Press release: Carmichael approval spells further decline for Australian coal industry

July 28, 2014

Map from IEEFA’s report Remote Prospects, p. 8. Click photo for larger map

SYDNEY – Australia’s biggest coal mine, Adani’s Carmichael Coal and Rail Project in Queensland’s Galilee Basin, was today given Federal approval despite mounting evidence demonstrating the project is economically unviable.

Tim Buckley, Director of Energy Finance Studies, Australasia, for the Institute for Energy Economics and Financial Analysis (IEEFA) has spent many years studying the economic viability of energy projects and companies, with a particular focus on the Galilee basin projects.

“It’s not surprising that Minister Hunt is going along with Premier Newman and Prime Minister Tony Abbott’s desire to facilitate foreign firms in their efforts to try to prop up Australia’s declining coal industry,” Mr Buckley said.

“Ironically, if this project proceeds, it will actually accelerate the longer term destruction of Australia’s coal export industry by dramatically expanding the capital invested whilst at the same time driving coal prices down globally.

“Global coal prices are already depressed due to excess supply. If the Carmichael project proceeds, it will potentially open up access to another nine mine proposals with a combined thermal coal capacity of up to 300 million tonnes per annum. Our analysis forecasts that this would drive down thermal coal export prices a further 10-20%, thereby squeezing coal sector profit margins which are already down to zero,” Mr Buckley said.

As part of Peabody Energy’s net loss of US$122m for the first half of 2014 reported last week, its Australian coal division’s earnings before everything were down 93% year-on-year to just US$14m.

Tim Buckley is the Director of Energy Finance Studies, Australasia for the Institute for Energy Economics and Financial Analysis. He has 25 years of financial markets experience, including 17 years with Citigroup culminating in his role as Managing Director and Head of Australasian Equity Research. Mr Buckley has spent the past five years investigating trends in global renewable energy.