Coal miners in Australia are looking at a $17 billion decline in export earnings as the coronavirus blow on the sector continues and more power utilities in Asia make the switch to gas from coal.
A federal government report that will be released in the coming week indicates the projected declines between 2020 and 2021. This comes after various coal companies recorded sharp profit contractions for the year, like Whitehaven Coal which declined by 95% and New Hope Corporation, which reported a 69% decline.
Glencore, a Swiss mining company, suspended their operations in some of their coal mines located in the Hunter Valley in New South Wales a week ago. The operations were suspended for a two week period in an effort to cut back on their output because of the decrease in demand.
According to the federal Industry Department, metallurgical coal exports, which are used in steelmaking, are expected to decline by 34% to $23 billion from $35 billion. Thermal coal on the other hand, which is used in the generation of power, is projected to decline by 25% to $15 billion from $20 billion.
The report from the department notes that various factors have led to the decline of thermal coal prices to levels that have not been experienced for more than a decade. These factors include the strictness of China’s import restrictions in a bid to support their local suppliers, the virus-driven industrial recession that is affecting energy consumption and also the current transition from coal-generated electricity to decrease emissions. The report adds that at the current market prices, a huge portion of the production of thermal coal in Australia is loss-making.
Analysts state that even though Asia’s essential coal centers have bounced back to last year’s levels after decreasing by about 30% at the peak of the lockdown, the thermal coal market remains affected.
The Chinese government policies that avoid seaborne coal have further affected the thermal coal market. The diplomatic relations between Australia and China have soured after coronavirus inquiry calls were made, which many suspect led the Chinese Government to dictate that utilities avoid Australian coal in particular.
Plummeting coal exports and prices for other products led to the federal government lowering forecasts for energy export earnings and overall resources to $256 billion for the 2020/2021 period and $252 billion for the 2021/2022 period, which is a significant decline from last year’s $290 billion.
Keith Pitt, the Federal Resources Minister, says that the figures were still impressive, despite the decline and that they showed the resilience of the mining sector in the midst of the coronavirus crisis. He adds that the Australian economy now requires hearty commodity earnings as the country rises from the biggest global recession since the 1930s.
It would be enlightening to hear how individual entities elsewhere like GoldHaven Resources Corp. (CSE: GOH) (OTCQB: ATUMF) have fared during this pandemic.
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