On the political front there was a fresh comment from Prime Minister Tony Abbott that coal is more than a simple mineral commodity, it is “the foundation of prosperity”
On the money front, one of the mining industry’s smartest operators, Ivan Glasenberg, sent a very clear signal that the company he runs, Glencore, is not backing away from coal. Rather, it is boosting its exposure.
Both men, Abbott and Glasenberg, know exactly what they’re doing and understand that in the games of politics and money, words are bullets.
For Abbott, a man in need of a win as Australia stumbles towards its first recession in 20 years, coal has become a cause that will differentiate him from his opponents.
He is daring the Labor Party to take a different stand on coal and align itself with the Green movement which is virulently opposed to any form of fossil fuel.
In effect, coal for Abbott has become a wedge issue that will force Labor to decide whether it is in favour of jobs in the coal industry at a time when jobs are a precious commodity, or be forced to join the Green demonisation of coal and pay a heavy price at the next election.
As a strategy, Hogsback is not sure if Abbott’s plan will work but it should be enough to shift coal off the political battlefield, which can’t be a bad thing, and give the industry a bit of breathing space to recover from its big slowdown.
Glasenberg’s defence of coal is not being done with words. He is simply investing more of Glencore’s money and executive time in coal because he is a true believer in the commodity as a fundamental building block of every civilised society – and a great way to make money over time.
Glencore’s focus on coal as a key plank in its mix of commodities was highlighted during the week when it revealed that its Australian operations have boosted coal output by 15%, and that its global coal business has expanded by 7%, cementing the company’s position as the world’s biggest coal exporter.
Confirmation, if it was needed, that Glencore is fully committed to coal and is boosting exposure ahead of a strong price recovery, is one of the most positive signs yet that better times are not far off.
Critics will hate both Abbott and Glasenberg for what they’ve just done because until now there have been doubts about where Australian politicians stood on coal, or whether declining investment by some companies was a sign that more mine closures were inevitable.
Until the pro-coal political card was played, and until Glasenberg said he wanted more coal, the propaganda war seemed to be one-way traffic with the anti-coal brigade winning every trick.
Last week was a turning point, not just because of the political and money factors but also because two other developments threw a bit more light on the weak arguments of the Greens about coal losing its place as the world’s energy leader.
In Denmark, a delightfully clean and green country, a campaign was launched to totally ban coal, a move that appears to have won some support, albeit without most people realising that their power bills will rise as a result.
On the other side of the world, India made some headway in cleaning up the mess which is its coal industry and pushed ahead with plans to build more coal-fired power stations as a key part of its modernisation with includes connecting every home to electricity.
In terms of numbers, the Denmark versus India situation is a brilliant example of why coal is winning because Denmark represents the potential loss of 5.6 million users of coal-fired electricity, and India’s push for more coal-fired power represents a potential market of 1.25 billion.
In other words, the world’s most heavily populated country (India’s headcount has passed China) is keen on coal because it is a key to modernising its economy and in lifting hundreds of millions of people out of poverty.
Denmark has the luxury which resides with a small country to opt out of coal – and hope that it has enough power from other sources to keep its economy ticking over.
Of the various events that occurred last week the Denmark versus India comparison is probably the most telling because it is a parable of how the rich Western world sees coal as yesterday’s fuel source and how the poor Eastern world sees coal as a future power source.
In that competition, West versus East, there is no doubt that the East will win, simply because it has the numbers – which is precisely what Abbott reckons he will get with a pro-coal policy and Glasenberg reckons he will get in future profits as the biggest supplier of coal to the East.
