Asia's Exploding Economic Growth Churns Australia's Coal Industry
Global steel production is set to increase by nearly two-thirds in 2020, anticipates Peabody, the bulk of which will be in India and China. And, as the biggest American coal company playing in the Asian market, Peabody is pressing its case in the form of acquisitions and infrastructure expansions.
Peabody had $6 billion in revenues last year, and is on target for similar results in 2010. In a project at Australia's oldest continually operating coal mine, the Metropolitan Mine about 30 miles south of Sydney, Peabody expects to squeeze out another 1 million tons by 2014.
Well north of there, in the Bowen Basin about 100 miles inland from the Queensland coast, the miner is looking at expanding its North Goonyella underground mine and Eaglefield open-cut mine.
Economic growth trumps climate concerns
Coal basins are developing throughout the Pacific Rim, including in countries once considered too unstable to reliably supply fast-growing economies. On Monday, Peabody said it entered an agreement to sell coal sourced out of Indonesia on Peabody's trading hub in Singapore.
The other big player in the market, Rio Tinto, is building closer ties with China. The prospect of granting Chinese companies significant shares in Rio Tinto coal and aluminum projects has been fraught with concern about "China Inc.," the idea that China is aggressively snatching up stakes in companies worldwide to gain control of the development of vital natural resources.
As coal prices tied to Asian demand remain buoyant, coal producers large and small are looking for the right mergers and buyouts. In the latest move, Rio Tinto is reportedly preparing to spend about $4 billion on Riversdale Mining Ltd. Its two big coking coal plants in Mozambique are the main attraction.
"We regard growth in imports of high-quality hard coking coal into India and Brazil as a long-duration and irreversible trend," Melbourne-based analysts for Goldman Sachs said in a recent research note. "China's seaborne imports will also continue rising until export availability from Mongolia reaches critical mass of volume and quality -- 2015 at the earliest, in our opinion."
But it's the abundance of thermal coal for power generation that's the major issue for climate advocates. They're concerned that Asia's economic growth is snuffing out attempts to rein in the growth of carbon dioxide emissions.
The world is now awash in thermal coal, said the banking goliath. Infrastructure bottlenecks in Australia and South Africa are being addressed, says the Goldman report, and Indonesia is proving it can quickly accelerate shipments to China and India in response to high global coal prices.
"Thermal coals are trading at over $100/metric ton, and there seems to be a very high floor to prices while Chinese domestic supply is unable to meet the constantly growing number of power stations in the country," according to a report from Patersons Securities Ltd. "However, it's now coking coal that's dominating the concerns of consumers."
China's good intentions to gradually cut greenhouse gas emissions can't compete with the pace of industrialization. That pace hasn't slowed and probably won't slow for some time, said Andrew Harrington, an equity analyst at Patersons.
"If wealth starts to decline in a country like China, they might have some problems holding the place together," he said. "That means they'll use more energy to create more wealth."
Selling undeveloped mines
TV cameras light up for Australia's best-known mining magnate, Clive Palmer, whose companies own Waratah Coal. A little-known real estate tycoon just five years ago, he's now the embodiment of the nation's obsession with its coal export potential and China.
The 56-year-old billionaire appears always on the move. If he's not flying from city to city on the East Coast to give speeches and cut deals, he's on a plane to Hong Kong to meet with financiers, utility heads or stock exchange executives.
Palmer made international headlines in February after he announced he had scored a $60 billion contract with Chinese coal buyers for coal out of the yet-undeveloped Galilee Basin in Queensland. He and China Power International Holdings have backtracked on that, and both analysts and the government say they're waiting for more details.
"Time will tell," Martin Ferguson, Australia's minister of resources and energy, said tartly. "Historically, he's been more of a real estate agent. If it proves to be true, it's good for Australia and good for Clive."
Palmer does, however, appear to have significant backing for his $8 billion China First project to tap the Galilee Basin and have a say in the development of rails and ports. The Export-Import Bank of China, Metallurgical Corp. of China and China Railway Group are all seen as probable partners.
