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IEEFA report: Past their peak, New South Wales coal export volumes head toward terminal decline as markets transition

October 31, 2018

Nov. 1,  2018, SYDNEY (IEEFA)A report published today by the institute for Energy Economics and Financial Analysis sends an urgent message to the New South Wales government that, with coal export volumes having peaked and now facing a terminal long-term decline, transition preparations must be made for the coming decades to prepare businesses, workers and communities historically dependent on coal mining.

The IEEFA report, New South Wales Thermal Coal Exports Face Permanent Decline: Grim Outlook Prompts the Need for a Planned Transition, examines the status of NSW coal export destinations.

The report found the pipeline of new coal plants in major Asian markets experienced a 74% decline since 2015 with more contraction expected.

Report co-author Tim Buckley, IEEFA director of energy finance studies, said coal does not have credible export numbers anymore and the risk to people and communities across NSW cannot be ignored.

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

According to the report, Australia’s largest thermal coal export locations – Japan, China, South Korea and Taiwan – have all introduced policy settings to reduce the consumption of thermal coal while creating opportunities to increase the development and uptake of renewable energy.

The report also looked at possible new thermal coal export destinations and found that imported thermal coal power in India costs US$60-80/Megawatt hour, double the cost of new renewables at US$34-40/Megawatt hour, fixed with zero inflation indexation for 25 years.

“Imported thermal coal is now entirely uncompetitive and possible new markets such as India and Vietnam are pursuing cheaper, more sustainable renewable energy options,” said Buckley.

“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.  NSW is facing a terminal threat to its thermal coal export market over coming decades.”

Report co-author Simon Nicholas, and IEEFA energy finance analyst, said the International Energy Agency’s sustainable development scenario projects plummeting global thermal coal trade volumes.

“The magnitude and speed of change in energy sector technology is staggering,” Nicholas said. “Major global investors, corporates and financial institutions are turning away from thermal coal investment at an accelerating rate. Japan’s Marubeni Corporation and UK’s Standard Chartered are the most recent examples.

Nicholas observed that it is a mistake to see current high export revenues and prices as a sign of good health: “Higher coal prices indicate growing concerns over the long-term viability of the industry, leading to lower investment in new coal mining capacity.”

The report found export markets are being driven by a technological transition compelled by ever-cheaper more efficient renewable energy which is now outclassing coal-fired power on all measures. Air pollution and carbon emissions are also of increasing concern across Asia.

“With export volumes continuing to decline, the Chairman of the Port of Newcastle has recognised 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.”

Full report here: New South Wales Thermal Coal Exports Face Permanent Decline: Grim Outlook Prompts the Need for a Planned Transition

Media Contact: Kate Finlayson, [email protected] 0418 254 237

About IEEFA: The Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

Tim Buckley, Director of Energy Finance Studies at IEEFA, has 30 years of financial markets experience, including 17 years with Citigroup culminating in his role as Managing Director, Head of Australasian Equity Research. Tim has written broadly on the China and India’s energy transformation and the resulting stranded asset risks for thermal coal exposed projects.

Simon Nicholas, an energy finance analyst with IEEFA, holds an honours degree from Imperial College, London and is a Fellow of the Institute of Chartered Accountants of England and Wales and has 16 years’ experience working within the finance sector in both London and Sydney at ABN Amro, Macquarie Bank and Commonwealth Bank of Australia.

Tim Buckley

Tim Buckley, Director, Climate Energy Finance (CEF) has 30 years of financial market experience covering the Australian, Asian and global equity markets from both a buy and sell side perspective. Tim was formerly Director Energy Finance Studies, Australia/South Asia, IEEFA, and was a Managing Director, Head of Equity Research at Citigroup for 17 years until 2008.

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Simon Nicholas

Simon Nicholas is IEEFA’s Lead Energy Finance Analyst for Bangladesh, Pakistan and the global steel sector as well as Asian seaborne thermal and coking coal markets.

Simon’s focus is on the energy transition, the long-term outlooks for coal and steel as well as the need for emerging nations to establish financially sustainable power systems to support their development.

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Kashish Shah

Kashish Shah is a Senior Research Analyst with Wood Mackenzie. Previously,
he worked as an Energy Finance Analyst with the Institute for Energy
Economics & Financial Analysis (IEEFA). He specialises in financing, policy

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