logo

Demand and Supply of Coal in Australia

6 Pages1163 Words190 Views
   

University of Liverpool

   

Economics (ECON113)

   

Added on  2020-03-04

About This Document

The following written report is based on Microeconomics discussing the Demand and Supply of Coal in Australia, also its impact on the price of coal is analysed. We will see in the assignment the coal price in Australia has been principally driven by the demand from China.

Demand and Supply of Coal in Australia

   

University of Liverpool

   

Economics (ECON113)

   Added on 2020-03-04

ShareRelated Documents
ECONOMICS 1Demand and Supply of Coal in AustraliaStudent’s NameCourse IDUniversityDate
Demand and Supply of Coal in Australia_1
ECONOMICS 2The price of a commodity is largely driven by the supply and demand factors. Precisely, increase in demand of a certain product during constant supply may lead to a surge in the price. On the other hand, shortage in supply of a resource can lead to sudden price hike of a commodity(Gilman, 2016). In the study, the demand and supply scenario of coal in the Australian market has been illustrated. Furthermore, the impact of the demand-supply dynamics on the price of coalhas been determined in the study report. In the article, Cain (2017) has clarified that slowing demand of mining commodity from China can cause the decline in the price of coal in the upcoming year or so. In the meanwhile, bearish growth outlook of Chinese economy may affect the demand for coal exported by Australia (Dong, Li and Lin, 2015). As a result of the effect, people associated with the coal mining industry in Australia may face a severe challenge in near term. Cain (2017) has admitted that the coal price in Australia has been principally driven by the demand from China. The government policies of China in infrastructure expenditure, pollution control, and steel production industry have significantly influenced the demand side of the fossil fuel. Similarly, due to demand side dynamics, the price of coal has fluctuated. Due to the recent infrastructure spending cut and moderate property prices by the Chinese government, coal price may face a substantial downside risk. In terms of the current price of coking coal, spot prices of coal have declined from US$ 315 a tonne in April to US$ 150 a tonne in June (Cain, 2017). Considerably, slowing demand from Chinese economy is expected to make a further impact on coal price as the price may slip to as low as US$ 120 a tonne by the end of 2017. Due to subdue demand of thermal coal, the price of the commodity may trade sideways between US$68 and US$77 a tonne (Cain, 2017).
Demand and Supply of Coal in Australia_2
ECONOMICS 3It is important to note that China is one of the major importers of Australian Coal across the globe. Hence, a downfall in the demand for coal in the Chinese market directly impacts the quantity demanded of Coal in the Australian market. For instance, Australia is accounted for 24 percent of the total coal requirement in China (Perry, 2016). Hence, a decline for demand of coal due to the Government policies regarding the environment will directly impact the quantity demanded for Australian coal. Furthermore, it is important to note that the Carbon Tax Policy implemented by the Australian Government also enforces the domestic consumers to shift to renewable energy sources (Perry, 2016). For example, the Australian Government has taken an initiative to provide subsidies to the firms that minimises the emission of carbon caused by the use of coal. Hence, the demand for coal is expected to reduce in the Australian market as well.By applying the theory of demand and supply, it can be seen that the supply of coal remains constant due to the improvement of production technology (Bolle, 2011). However, the fall in the quantity demanded influence the market equilibrium resulting in a fall in the aggregateprice of coal in the Australian as well as global market. A diagram has been presented herein below for further explanation:
Demand and Supply of Coal in Australia_3

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
HI5003 - Demand and Supply of Coal in Australia
|6
|1393
|55

HI5003 - Economics for Business assignment
|7
|1570
|43

Impacts of the Chinese economy slowdown on Australia’s mining industry
|9
|1842
|304

ECON 600 - Demand and Supply of Iron Ore in Australia Report
|7
|1420
|70

HI5003 - Economics - Demand and Supply of LNG in Australia
|7
|1463
|43

Price Elasticity of Demand and Recent Events Affecting the Mining Industry of Australia
|6
|620
|132