TWICE in the past week it’s been my pleasure to sit on a stage and talk about coal.
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The first time was at the Hunter Coal Festival in Singleton on Friday, where the audience was, not surprisingly, predominantly pro-coal. In that forum, I did my best to be a belated “canary in the coalmine”, explaining to those present why a great swathe of the public was so hostile towards coal and coal mining, even if they didn’t always understand, or recognise, the benefits that coal had given us historically.
The second time was the Newcastle Writers Festival on Sunday, where I shared a panel with Sydney Morning Herald economics editor Ross Gittins – who recently proposed a moratorium on new coalmines in the Hunter – and author Sharyn Munro, whose most recent book, Rich Land, Wasteland, took aim at the coal industry, in her words “exposing the facts behind the spin, sharing true stories of the long-term negative impacts of the coal and gas invasion, from broken rivers to broken hearts”.
In that forum, I was the one more or less carrying the can for coal, arguing that the present downturn in the industry – as deep and as challenging as it is – was most likely a cyclical one, and that predictions of the industry’s demise were as much wishful thinking as anything.
The main speaker at the Singleton lunch was Glencore executive Mick Buffier, who is also serving a term as chairman of the World Coal Association, a peak employer body which has many of the world’s big mining companies, as well as other industry groups, such as the Minerals Council of Australia, as members.
As I reported on Saturday, Buffier’s presentation came with some two dozen overheads, starting with a graph that showed the global demand for “primary energy” growing in the coming decades, regardless of which post-Paris policies were chosen.
According to the World Coal Association, coal is used to generate 41 per cent of the world’s electricity, and to make 70 per cent of the world’s steel, and 90 per cent of its cement. It is also used in refineries, paper manufacture and the chemical industry.
Although coal’s relative share of power generation is expected to fall from its present 41 per cent to about 30 per cent in 2040, the actual tonnages of coal will rise substantially, because overall energy use will be higher. Even if the coal association has been overly optimistic in its predictions, coal demand will continue to rise, and efficient exporters like Australia will continue to meet the demand. Coal companies are in trouble now because they did what a lot of businesses do when tempted by an unexpected period of high prices: they competed against each other to lift production as quickly as possible to take advantage of the situation, leaving themselves laden with debt they were always going to struggle to service once prices went back to historical levels.
Some coal companies may well go under. Some unprofitable mines will close. But in most cases, a struggling seller like Anglo American will find a willing buyer somewhere or other, and the slow cycle of rebuilding the market will begin.
It’s true that renewables may become cheap enough, and powerful enough, to cut a sizeable chunk out of the demand for coal for power stations. But this is a long way off, and coal will still be needed for steel and cement. And some of the hoped-for breakthroughs in renewables may well prove as elusive as the promises made for carbon capture and storage.
Watch this space, in other words.
