The Australian industry’s northern neighbour ramped up exports of its lower quality coal to the expanding economies of India and China despite an ongoing sovereign risk and was in the box seat to corner up to half a billion tonnes in exports, HDR Slava director Chris Urzaa told the Longwall Conference yesterday.

“Coal is a cheap widely available fuel source,” he said.

“Supply will struggle to meet the challenge of increasing demand.

“The Indonesians will therefore continue to capitalise on their strengths of being quick to market, their close proximity to the demand centres, and their ability to utilise their river system to continue to satisfy the majority of demand growth.”

The Australian industry is being hamstrung by the high infrastructure and project development costs, onerous environmental regulation, and high operating costs.

While Australia still holds a dominant position in coking coal, it is at risk of being marginalised as the dominant Asian seaborne coal supplier by the Indonesian industry, which continues to attract investment by global players despite a 51% domestic ownership stipulation after four years.

“The Indonesians will power on,” Urzaa said.

“We won’t be the dominant player and it may mean we will end up the swing supplier.”

Consultant Guy Mitchell told the conference that the challenge for the Australian industry was utilising its human resources more efficiently and productively in a time when capital investment by companies was being cut back.

An added complication was that companies were expanding production to achieve lower unit costs which was in turn leading to lower prices.

Australian longwall operations should also consider optimising longwall face width to deliver incremental increases in productivity, Mitchell said.

“It’s a lot to do with tonnes and a lot to do with costs,” he said.

“The best teams win and they win more often.”

The Australian coal industry’s bulk materials-handling and logistics planning lags world’s best practice, according to management consulting firm Siecap Advisory.

It says Indonesia had stolen the march when it came to export volumes, performance and time to execute projects.

The resources sector still held great opportunities for Australia and particularly Queensland, but the nation needed to operate more efficiently, especially in logistics and supply chain activities, according to Siecap says.

However, Urzaa said it was not all and gloom for the Australian industry, pointing to the impressive increase in capacity utilisation by the BHP Billiton Mitsubishi alliance in Queensland after the floods and the conclusion of enterprise agreements.

“Things have turned around and when you put your mind to it you can do good things,” he said.

Urzaa said major international companies were ramping up production in Indonesia in small projects close to that country’s extensive river transport network to skirt around the domestic ownership obligations.

Australian producers cannot afford to write off Indonesia’s coal output as being inferior as it will remain in demand by power stations around Asia, especially India, which will potentially grow larger than China in population and energy usage.