Around the world, bureaucratic government policy pressures, rising operational costs, delicate supply-demand fluctuations and evolving energy market dynamics have reshaped our view of the industry. Indeed, many coal experts have declared the onset of “the new normal” – a place where greener governments are increasingly hostile to coal, energy portfolios are increasingly mixed and depressed prices are here to stay.
But like any rollercoaster, 2012 has given us both ups and downs. Though many of us have decided to get off the ride, many more have strapped in for the long haul.
In 2012, spot coal prices fell to a three-year low, hitting $US81 per tonne by the end of October. Some heavyweights staggered. Reduced production meant closures and pruned outlooks. But the macro, long-range viewpoint held focus.
In fact, the latest data from the International Energy Agency forecast coal overtaking oil as the world’s top energy source by 2017.
The IEA expects coal demand will increase in every region of the world except the United States.
IEA executive director Maria van der Hoeven said coal had met nearly half of the rise in global energy demand during the first decade of the 21st century.
“This report sees that trend continuing,” she said.
In 2012, ambitions clashed with realities, gloom clashed with encouraging fact and the coal industry found new niches in sectors destined to evolve at the speed of technology.
Australia
The Minerals Resource Rent Tax cleared its final hurdle in the senate in October, prompting a backlash from mining giants such as Fortescue Metals Group and magnate Clive Palmer, who said, “the MRRT has also destroyed Australia’s role in mining exploration for future generations”
Australia also joined an increasing number of nations imposing a levy on carbon emissions with a scheme that fixed a $23 per tonne price on the country’s biggest polluters.
Increasing costs and soft markets meant a slew of closings and cutbacks. Centennial Coal responded to the downturn by placing its Mannering and Airly mines in New South Wales on “care and maintenance” in January. BHP Billiton Mitsubishi Alliance shut its Norwich Park and Gregory mines in Queensland.
Rio Tinto got rid of Clermont workers amid falling prices as Queensland shed up to 5000 coal jobs. BMA strikers hampered production at several Bowen Basin operations until an October deal was reached.
Nathan Tinkler began to see his coal-founded empire crumble with a growing chorus of companies seeking payment of outstanding debts after a series of business blunders and setbacks including a failed purchase of Blackwood Corporation by the entrepreneur’s Mulsanne Resources.
Contractors such as Delta SBD, however, weathered the downturn by engulfing other contractors and diversifying services. Queensland’s massive Carmichael project outlined a 60 million tonne per annum complex and Whitehaven’s Narrabri longwall resolved frustrating mining automation glitches to approach its full capacity of 6Mtpa.
Major Queensland rail plans chugged forward with essential infrastructure for Abbot Point and Gladstone port connections. To the dismay of Palmer, the state favoured QR National and Indian giant GVK (developer of the $6.4 billion Alpha project) for the two-corridor transport project.
Centennial managing director and chief executive David Moult took over as the new chairman of the NSW Minerals Council, while Anglo American boss Cynthia Carroll announced she would step down from her company after being on the board since 2007.
The US
US news this year was dominated by the re-election of President Barrack Obama, a political result bemoaned as a calamity for a coal sector already heavily pressured by the President’s hardening emissions control standards.
After the election, Obama said he would stick to his current carbon plan, dubbed the “war on coal” by industry supporters. Hints of further restrictions on coal plants from federal authorities surfaced in recent months, but many analysts agreed that even a Romney win would have failed to save US coal from evolving energy market realities.
Cheap natural gas forced US miners into tough positions, with Patriot Coal taking the biggest tumble with a Chapter 11 bankruptcy filing in July. Patriot’s business had been pummelled by cancelled customer contracts, lower thermal prices, environmental rules and rising costs.
Booming overseas markets were of little consolation to American coal miners as efforts to open Pacific coast ports faced more stubborn resistance than anyone expected. US exports were up in 2012 and are expected to continue to climb next year, but much-needed export infrastructure developments have been slow-going.
China
China’s 2012 was characterised by slowing growth, rising coal stockpiles, safety overhauls, extensive overseas exploration and major investments in high-tech coal facilities.
Oversupply threatened ports at the world’s biggest coal consumer as facilities like Qinhuangdao (the largest coal port in the world) saw inventories pile ever higher on slackening demand.
As the domestic sector recalibrated, China focused on the long term and investments were made. Major rail projects got underway while syngas and emissions technologies programs were funded and promoted.
China’s African forays bore little fruit and the country’s Chalco coal company dropped a $926 million bid for Mongolian coal player SouthGobi.
