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Australian coal miners face China cap

17 May, 2013 09:01 AM
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Coal starts to lose favour in China.
Coal starts to lose favour in China.

China's new leadership seems to have a new slogan - "control coal" - and Australia's coal exporters underestimate their resolve to cap consumption of the fossil fuel at their peril, a Chinese researcher says.

China's leaders under President Xi Jinping say they plan to enforce a target of limiting annual coal use to 4 billion tonnes – about half the world's total - by 2015.

While estimates vary about how close to the cap current consumption is, the determination to limit the amount burnt each year should be taken seriously, said Yang Yilun, a senior associate with the US-based World Resources Institute.

“People tend to think of China's coal demand as something that will rise forever, and so, overlook the potential risks,” Ms Yang said.

Australia's plans for new coal mines and expansions of old ones that will come on stream in five to 10 years “will probably be the most affected because there will be a serious mismatch”, she said. “You will be ready at a time China's coal demand has reached its peak, and [beginning] a sharp decline.”

Ms Yang will address a session of an anti-coal and anti-seam gas rally organised by community groups this weekend. The gathering - Our Land, Our Water, Our Future: Beyond Coal and Gas - will be held from Saturday to Monday at Kurri Kurri in the NSW Hunter Valley, and follows similar events in Queensland and NSW.

Prices tumble

Doubts over the strength of China's economy have helped send the coal price tumbling in recent months. International prices for coking coal, used in steel making, are down about 11 per cent since March, while thermal coal prices are about 9 per cent below the 2012 average, according to Bloomberg.

Earlier this week, Glencore Xstrata, the world's largest shipper of thermal coal, cancelled plans for a $1 billion export terminal north of Gladstone, Queensland, blaming over-capacity in the industry.

In its reply to the federal budget, the Australian Coal Association said the total "coal economy" created almost $60 billion in wealth in 2011-12, with four jobs indirectly created for each coal worker. Still, coal is facing its toughest market conditions for a decade, the association said, citing its acting chief executive Greg Sullivan.

In 2011, Australia shipped more coal to tiny Taiwan than to mainland China, with Japan and South Korea also taking larger amounts, according to a report from Deutsche Bank earlier this month.

Still, it's the prospect that if China burns less coal, not only would its imports end but it would also return to being net coal exporter to the region, hammering prices in the process.

Pollution prompt

Chronically bad air pollution is one factor driving China's bid to restrict coal consumption, with the capital Beijing routinely reporting very unhealthy conditions.

“You can be a government official but you still have to breathe,” Ms Yang said.

China's rapid advances in renewable energy – the country has become the biggest producer of solar photovoltaic panels and wind turbines – have also given the government “a taste of what future competitiveness will look like”, she said.

“Nobody doubts China's commitment to renewable energy and energy efficiency measures,” Ms Yang said.

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COMMENTS

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Emily, have U seen what is happening to Chinas peasant farmers in their country? Cleared out and
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Hey it is pretty dumb all unifying together to make good progress if you are headed in the wrong
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jillaroo, how right you are. In fact Australian farmers still supply the lowest priced food