
2005-06
2006-07
2007-08
Mt
Mt
Mt
Mt
Mt
 
Brown Coal
VIC
66.3
67.2
67.7
65.6
72.4
SA
3.2
3.6
3.8
3.6
3.8
Total
69.6
70.8
71.5
69.2
76.2
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Black coal
NSW
114.2
122.1
124.6
130.9
135
QLD
162.2
172.7
171.9
182.8
180.9
TAS
0.4
0.4
0.6
0.6
0.6
WA
6
6.2
6.3
6.1
6.4
Total
282.8
301.4
303.4
320.3
323
 
a Saleable production. Sources: Coal Services Pty Ltd; Queensland Department of Mines and Energy; Victorian Department of Primary Industries; ABARE, Australian commodities.
Production
Australia accounts for around 6 per cent of world black coal production, 98 per cent of which is sourced from New South Wales and Queensland. The majority of Australia’s metallurgical (or coking) coal is produced in Queensland, while New South Wales’ production is largely classed as thermal (or steaming) coal. Around three-quarters of this output is sourced from open cut mines. In addition, brown coal is mined in Victoria and South Australia, where it is used for domestic electricity generation.

There has always been significant foreign investment in the Australian coal industry. Major producers of coal in Australia include Loy Yang (brown coal), Hazelwood (brown coal), CLP Power Asia (brown coal), BHP Billiton-Mitsubishi Alliance, and Coal and Allied Industries.

Australian black coal production increased at an average annual rate of 3.2 per cent between 2003-04 and 2007-08, encouraged by strong global import demand. This growth was supported by the addition of new capacity in Queensland and New South Wales. Australia’s coal production is likely to continue to increase significantly over the medium term as a result of considerable investment in new mining capacity. As at October 2008 there were 11 committed coal mining projects and an additional 41 proposed projects (see Appendix 1).
Trade
More than three-quarters of Australia’s black coal production is destined for export. Australia accounts for approximately one-third of world black coal trade — almost 60 per cent of world metallurgical trade and 20 per cent of thermal coal trade. Growth in Australian export volumes has been limited by infrastructure constraints. The ability of the industry to meet future coal demand will be improved by recent additions and planned expansions to infrastructure capacity.

The majority of Australia’s metallurgical coal exports are destined for Asia and Europe, where it is used in steel-making. The largest importers of Australian metallurgical coal are Japan, India, Chinese Taipei and the European Union. Australia’s thermal coal exports are mainly destined for Japan, the Republic of Korea and Chinese Taipei for use in power generation.

Australian exports of metallurgical coal increased at an average annual rate of 5.2 per cent between 2003-04 and 2007-08, driven by rapid demand growth in Chinese Taipei, India, Japan and the European Union. Over the same period, thermal coal exports increased by a relatively slower 1.9 per cent a year. This growth was mainly in the form of higher imports by Chinese Taipei, Japan and the Republic of Korea. Over the medium term, Australia’s coal exports are likely to increase significantly, underpinned by strong growth in steel-making and electricity generation capacity.

In 2007-08, earnings from Australian coal exports increased by 11 per cent because of higher volumes shipped and higher contract prices. Earnings from metallurgical coal exports are estimated to have increased by 5 per cent to $15.8 billion and thermal coal export earnings by 23 per cent to $8.3 billion. A detailed outlook for the metallurgical and thermal coal industries can be found in ABARE’s quarterly journal Australian commodities.
 