A 1800km rail network plan by China Coal Energy would help connect the eastern cities with 81 billion tonnes of newly discovered coal in the country’s remote Xinjiang region near the Kazakhstan border.
Europe
European coal news for the year centred on the fallout of a sweeping financial crisis, the ensuing austerity measures and an increasingly stark divide between the continent’s various energy policies.
The economic collapse in Greece, burgeoning coal supply from Russia and a nuclear scare after Japan’s Fukushima plant disaster created a sort of paradox in Europe’s coal scene. Coal power generation rose and drove US exports. Meanwhile, green power momentum and Germany’s nuclear phase-out clashed with coal’s affordability. The so-called carbon curtain had formed.
Rioting among coal miners in Spain made headlines after the country’s economic retreat forced subsidy cuts in the country’s mining industry. A four-day protest in June overflowed into a month of emotional protest and violence.
A small UK coal renaissance included New Age Exploration’s licensing for a longwall project in the all-but-forgotten Canobie coalfield and an aggressive steel industry bolstering increased metallurgical exploration.
UK Coal and Walter Energy experienced severe market pressure during the year. Walter’s British operators blamed low global prices for the idling of its Aberpergwm underground, while UK Coal finagled a “final chance” at survival with a December deal to restructure debt and close a number of operations.
Africa
Investment in Africa continued to grow as infrastructure developments baby-stepped forward. Mozambique’s emerging Tete region began to produce and South Africa endured a deadly spate of strikes.
Exploration drilling in West Africa surged in 2012, with gold and metal hopes in Ghana, Burkina Faso and Mali, promoting anticipated investor confidence across the continent in general. The buzz at this year’s Africa Down Under conference was that Australia’s $A23 billion investment across 280 resource companies on the continent would soon be overtaken by Indian and Chinese bids.
Coal projects and infrastructure development in Mozambique, Zimbabwe and Botswana have laid the bedrock for a 10-year plan to unlock some of the largest untapped coal reserves in the world. Increased coal traffic between Botswana mines and South African power generators hinted at the development of an internally sustainable industry in the region.
But the hazards of African business were on display as well. Violent South African strikes in metal mines made their way to coal and affected operations by Canada’s Forbes Coal and Australia’s Coal of Africa.
India
Coal shortages have been a serious concern in India, culminating with an August blackout that left 600 million people without power. State miner Coal India was ordered to increase production to 615Mt by 2016 as overseas project investments proliferated. Despite the efforts, shortfalls for the year prompted about 80Mt of thermal imports.
On the domestic front, India grappled with the “coalgate” scandal, which put Prime Minister Manmohan Singh under fire for squandering $US600 billion through the allocation coal blocks without competitive bidding.
Coalgate investigations led to the de-allocation of hundreds of millions of tonnes of coal, slow-moving reform efforts in internal asset distribution and growing pressure to de-nationalise the coal industry.
South America
Colombia continued to dominate the South African coal scene with expanded diplomatic efforts to tap the Chinese market and a massive infrastructure overhaul. Anti-industry violence from guerrilla rebels and persistent strike action also played a major role over the year.
With growing presence by major miners such as Glencore and Drummond International, Colombia flagged increased coal production for 2012 as policymakers indicated an intention to refocus coal exports toward China rather than the country’s traditional American and European markets.
Progress, however, was hampered by sabotage from guerrilla groups including the Revolutionary Armed Forces of Colombia. FARC terrorized Xstrata, Anglo American and BHP Billiton’s Cerrejon mine over the course of the year with a number of equipment and rail bombings. Due largely to the effect of two major strikes, Latin America’s largest producer saw exports drop by 10%.
Russia
The world’s sixth largest coal producers started the year with Prime Minister Vladimir Putin announcing an $8 billion program to ramp up coal production to 430Mt by 2030. Australia’s Tigers Realm Coal and Moscow-based miner Mechel answered with project pushes in Siberia and rail development works targeting Chinese markets.
Despite improving profits, Mechel increased its debt by 8%. The company responded with limitations on expenses, the selling of inventory, production cutbacks and temporary suspension of some US operations.
Coal activity accelerated in Kyrgyzstan this year with a re-discovery of Soviet-era assets and Celsius Coal (previously called View Resources) completing a drill program in the promising Uzgen Basin. Ukraine edged away from Russian gas dependence with an increased focus on coal, coal-to-gas technology and efforts to expand ties with China.
