Demand and Supply of Coal in Australia and Economic Impact Analysis

This report provides a comprehensive analysis of the demand and supply dynamics of coal in Australia and its significant impact on the national economy. It begins with an introduction to coal's global importance, particularly in Australia, which meets a substantial portion of global power generation needs. The report explores Australia's substantial coal reserves, production levels, and export capabilities, highlighting its position as a major player in the global coal market. It examines the factors influencing coal supply, including exploration expenditures, regional production trends, and industrial activities. The report also delves into the demand for coal, both domestically and internationally, focusing on the increasing demand from Asian countries and the implications for local power producers. Furthermore, it assesses the economic impact of the coal industry, including its contribution to export earnings, employment, and government revenue. The report concludes by discussing the industry's role in ensuring energy security and supporting Australia's economic growth, particularly during global economic downturns.

DEMAND AND SUPPLY OF COAL IN AUSTRALIA AND ITS
IMPACT ON THE ECONOMY OF AUSTRALIA
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Reejoug Ghosh
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INTRODUCTION
Coal is said to be one of the most essential fossil fuel which accounts for nearly 40 percent of
the entire power generation globally. Of the 40 percent, Australia alone meets the needs of 30
percent of coal. The fact that coal being a non-renewable source of energy, yet it remains
crucial and significant for the developed economies, especially Australia. Thus the present
condition makes it clear that it is impossible to think of a future wherein coal is absent or not
being used to meet the increasing requirement of power . Australia is also a part of the said
trend, black and brown coal amount to Australia’s main energy generation source, covering
34 percent of its main energy requirement and 75 percent of its grid electricity. Black coal
provides 90 percent of grid energy in New South Wales and 77 percent in Queensland,
whereas brown coal provides 93 percent of electricity in Victoria.
Source: http://www.minerals.org.au/resources/coal/coal_bringing_power_to_the_people

Thus the above pie charts make it clear that there exists no other fuel whether renewable or
non-renewable, that can execute this critical aggressive role in Australia’s power production
blend. The supply of coal is Australia is so abundant along with its propinquity to densely
inhabited areas, construes that the cost of the electricity in Australia has always been very
low across the globe. Electricity generated with the help of coal are also the reasons for the
prices of electricity to be so competitive across the globe, dependable and efficient electricity
generation that emphasizes energy-intensive industries, an employer of around one million
Australians (minerals.org.au., 2018).
DEMAND AND SUPPLY OF COAL IN AUSTRALIA
As is detailed above, Australia supplies around 30 percent of the world coal trade, the largest
across the globe. Coal has various varieties of which it was noticed in the year 2011 that
Australia was the world’s largest exporter of metallurgical coal and ranked second in the
export of thermal coal. Apart from the same, the continent is ranked fourth in the production
and fifth in the resources of black coal across the globe. So much is the production of black
coal that Australia’s reachable financial established resources are adequate to uphold the
present production rates for almost a century. Brown coal accessible economic resources are
expected to be able to sustain current brown coal production for over five centuries.
Australia is specifically dependent on coal exports both for present and upcoming economic
development. Due to the said reason, it is critical to have a thorough knowledge with regards
the prospective needs and demand and the expected rate of production supported on the
recognized coal mineral deposits. The Supply of coal is still confined and restricted, reasons
being China carrying out various safety scrutiny and checks and the action of the industry
also has an implication on the Australian result.
The continent’s coal discovery and investigation spending is still fairly unpretentious and
unassuming, with $35.1 million invested in the second quarter of 2017. The figures are one
third more than the June 2017 quarter, but almost unaltered during the year. The increase in
the supply during the quarter was due to the greater investigation in Queensland, which
presently constitutes to more than 80 percent of the entire coal investigation and exploration
(Davidson & Silva, 2013). However, September 2011 witnessed one of the highest coal
exploration expenditure. Unfortunately, the same has been gradually bolted back due to the
lowering prices of coal and excessive supply of low quality thermal coal markets.

On analysing the below graph with regards the regional coal production since 1980, it is
evident that production of coal in most of the areas are declining or eradicating totally but for
Asia and Oceania, which comprises of China, India, Indonesia and Australia. Although
Australia has been at the upper edge with regards the production and supply of coal since
1980, yet the rate of increase in the production since 2000 is the highest in China
(Heaney,2015).
FIGURE 1: REGIONAL COAL PRODUCTION
Source: https://theconversation.com/the-facts-on-australian-coal-production-43255
Further the supply of coal had a small implication in 2017-2018 due to the industrial
activities. Along with continuous increasing prices each term and a strong demand line, the
Australian producers are trying to enhance the production of coal. Lastly, if the Australian
differences do not enhance, it is expected that manufacturing will reveal noticeable
augmentation and enlargement in 2018 and early 2019, before it compresses out. It is
expected that the production would be approximately 249 million tonnes in 2017-2018,
which is marginally low from 250 million tonnes in 2016-2017.
In 2018-2019, it is anticipated that the production would enhance by two percent which
would be equivalent to 254 million tonnes. The said increment in the supply would occur due

