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As the coal price continues to falter and major producers are hit drastic action is being taken to reverse the tide.
The commodity has faced a massive decline. It has fallen in price by more than a third in a year from December 2013 to December 2014, as Chinese demand waned and a projects came online, flooding the market and causing excessive supply problems.
The Bureau of Resources and Energy Economics (BREE) said Australia exported 181 million tonnes of metallurgical coal in 2013-14, with this expected to increase to 185 million tonnes in 2014-15, while thermal coal exports are tipped to top 196 million tonnes in 2014-15.
Queensland alone managed to export 216 million tonnes of both thermal and coking coal for 2014, setting new export records.
Making matters worse for miners in Australia is the supply coming online from other competitors such as Indonesia, Colombia and South Africa, further flooding the market, while Russia has plans to quadruple its coal output levels by 2030.
At the same time, rising natural gas production in the United States means thermal coal will be diverted from domestic American markets where it is used as an energy source, to export destinations – particularly Asia.
Added to this are closer energy ties between China and Russia and cross-border co-operation between the two nations.
At the top of the market this posed no problem for coal miners, as the margins more than supported fluctuations in demand in an undersupplied market; however China is no longer willing to pay excessively high amounts for coal.
Now as Australia’s coal exports reach these new peaks for exports and lows on price, how can the coal mining industry claw back profit and create a stronger market?
For some miners it is a case of mining more, at these lower margins, to stay profitable.
According to Queensland Resources Council CEO Michael Roche: “We are seeing are Queensland coal producers replacing the high prices of a few years ago with the volumes necessary to keep their operations viable in a currently depressed market”.
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