NSW’s Coal Export Market Facing “Terminal Threat”

- November 1st, 2018

A new report from the Institute for Energy Economics and Financial Analysis has indicated that coal exports from New South Wales will face an inevitable, long-term decline.

A new report from the Institute for Energy Economics and Financial Analysis (IEEFA) has indicated that coal exports from Australia’s New South Wales (NSW) will face an inevitable, long-term decline.

The report, “New South Wales Thermal Coal Exports Face Permanent Decline: Grim Outlook Prompts the Need for a Planned Transition,” showed that new coal plants in major Asian markets had seen a 74 percent decline since 2015.

According to the report, Japan, China, South Korea and Taiwan—which make up Australia’s largest thermal coal export locations—have all introduced policies to reduce thermal coal consumption in exchange for renewable energy development opportunities.

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“Thermal coal exports out of the Port of Newcastle peaked three years ago and are now set to decline,” report co-author and IEEFA director of energy finance studies Tim Buckley said in a press release. “Going forward we will witness a permanent, terminal decline as Asian markets continue their technology-based energy transition towards cheaper more sustainable renewables.”

While the report explored possible new thermal coal export destinations, it found that imported thermal coal power in India costs US$60 to US$80 per megawatt hour, double that of new renewables at US$34 to 40 per megawatt hour.

Buckley elaborated on the Asian market crisis facing coal, explaining that additional growth wouldn’t be able to supplement the losses coal exports are now set to endure.

“If there’s any growth in coal consumption across Southeast Asia it will not be enough to compensate for declining consumption in NSW’s four major export markets,” he said. “NSW is facing a terminal threat to its thermal coal export market over coming decades.”

The report predicts global thermal coal trade volumes will drop 59 percent by 2040 in its “most sustainable” outlook. As international markets that once relied on coal imports begin to shift to cheaper, more efficient and renewable energy sources, the report has been touted as a message to NSW’s government to explore similar transition strategies.

“With export volumes continuing to decline, the chairman of the Port of Newcastle has recognized the need to diversify the port away from its reliance on coal,” Buckley said.

“The NSW government must catch up and begin planning an efficient multi-year transition for communities and businesses historically dependent on coal mining across NSW.”

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.

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