ABARE projected global demand for thermal coal to rise an average 2.5% a year to 2006, on the back of rising demand for electricity on the back of ongoing economic growth and rising electricity intensity in industrial production. It estimated thermal coal demand in the three major importing nations of Japan, South Korea and Taiwan to grow around 5% a year to 2006.
"Korean thermal coal imports in 2000 are estimated too have risen by 15% and are projected to continue rising strongly over the medium term," ABARE said.
ABARE said Australia's share of world metallurgical coal exports should continue to rise in 2001, having risen from 44% in 1998 to over 48% in 2000. Australia’s share is forecast to increase by 3% to 103.6 million tonnes in 2001, lifting to 50% its share of the world export market. But the sector is expected to show only moderate growth.
Growth in demand from blast furnaces is outweighing the negative effects of reductions in the quantity of coal required a unit of blast furnace output and the increase in electric arc furnace technology in steel output, ABARE said.
The domestic industry is expected to produce around 12Mt of new black coal over the next three years and maybe a further 55Mt before 2006 if companies in Queensland and New South Wales go ahead with the development of planned new projects.
Productivity improvements are also expected to underpin further growth in coal exports.
"With higher prices forecast for both metallurgical and thermal coals in 2001 and demand in the Asian region to continue to increase over the outlook period, Australia's production capacity and exports of coal are expected to rise," ABARE said.
Addressing the ABARE conference in Canberra, Pacific Coal managing director Brian Horwood forecast thermal coal exports would rise to 105 million tonnes by 2005 and 120 million by 2010, giving Australia the potential to earn an extra $1.5 billion a year. Prices this year alone could recover almost half the 45% they had lost since 1995.
"This year we are potentially looking at prices perhaps as high as 15 to 20% up for our annual contracts," Horwood said.
He said coal was forecast to maintain its 44% share of the world energy supply market, and thermal coal demand would be 130Mt a year higher in 2010 then it was today.
BHP Coal president Mike Oppenheimer said steel industry performance over the last 10 to 20 years had been relatively poor and there was no evidence of change, although lower-value metallurgical coal would continue to take over from coke.
"The net result is, we see a flat profile for met coal demand going forward," he said.
Oppenheimer said increased local production had driven down prices, making Australia practically the only viable supplier of metallurgical coal world-wide but the industry had to avoid any more unrestrained growth.
"We need to make the hard decisions and shut down uneconomic mines and probably as importantly, as far as the marginal mines are concerned, we aren't pushing production to try and cover off on capital servicing and unit production cost targets."