04/02/2015 – Queensland coal sector on edge over election result

Queensland’s struggling coal miners are on alert after the shock defeat of Campbell Newman’s government, with some operations facing certain shutdown if hostile policies are introduced by the incoming Labor party.   

Many mines are being run at a loss, and for their head offices – often based overseas – any policy uncertainty or pressure could prove the final straw, Queensland Resources Council boss Michael Roche told Fairfax Media.

“Some miners have put to me that if there was to be unexpected negative moves by a new government, they may find that head office decides that they should opt for the certainty of the cost of a shutdown, rather than the uncertainty of staying in operation,” Mr Roche said.

Mr Roche said about half of Queensland coal was being produced at a loss, including about 10 per cent at losses greater than $14 a tonne.  

“At the moment it is very hard for them [the miners] to convince head office to tip in capital, or essentially to under-write their losses. So the last thing we need are policy changes that tip the balance on the preparedness of the resource company head offices to keep tipping in the capital to sustain these operations.”

It must be “rammed home” early on in industry discussions with the incoming government that many of Queensland’s producers are in survival mode and can’t afford additional pressures, he said. 

Many of Queensland’s mining operations are still open only because of onerous take-or-pay obligations for rail and port that lock them into paying haulage charges for coal, regardless of whether or not they ship it.

“If you were to overlay a set of policy changes from left field, that might be the tipping point for some,” Mr Roche said.

“That’s a conversation that I’ve been urged to have as early as possible with the new set of ministers.”

Queensland exports about 200 million tonnes of coal a year – about half Australia’s total exports. That figure includes about 145 million tonnes of metallurgical coal, while the balance is thermal. 

Prices are continuing to deteriorate. Premium metallurgical coal – a type of coking coal – is trading at about $US106 a tonne, compared to more than $US300 it was fetching three years ago. while thermal coal has been trading at close to $US60 a tonne, less than half prices in 2012. But a drop in the Australian dollar to below US80c in the past few months has provided some much needed relief for the industry, after years of trading at near parity. 

Source – SMH.com.au