(EnergyAsia, June 22 2012, Friday) — Australia’s coal industry is taking a well-deserved break after years of rapid expansion as it surveys a host of uncertainties brought on by the global economic outlook, rising construction and production costs, and environmental opposition.
Analysts at Bank of America Merrill Lynch (BofAML) recently issued a report citing weak demand and rising production costs for the sector’s slowdown which is affecting investments in new mines and infrastructure development.
Prices of Australian thermal coal for power generation have slumped to a two-year low on account of slowing demand out of China and India. Metallurgical coal use has also slowed on weaker-than-expected construction activities in Asia.
While companies are unlikely to cancel large approved investments in the Wandoan and Galilee thermal coal projects, implementation could be slowed down while smaller mines could face long delays, the bank said.
“This makes sense, given rapid cost inflation and declining prices impacting profit margins. However, several big capex projects are underway and likely to continue,” it said in a research note.
Australian miners are also weighing the impact of a new carbon tax coming into effect on July 1, and the growing dispute between the Federal and the opposition-held Queensland state government over protection of the Great Barrier Reef from coal mining activities and seaborne traffic out of the state. Queensland, which contributes to Australia’s position as the world’s largest coal exporter, has a front-row seat to the highly sensitive eco-system of the Great Barrier Reef.
Environmental groups like Greenpeace have launched a major campaign to stop all coal and resource-mining activities in Queensland to protect the reef. The conflict has attracted the attention of UNESCO which appears to agree with Greenpeace when it recently declared the world heritage site is at risk of irreversible long-term damage from mining activities and shipping traffic.