MORE than half the coal being exported through Newcastle is probably being sold at a loss, according to new research commissioned by the coal industry.
The research, by consulting group Wood Mackenzie, was commissioned by the Australian Coal Association and shown to MPs in Canberra as part of the industry campaign to overturn Labor's resource rent and carbon taxes.
Similar Wood Mackenzie research was used by merchant bank Morgan Stanley to show the dire position of many thermal coalmines in NSW and Queensland.
Speaking at a NSW Minerals Council risk management conference in Cessnock, the council's chief executive, Stephen Galilee, said it was clear the industry was doing it tough.
"It's become a cliche but falling prices and rising costs - and that includes the MRRT, the carbon tax and uncertainty over planning and regulatory regimes - are making it very difficult," Mr Galilee said.
Media reports indicated that about 600 people had lost their jobs in the Hunter coal industry, but the real figure could be substantially higher, he said.
The Australian Coal Association says 9000 jobs have been lost from the industry nationally in just 15 months.
About 85 per cent of the coal exported from Newcastle is lower-priced thermal coal for use in power stations - as opposed to coking coal for steelmaking, which is still bringing about $US140 ($143) a tonne.
Thermal coal, by contrast, is selling for about $US87 a tonne and more than 40 of the 71 thermal mines surveyed by Wood Mackenzie had cash operating costs above this level.
Some mines are selling lower-quality thermal coal at well below this price, with traders reporting recent sales as low as $US72 a tonne.
Indeed, Thai company Banpu reported its Centennial Coal mines on the Central Coast and western NSW earned an average of just $US65 for the first three months of 2013 - a fall of 10 per cent year on year - although some of this coal was for NSW power stations, which pay well below export prices.
Morgan Stanley said the 71 thermal mines had costs of $US80 a tonne, up from $US70 a year ago.
An average profit margin of $US7 a tonne was slim, especially when compared with the Queensland-based metallurgical coal industry, and "decisions around coalmine closures or expansions are likely to be more sensitive to the outlook for coal prices".
While the fall in the Australian dollar in recent days will help the industry's profitability if it is sustained over time, the usual response to low prices - to cut production - is made harder for the coal industry this time around because of "take or pay" contracts with port and rail companies.
Morgan Stanley said the "high degree of take or pay" contracts in the NSW and Queensland coal industries offered "protection against miners' pursuit of lower costs" for rail companies Asciano (Pacific National) and Aurizon (formerly Queensland Rail National).
This meant the coal companies were locked in to paying an estimated average of about $10 a tonne on millions of tonnes of rail and port capacity they were unlikely to use on current estimates of demand.
In previous downturns, coal companies have cut production in an effort to lift prices by reducing supply, but the "take or pay" contracts have made this route much more expensive.
Morgan Stanley said 19 per cent of the costs facing thermal coalmines came from rail and port charges.
At the height of the boom, corporate leaders were predicting many years of buoyant profits driven by Chinese expansion, but the Coal Association is now promoting the traditional view of mining as a cyclical industry.
Mr Galilee said the Australian currency usually fell in line with commodity prices and recent falls in the Australian dollar had given miners some hope.
Share price graphs for Gunnedah-based Whitehaven Coal and the Chinese-owned Yancoal - which owns various mines in the Hunter Region - have recovered from record lows in recent weeks, although both are well below their boom-time valuations.
Mine industry turns to social media’s voice
By IAN KIRKWOOD
THE ‘‘Voice for Mining’’ campaign will be launched today by NSW Minerals Council chief executive Stephen Galilee at the council’s risk management in mining conference at the Crowne Plaza Hunter Valley.
Mr Galilee said the first phase of the campaign included a website – voiceformining.com.au – as well as a Twitter feed and Facebook page.
‘‘The environmental movement makes great use of social media in getting its message out and we acknowledge that,’’ Mr Galilee told the Newcastle Herald.
‘‘But we have always believed that the broad majority, the silent majority, support the industry, and the recent research shows that.’’
Mr Galilee was referring to two surveys commissioned for the minerals council and released in conjunction with this week’s conference, which is being attended by 450 people.
He said a survey by polling company ReachTEL showed that more than 60per cent of Hunter residents supported mining in the region, compared with the 16per cent of residents who were opposed.
Separate statewide polling by research firm Crosby Textor showed 70per cent in favour and 26per cent against.
The Voice for Mining website says: ‘‘Most people recognise that a strong NSW mining industry means a strong economy and jobs that support thousands of workers and their families across the state.
‘‘But sometimes our politicians are swayed by the voices of noisy anti-mining activists.
‘‘We want to make sure your voice and the voices of the people that support our miners are heard by the state’s decision makers and don’t get shouted down by the noisy few.’’
Resources and Energy Minister Chris Hartcher said last night the mining industry needed to regain public trust.
Speaking at a minerals council dinner, Mr Hartcher said the public’s trust in the three institutions that had supported the industry – mining companies, governments and unions – had all fallen away.
He described the Greens as people who believe in fairies at the bottom of the garden who refused to accept that the energy needed for a modern standard of living needed to come from mining.
He said renewables would have their day but the technology was not there yet.
In the meantime the mining industry needed to get the message out to its employees and to the public; that mining had great benefits for society.