If all other projects in the Carmichael region are stalled due to environmental and social reasons, up to 140mt of coal supply will be absent from the market in the next few years
Mumbai: Adani Group’s Australian coal-rail-port project is a test case for several other miners that have similar projects in the same region. If they are all stalled owing to environmental and social reasons, up to 140 million tonnes (mt) of coal supply will be absent from the market in the next few years.
“Carmichael was almost a test case…if this falls, then the rest will be in trouble," Neil Bristow, consultant with H&W Worldwide Consulting Ltd, said from Beresfield in Australia. “The other major Galilee mines are further behind, for example (GVK plus) Hancock’s Alpha and Kevin’s Corner, plus Palmers."
If all fail, one could be looking at around 120-140mt of coal lost if they were to reach their planned capacity by 2017-18. This would be a small portion of the current global coal production of 7.8 billion tonnes; but still, could this tighten global coal supplies, and, as a result, arrest the fall in coal prices?
The seaborne market for this natural resource is already oversupplied by about 80-90mt for thermal coal alone and is seen rising as China is cutting its imports owing to slowdown of its industrial growth and India reducing its imports as its local production, fresh from the coal mine auctions, is seen picking up.
“With China’s devaluation of the yuan, domestic Chinese coal will become cheaper, which means Chinese requirement of imports could fall more than expected," said Kalpit Dubey, senior analyst, Virginia Mining Resources Pvt. Ltd. “Countries taking to green sources of energy will also ensure that price forecast is more or less steady to bearish in the longer term."
On 11 August, forward steam coal from Richards Bay, South Africa, on a free-on-board basis, was quoted at $54.60 a tonne, down 28% from a year ago, Bloomberg data show. However, in Australia, there could be further attempts at putting the coal projects back on track as the jobs that these mines will create in construction and operations could justify a renewed attempt to get it through, Bristow said. So, it maybe it is too early to write off the mega projects just yet.
However, even if there is a government-driven push to get the project back on rails, would the miners or their bankers be happy to put in their investment in developing mines—an expensive and time consuming affair—when selling prices are looking down?