Coal crash: How long can Australia ride in the coal wagon?

While it’s true that the world will burn coal for many years to come, Australia’s reliance on this industry now looks like a bad strategy. Not only is thermal coal under major threat from global action on climate change, but the export market is also undergoing a profound change. An increasing share of the coal burnt in existing and new power plants will be sourced from the US, India, China and Indonesia. Consequently, Australia’s export prospects for thermal coal will be heavily affected.

While the outlook for coking coal presents a very different scenario, the hope that rising steel production in India will somehow offset slowing output in China seems like wishful thinking. Even though multinationals like Rio Tinto say that Chinese steel production will continue to rise and may reach 1 billion tonnes by 2030, this forecast seems hubristic given the vast amount of excess industrial and urban capacity that China’s rise has generated over the past two decades. This overhang is a huge problem in a sluggish global economy. Debate about the future of Australia’s coal industry often hinges on views about whether the recent price slump represents a temporary cyclical slowdown or a long-term structural shift. In fact, the industry will most likely be battered by both trends.

The Monthly: Paul Cleary: October 2015

Key Words: Climate Change, fossil fuels
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