China's changing coal consumption is threatening the existence of Australian coal mines. As China rallies to war to work for cleaner air, the most visible casualties of this war would be the Australian coal mines which are at risk of getting stranded, if not all together abandoned.
"Demand below expectations, and lower coal prices as a result, would increase the risk that coal mines, reserves and coal-related infrastructure could become mothballed or abandoned," a new study by Oxford University, commissioned by HSBC Bank, said.
It is a known fact that Australia zoomed to economic greatness the past years and was able to withstand the global financial crisis, thanks to the sustained hunger of China for its commodities, primarily coal and iron ore. China accounts for half the world's coal consumption.
A worker sits on a truck as he waits for the loading of coal at a railway coal yard on the outskirts of the western Indian city of Ahmedabad November 25, 2013. India's coking coal imports could see a double-digit percentage increase this fiscal year as a scarcity of high-quality iron ore after a mining ban is forcing steelmakers to use inferior grades that need more coal to process into steel. REUTERS/Amit Dave
Australian shipments of coal to China in the 2012-13 year alone hit AU$38.9 billion or 16 per cent by value of exports.
But after getting plunged into darkness from polluted smog China placed itself into, the country has vowed to shift to cleaner, environment-friendly sources of energy and power.
China becoming more environment-conscious will force Australian coal miners to rethink the once viable coal mining industry, according to researchers.
Apart from dropping demand, "prices could also drop to the point where it is in the interests of miners to cease production, resulting in stranded mines and dependent infrastructure such as railways."
Australia's exports to China are recorded at 32 per cent. Indonesia follows 26 per cent and Russia at 10 per cent.
Researchers noted the Australian government as well as coal mine owners may want to rethink the many planned projects and mine expansions in the country. One such project the researchers highlighted is the mega coal projects planned for the Galiliee basin.
"These are feasible based on current high coal prices. But if the world price drops, many projects will be forced to be shelved."
The report likewise warned local governments that depend too much on coal production for revenue.
"Less production will reduce royalty payments. The Queensland government in particular, notionally has much to lose from the mega-mines in the Galilee not going ahead."