In a race to develop the basin, which has an estimated 14 billion metric tons of coal, Palmer's Waratah is considered by the Queensland state government to be the most serious developer with two others: Hancock Coal -- which is owned by another mining oligarch, Gina Rinehart -- and Adani Enterprises Ltd., which is a major resource conglomerate in India.
Hancock and Waratah are looking at large mines in the range of 30 million to 40 million metric tons, capturing the scale they need to make high-quality thermal coal profitable. Rinehart's coal company is expected to build the 300-mile rail corridor needed to ship the Galilee's coal to port. Abbot Point and BHP/Mitsubishi Alliance's Hay Point, two northern coal ports, are also considering significant expansions.
'Professor Palmer' touts China's growth
"In time, yes, you'll see the Galilee Basin a couple decades out doing more than 100 million tons," said Michael Roche, chief executive of the Brisbane-based Queensland Resources Council. "But there are challenges. You have to get the rail, we know we'll have the port capability, and water needs to be secured."
Palmer bangs the same drum during public appearances. He presses the case hard that China's growth is not only unprecedented but inevitable, and given that, Australia needs to be its top importer of coal.
Earlier this month, Palmer ambled to the podium in a packed ballroom in Sydney to give a speech to the Sydney Mining Club. He started with a joke, as he often does, that ends with a punch line about former Prime Minister Kevin Rudd's loss of power since being ousted by his own party last June. Rudd proposed a 40 percent resource tax in 2009 that angered miners and put an evolving climate policy proposal on its heels.
Waratah's chief refers to himself as "professor Palmer." With 400 of his "students" looking on, Palmer flipped through slides detailing China's urban influx, demographics, migration patterns and construction figures, pulling his audience toward a single idea.
"We're in the box seat to supply those Chinese cities," Palmer said. "What we see happening in China is the largest urban migration in world history."
He challenged an argument made in Australia that China's influence is felt too deeply, and that tying Australia's fortunes too tightly to China's growth is risky. "We shouldn't be racist about where our money comes from as long as we keep it here in Australia," Palmer said.
"Whenever anybody talks to you and says, 'Is it a good thing, or is it a bad thing? Should we be taking our minerals to China? Could there be too much Chinese investment in Australia?'" Palmer said, "you tell them it's all a bunch of bullshit, mate!"
Copyright 2010 E&E Publishing. All Rights Reserved.
Peabody had $6 billion in revenues last year, and is on target for similar results in 2010. In a project at Australia's oldest continually operating coal mine, the Metropolitan Mine about 30 miles south of Sydney, Peabody expects to squeeze out another 1 million tons by 2014.
Well north of there, in the Bowen Basin about 100 miles inland from the Queensland coast, the miner is looking at expanding its North Goonyella underground mine and Eaglefield open-cut mine.
Economic growth trumps climate concerns
Coal basins are developing throughout the Pacific Rim, including in countries once considered too unstable to reliably supply fast-growing economies. On Monday, Peabody said it entered an agreement to sell coal sourced out of Indonesia on Peabody's trading hub in Singapore.
The other big player in the market, Rio Tinto, is building closer ties with China. The prospect of granting Chinese companies significant shares in Rio Tinto coal and aluminum projects has been fraught with concern about "China Inc.," the idea that China is aggressively snatching up stakes in companies worldwide to gain control of the development of vital natural resources.
As coal prices tied to Asian demand remain buoyant, coal producers large and small are looking for the right mergers and buyouts. In the latest move, Rio Tinto is reportedly preparing to spend about $4 billion on Riversdale Mining Ltd. Its two big coking coal plants in Mozambique are the main attraction.
"We regard growth in imports of high-quality hard coking coal into India and Brazil as a long-duration and irreversible trend," Melbourne-based analysts for Goldman Sachs said in a recent research note. "China's seaborne imports will also continue rising until export availability from Mongolia reaches critical mass of volume and quality -- 2015 at the earliest, in our opinion."
But it's the abundance of thermal coal for power generation that's the major issue for climate advocates. They're concerned that Asia's economic growth is snuffing out attempts to rein in the growth of carbon dioxide emissions.
The world is now awash in thermal coal, said the banking goliath. Infrastructure bottlenecks in Australia and South Africa are being addressed, says the Goldman report, and Indonesia is proving it can quickly accelerate shipments to China and India in response to high global coal prices.
