Coal building to record levels

STRONG rises in demand and prices in 2004 to 2006 will result in record coal mine construction in Australia mid-decade, according to a report by BIS Shrapnel.
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Angie Tomlinson

BIS Shrapnel’s Mining and Heavy Industry Construction in Australia, 2003 to 2018 report said Australia’s coal mine construction was recently at its highest level since the early 1980’s with a positive mid-term outlook.

“Stronger rises in demand and prices — in line with assumed strong economic growth in the Asian region from 2004 to 2006 — is expected to again spur another major round of coal mine development around mid-decade, with a new record level predicted for 2005/06,” the report said.

The report detailed undersupply and sharp rises in coal contract prices in 2000/01 spurred a strong increase in coal mine development over 2000/01 and 2001/02, with another small rise estimated in 2002/03.

The current high levels were a result of developments on a number of new major mines and expansions to supply both export and domestic coking and electricity markets. Currently, low prices have caused construction on new projects to be delayed.

“Overall levels held up in 2002/03, but with few new major projects or expansions expected to commence in 2003/04, activity levels in the coal segment are forecast to decline significantly in that year,” it said.

The report outlined that due to falling mine operating costs, productivity gains in the 1990’s and declines in land and port charges, Australian exports were now among the most competitive in the world.

“The Australian coal industry also has freight cost advantage to the east Asian region over its main competitors — South Africa, US, Canada and Russia — which augers well for future Australian coal investment, given growth in coal consumption will be the fastest in the Asian region over the short, medium and long terms.

“A number of Asian countries have plans for a major phase of coal-fired power stations to be constructed over the medium-to-long term, with coal expected to increase its share of electricity generation capacity. These plans will receive renewed commitment when stronger economic growth resumes.”

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