Sunday, March 30, 2014

Federal govt shake out in coal industry likely to take up to 5 years

The state’s mining and resources industry is in turmoil with a Federal Government report claiming more coal mines will shut more jobs will be lost and aluminium production in Gladstone had become temporarily uneconomic.

And the industry believes it will be three to five years before a recovery occurs as prices for coal used in steel making plunge to about a third of what they were in 2011 at the height of the boom.

About 8000 mining jobs have been lost in the past two years in Queensland and Glencore announced yesterday the closure of a NSW mine with the loss of 130 jobs because of low prices and high costs.

Ironically, the only way coal mines are surviving is by producing more coal which reduces costs but also floods the market and suppresses the global price, particularly for thermal coal used in energy production.

The Federal Government’s Bureau of Resource and Energy Economics said that as a result some (thermal coal) operations may be forced to close or scale back production over the coming years. At these prices, a substantial portion of the world metallurgical coal (used in steel) production is believed to be loss making.

Mr Michael Roche CEO of Queensland Resources Council said that for Queensland and Australia it was now a case of survival of the fittest with increased pressure from the US, Canada, South Africa and Mongolia.

Mr Ian Macfarlane resources minister of Federal Government said that despite softening commodity prices leading to some downward revision since the last BREE report, the future was bright for the industry. The investment phase of our mining boom is coming to an end, and now we see the benefits as we shift increasing volumes of product into hungry global resources markets.”

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