News Wrap

IN this morning’s News Wrap: low carbon price fuels more coal, says King; ASX eyes Yancoal as chairman exits parent; and Rio Tinto may ‘go slow’ on 360 project.

Staff Reporter

Low carbon price fuels more coal, says King

Energy companies will build more coal-fired power stations rather than switch to cleaner gas if the carbon price remains low when it floats next year, warns Origin Energy CEO Grant King, according to the Australian Financial Review.

The federal government plans to move to an emissions trading scheme one year early, which would see the price plummet from $25.40 to $6 a tonne based on Treasury estimates.

“If the price was always going to be $6, you’d be building coal-fired power stations,” King said. “A carbon price of more like $40 a tonne is necessary to really swing the economics from building coal to gas.

“And in so far as we rely on carbon price to cause different decisions to be made. $20, let alone $6, will not change the decision to build coal versus gas.”

ASX eyes Yancoal as chairman exits parent

The Australian Securities Exchange is monitoring Yancoal Australia after it failed to update the market on a major board reshuffle at its parent company, which included the departure of the local subsidiary’s chairman, Li Weimin, according to the Australian Financial Review.

Li left Yancoal’s Chinese parent company a week ago in a surprise move, in the middle of its controversial takeover bid for the local subsidiary.

Yankuang Group, which owns Yanzhou Coal Mining, announced on its website last Monday that Li had left the state-owned company and was now the general manager at another resources firm, Shandong Energy Group.

Rio Tinto may ‘go slow’ on 360 project

More analysts are predicting Rio Tinto will slow its proposed ramp-up of iron ore production to 360 million tonnes a year, as the market remains divided on whether oversupply of the steel-making commodity will reduce prices in the short term, according to the Australian Financial Review.

Rio, the world’s lowest-cost producer of iron ore, has spent $US1.5 billion on building infrastructure at its Western Australian Pilbara-based operations required to cope with extra iron ore production.

But the global resources company’s board is yet to approve an additional $US5 billion to develop new or existing mines (or a combination of both) to boost production from 290Mt to a possible 360Mt of iron ore a year.

At Rio’s second quarter result, it confirmed the ramp-up to 290Mt a year was on budget and on time, with delivery of the first tonnes by the end of the third quarter.