19 Australian coal exports by type, by destination
2003-04
2004-05
2005-06
2006-07
2007-08
Metallurgical coal
Brazil
Mt
3.85
3.09
3.17
3.05
3.87
China
Mt
3.56
4.19
2.86
2.97
1.53
Chinese Taipei
Mt
5.31
7.09
7.72
8.04
6.39
France
Mt
4.11
3.89
3.33
3.44
3.06
Italy
Mt
1.93
2.53
2.26
2.29
2.25
United Kingdom
Mt
4.06
4.45
3.93
3.76
3.78
Other EU
Mt
12.4
13.79
14.82
15.39
15.42
India
Mt
13.58
17.44
16.39
19.61
24.23
Japan
Mt
41.38
44.96
44.22
48.86
50.23
Korea, Republic of
Mt
10.14
12.46
7.7
6.25
8.36
South Africa
Mt
1.28
1.88
1.53
1.45
1.36
Rest of world
Mt
10.13
9.13
12.54
16.86
16.47
Total
Mt
111.73
124.92
120.48
131.97
136.95
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Thermal coal
Chile
Mt
1.12
0.41
0.83
0.67
0.42
China
Mt
2.45
1.75
3.99
3.22
1.48
France
Mt
0.58
0.47
0.74
1.2
0.68
India
Mt
1.74
1.21
1.23
0.66
0.66
Japan
Mt
58.78
57.28
59.33
58.64
66.92
Korea, Republic of
Mt
16.22
17.95
20.24
15.06
18.53
Malaysia
Mt
2.53
3.37
2.77
3.54
2.4
Mexico
Mt
2.29
4.24
4.76
5.07
0.82
Spain
Mt
0.91
0.29
0.5
0.49
0.38
Chinese Taipei
Mt
9.89
14.33
13.21
16.23
18.56
Other EU
Mt
7.28
3.01
1.57
2.53
1.46
Rest of world
Mt
2.89
2.09
1.65
4.22
2.72
Total
Mt
106.69
106.4
110.82
111.62
115.05
Source: ABARE, Australian commodity statistics.
20 Australian exports of coal
2003-04
2004-05
2005-06
2006-07
2007-08
Metallurgical coal, high quality
Volume
Mt
67.55
80.73
77.48
82.81
83.77
Value
$m
4 883
8 447
12 986
11 384
10 720
Unit value
$/t
72.29
104.63
167.59
137.47
127.96
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Metallurgical coal, excluding high quality
Volume
Mt
44.19
44.19
42.99
49.15
53.3
Value
$m
2 441
3 368
5 108
4 166
5 074
Unit value
$/t
55.23
76.21
118.81
84.75
95.19
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Total metallurgical coal
Volume
Mt
111.73
124.92
120.48
131.97
137.08
Value
$m
7 323
11 814
18 094
15 550
15 794
Unit value
$/t
65.54
94.58
150.18
117.83
115.22
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Thermal coal
Volume
Mt
106.69
106.4
110.82
111.62
114.85
Value
$m
4 919
6 958
7 668
6 987
8 336
Unit value
$/t
46.1
65.4
69.19
62.6
72.58
a Values are in 2007-08 Australian dollar terms.
Source: ABARE, Australian commodity statistics.
Prices
Contract negotiations for the Japanese Fiscal Year (JFY) 2008 (1 April 2008 to 31 March 2009) resulted in prices for metallurgical coal (hard) and thermal coal increasing by 206 per cent and 125 per cent, respectively. Compared with four years ago (JFY 2008 versus JFY 2004), metallurgical coal and thermal coal contract prices have increased by 426 and 178 per cent, respectively.

Contributing to the large increase in metallurgical coal prices were strong global demand for metallurgical coal associated with growing steel production, combined with supply difficulties resulting from congested Australian coal export infrastructure and heavy rainfall in Queensland in early 2008. Similarly, increases in thermal coal contract prices stemmed from strong growth in coal-fired electricity generation in Asia and limited increases in export growth from major suppliers such as Australia, South Africa and China.
 
21 Coal prices a
2004-05
2005-06
2006-07
2007-08
2008-09
Metallurgical coal, hard
US$/t
57
125
115
98
300
Real A$/t
87.84
184.16
161.22
117.59
340.74
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Metallurgical coal, semi-soft b
US$/t
41
80
56
64
240
Real A$/t
63.18
117.86
78.51
76.79
272.6
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Thermal coal
US$/t
45
52.5
52.5
55.5
125
Real A$/t
69.35
77.35
73.6
66.59
141.98
a Australian-Japanese prices. Japanese fiscal year beginning 1 April. Real prices are in 2007-08 Australian dollar terms. b Based on Australian/Japanese contract settlements.
Sources: International Energy Agency, Coal Information, OECD, Paris; ABARE, Australian commodity statistics.