"Thermal coals are trading at over $100/metric ton, and there seems to be a very high floor to prices while Chinese domestic supply is unable to meet the constantly growing number of power stations in the country," according to a report from Patersons Securities Ltd. "However, it's now coking coal that's dominating the concerns of consumers."
China's good intentions to gradually cut greenhouse gas emissions can't compete with the pace of industrialization. That pace hasn't slowed and probably won't slow for some time, said Andrew Harrington, an equity analyst at Patersons.
"If wealth starts to decline in a country like China, they might have some problems holding the place together," he said. "That means they'll use more energy to create more wealth."
Selling undeveloped mines
TV cameras light up for Australia's best-known mining magnate, Clive Palmer, whose companies own Waratah Coal. A little-known real estate tycoon just five years ago, he's now the embodiment of the nation's obsession with its coal export potential and China.
The 56-year-old billionaire appears always on the move. If he's not flying from city to city on the East Coast to give speeches and cut deals, he's on a plane to Hong Kong to meet with financiers, utility heads or stock exchange executives.
Palmer made international headlines in February after he announced he had scored a $60 billion contract with Chinese coal buyers for coal out of the yet-undeveloped Galilee Basin in Queensland. He and China Power International Holdings have backtracked on that, and both analysts and the government say they're waiting for more details.
"Time will tell," Martin Ferguson, Australia's minister of resources and energy, said tartly. "Historically, he's been more of a real estate agent. If it proves to be true, it's good for Australia and good for Clive."
Palmer does, however, appear to have significant backing for his $8 billion China First project to tap the Galilee Basin and have a say in the development of rails and ports. The Export-Import Bank of China, Metallurgical Corp. of China and China Railway Group are all seen as probable partners.
In a race to develop the basin, which has an estimated 14 billion metric tons of coal, Palmer's Waratah is considered by the Queensland state government to be the most serious developer with two others: Hancock Coal -- which is owned by another mining oligarch, Gina Rinehart -- and Adani Enterprises Ltd., which is a major resource conglomerate in India.
Hancock and Waratah are looking at large mines in the range of 30 million to 40 million metric tons, capturing the scale they need to make high-quality thermal coal profitable. Rinehart's coal company is expected to build the 300-mile rail corridor needed to ship the Galilee's coal to port. Abbot Point and BHP/Mitsubishi Alliance's Hay Point, two northern coal ports, are also considering significant expansions.
'Professor Palmer' touts China's growth
"In time, yes, you'll see the Galilee Basin a couple decades out doing more than 100 million tons," said Michael Roche, chief executive of the Brisbane-based Queensland Resources Council. "But there are challenges. You have to get the rail, we know we'll have the port capability, and water needs to be secured."
Palmer bangs the same drum during public appearances. He presses the case hard that China's growth is not only unprecedented but inevitable, and given that, Australia needs to be its top importer of coal.
Earlier this month, Palmer ambled to the podium in a packed ballroom in Sydney to give a speech to the Sydney Mining Club. He started with a joke, as he often does, that ends with a punch line about former Prime Minister Kevin Rudd's loss of power since being ousted by his own party last June. Rudd proposed a 40 percent resource tax in 2009 that angered miners and put an evolving climate policy proposal on its heels.
Waratah's chief refers to himself as "professor Palmer." With 400 of his "students" looking on, Palmer flipped through slides detailing China's urban influx, demographics, migration patterns and construction figures, pulling his audience toward a single idea.
"We're in the box seat to supply those Chinese cities," Palmer said. "What we see happening in China is the largest urban migration in world history."
He challenged an argument made in Australia that China's influence is felt too deeply, and that tying Australia's fortunes too tightly to China's growth is risky. "We shouldn't be racist about where our money comes from as long as we keep it here in Australia," Palmer said.
"Whenever anybody talks to you and says, 'Is it a good thing, or is it a bad thing? Should we be taking our minerals to China? Could there be too much Chinese investment in Australia?'" Palmer said, "you tell them it's all a bunch of bullshit, mate!"
Copyright 2010 E&E Publishing. All Rights Reserved.
Comments
Post a Comment