Hogsback remembers those days fondly: when coal mining companies were tripping over each to hire people and paying them handsomely to boot, building railways, building ports and putting so much money into mining gear because the price of coking coal had shot up to $US320 per tonne.
There was so much money around that people were building extensions on their extensions and there was a boat in every garage.
Well ANZ Bank has come out with a report that says spot prices are approaching levels not seen since 2011, when more than half of world trade in coking coal was impacted by heavy rains and flooding in Queensland.
The cyclone season and the inundation that came with it led to many coal mines curtailing their production levels.
However, the spike in coal prices also led to some handsome profits for miners that could still rip coal out of the ground. This led to another inundation – of celebratory beers all around.
This year there has been a surge in demand for coal in the international seaborne market as well as supply-side constraints driving prices higher, according to ANZ.
“Chinese cuts to capacity have seen their demand for imported coal jump sharply,” it said.
In 2015, China imported 48 million tonnes of coal. During the first nine months of 2016 China has already imported 43Mt.
Based on current estimates, 2016 imports will total around 60Mt – up 12Mt or 25%.
On the demand side, China has reduced the number of working days at its coal mines from 330 to 276 and seems intent on reducing the amount of smog in its major cities from coal fired power that use their inferior feedstock.
It also seems serious about improving its woeful safety record and closing down smaller dangerous coal mines that are not capable of improving its safety practices.
At the same time, exports from key producers have been constrained. Exports from Australia are currently down 0.5% year-on-year, with exports in Q3 2016 down 3.8% year-on-year alone. In North America, exports are also weak.
A number of events in Australia have led to this supply constraint, including production problems because of geotechnical issues at South32’s Appin mine in New South Wales, the impact of flooding in the Hunter Valley, derailments in Queensland, and issues at Anglo American’s Grasstree that forced it to call force majeure on some of its exports.
On top of this, is the ongoing uncertainty of the impact of the recurrence of black lung disease in Queensland mines, and the approach of yet another cyclone season with its potential to disrupt production even further.
According to ANZ, the party has some way to go yet.
“Going forward, we estimate growth in China’s coking coal domestic supply will continue decreasing year on year, keeping domestic prices steady,” it said.
“The government has implemented a ban for new coal projects until 2018, while the top coal producing province of Shanxi has stopped the approval of new projects until 2020.”
That’s great news for exporters like Australia, who stand to dominate exports to Asia, according to a report by the International Energy Agency.
So the message to coal miners is go out and party while you can – you will have plenty of time to get over the hangover, as we found out over the last five years.