UNTIL recently some optimists had asserted that the latest long boom in Australian mining would be permanent.
Endless fortunes would be made by shovelling coal and iron ore into ships and sending them to China.
Such optimism is, in itself, a feature of many booms, since it is this impulse that feeds the almost inevitable over-investment and oversupply that helps pull down prices and bring booms to an end.
History teaches its students many other lessons about cycles in demand and supply, if those students are prepared to learn.
It is easy to bid up the price of labour, for example, when the chief aim is to sell as much product as possible while prices are high and demand seems limitless. It is not quite so easy, however, to pare back labour costs when the bust arrives.
The Australian Coal Association has just published a report suggesting that more than half the coal now being exported through Newcastle may be being sold for less than it costs to produce and ship.
Mining companies are using the report to attempt to persuade parliamentarians to remove taxes and slash regulation.
To the extent that the carbon tax and the Minerals Resource Rent Tax have any meaningful effect on the cost of producing coal, the industry will obviously find a ready ear in the federal Coalition.
Others, however, might marvel at how sharply the cost of coal production has apparently risen over the past several years, bringing the industry to the point where it says it is barely in the black with thermal coal still over $US85 a tonne.
Still others might ask why the coal companies don’t appear to be complaining as loudly about the ‘‘take or pay’’ arrangements that force them to pay for shipping and loading capacity they don’t need.
Indeed, the Hunter community would probably see good reason to back the industry if it was to mount a campaign against take or pay, since it is being widely asserted that this system is forcing companies to keep developing and selling below-cost coal.
If this is true, and mines are being expanded and extended – with all the community and environmental costs this can entail – in order to make no profit at all from a vital national resource, then the market would appear to be suffering from a serious flaw.
After a remarkably long period of sky-high profits the miners are under pressure from shareholders to pare back costs – just like at the end of every previous boom.
As always in history, the inevitable pain of the bust will be shared. Some discussion about how it is to be shared is only to be expected.