More than 65 per cent of the world’s coal production is estimated to be unprofitable as prices for both thermal and coking coal head for their fifth consecutive year of declines.
The estimate, which was provided by commercial intelligence company Wood Mackenzie, applies to both types of coal. It would be even higher if sustaining capital spent by miners on things like engine maintenance was taken into account.
The extraordinary estimate illustrates the parlous state of the coal industry, which has been battling slowing demand in Asia and structural challenges surrounding coal’s place in an increasingly carbon-conscious world.
The Wood Mackenzie data includes coal mined for export markets and domestic energy supplies around the world.
Wood Mackenzie said about 33 per cent of Australian coal production would be cash-flow negative at current prices, which have thermal coal exported from Newcastle fetching about $US52.50 per tonne and Queensland coking coal fetching about $US74.45 per tonne.
The two commodities were fetching $US130 per tonne and more than $US300 per tonne, respectively, during the peak of the China boom in February 2011.
In terms of the number of individual Australian mines, Wood Mackenzie estimated that roughly half of them would be making a loss.
The situation is arguably worse in Indonesia, where the local mining association has warned that between 60 per cent and 70 per cent of Indonesian coal miners are loss-making.
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