The recent half-year production numbers out of BHP Billiton are more than a snapshot of one giant energy company: They’re a window on the world’s larger ailing coal-mining industry.
The figures show that BHP—like other big miners that include Rio Tinto, Vale S.A., and Anglo American—is gradually exiting its under-performing coal group.
BHP executives are no doubt well aware that any new coal project proposal will face a significantly increased level of scrutiny given the dramatically reduced commercial viability of such endeavors. As a result—and as can be seen in these new numbers—the company is scaling capital expenditures back significantly in a trend that will not easily be reversed.
One of the most notable takeaways from this latest report comes from what wasn’t said: BHP made no mention of new coal projects beyond those already under construction.
Also of note:
All of these developments reflect the larger truth that coal production, as a going concern, is not what it used to be.
In the case of BHP, in particular, IEEFA expects the company to stall or adopt a go-slow approach on any new coal-production proposals related to its sizeable holdings in Indonesia or in Caroona in New South Wales.
Tim Buckley is IEEFA’s director of energy finance studies, Australasia