to the continuous extensions and developments at Rolleston and also a noteworthy quantum
of coal mines in the NSW Hunter Valley region, comprising of Ravensworth as well.
Coal is mined in all the six Australian States, but Queensland and New South Wales top the
charts and in total both these states supply 98 percent of the black coal. Australia produces
coal in open cut mines, a methodology wherein the costs are very low as compared to the
underground mining and ensures around 90 percent of the revival of the resource. Due to the
same, the coal prices in the global markets have become cheap as Australia has the capacity
to supply coal at a cheaper rate due to cheaper production costs (minerals.org.au. 2015).
Australia being one of the highest producers of coal, the demand is also equally high,
especially of thermal coal. The demand is so high overseas, that the country is facing a
shortage of coal. The increasing demand of coal from the Asian countries is divesting the
local power producers of fuel and driving electricity prices higher. The domestic power
supply corporations are failing and disinterested in coping up with the price premiums that
some Australian coal has been profiting from Asian markets, in a state that reductive
pollution producing high energy and low discharge plants are being pioneered at a fast pace.
The deficit in coal is most prevalent in NSW which is Australia’s densely populated state as
per the Australian Energy Council that showcases the power supplies that produce the
maximum amount of the country’s electricity. The demand for coal domestically is very high
and also internationally, so much that in order to fulfil the demand of the latter, many
generators are unable to perform at their maximum capacity, simple reason being shortage of
fuel. Due to this allocating of fuel, the wholesale prices of fuel has enhanced considerably.
Further to this, the supply of coal is inhibited in New South Wales because around three-
fourths of the total output of the state is already committed towards exports (Regan, 2017).
The International Energy Agency’s Southeast Asia Energy Outlook report, portrayed an
optimistic viewpoint for the Australian coal producers with likely enhancing demand,
especially for thermal coal. The ten nations which are a part of the ASEAN region are
publishing a sturdy augmentation in the populace. It is due to the said population increase, the
demand for energy would increase as well which would be met not only by production
happening locally but with the help of significant imports as well, wherein Australia is being
construed as a major one. Presently, the support of Australian coal exports both metallurgical
and thermal, are the age old north Asian markets comprising of Japan, China, Korea and
Taiwan with India also gaining adequate importance off-lately (John,2017).

As the demand of coal enhances in the region by around 4 percent every year to 2040 and the
diminishing exports of coal in Indonesia along the same time frame (from 290 Mtce in 2016
to 170 Mtce in 2040) the IEA forecasts that Australia with its supply of high grade coal will
enhance its exports by more than 15 percent to 2040. Further to this, it is understood that
Australia is very competent at producing coal, so much that it is well positioned to cater to
the demand of Asia and supply them with a better grade of coal which is best suited to the
new generation coal plants and factories and steel making as well (Evans, 2017). These
reports substantiate the primary demand of coal and the extensive and substantial prospect for
Australia in the developing market of Southeast Asia.
The global demand for coal drooped 1.9 percent in 2016 which is one of the highest and the
same is expected to remain unaltered till 2022. The International Energy Agency predicts that
by the end of 2022 the demand for coal worldwide will be 5.53 billion tonnes, which
connotes that demand will be languished for more than a decade now. The demand of coal is
seen moving from western part of the globe and travelling to the east. Thus it can be said that
the demand has shifted from Europe, Canada, USA and China to South-East Asia, India,
Pakistan and Bangladesh. This demand is said to be the highest in India wherein it is
forecasted to grow by four percent every year till 2022 (McHugh, 2017).
IMPACT OF COAL IN AUSTRALIAN ECONOMY
The impact of coal in the Australian economy has been vast due to the large supply of coal
and the export earnings it makes from the said natural resource. Coal is Australia’s principal
power export earner. In 2010-2011, the continent exported 283 million tonnes of
metallurgical and thermal coal globally which amounted to A$43.7 billion. Australia is
successful in exporting such a huge quantum of thermal coal simply because domestically
their energy needs are minimal as compared to the supply (industry.gov.au., 2017).
The coal industry undoubtedly has a crucial part to play in the development of the Australian
Economy, energy safety and society. Coal as a natural resource and considered to be non-
renewable in nature, still is the largest export earner, as per 2008-2009 figures it is valued at
A$55 billion. It is also the largest sector for employment as it provides job to around 140000
Australians, the ratio being 40000 direct employment and 100000 indirect employment,
specifically in regional areas. The coal is found in so much of abundance in Australia, that it
covers more than 50 percent of the electricity supply from black coal, which also supports

and further strengthens the safety, dependability and comparative low-cost of Australia’s
electricity supply.
During and after the global recession which hit the world in 2008-2009, Australia was the
sole advanced economic country which showed growth amongst the 33 advanced economies
globally. The main cause which safeguarded the economy of the continent was the ongoing
coal exports. It is during this hour of the time when the continent realised the benefits the
continent was actually reaping from exporting coal. Further to this, the importance is also
visible in the increasing share of the Gross Domestic Product (GDP). The share has enhanced
more than twice from 1.7 percent in 2006-2007 when the economies of the world was its
boom to 3.5 percent in 2008-2009 when the economies of the world were facing tremendous
recession so much that people across all spheres had to face the brunt of job insecurity and
unemployment. The said improvisation from 2006-2007 to 2008-2009 made the continent the
biggest contributor to the mining segment.
Each year, the coal industry contributes billions of dollars to Commonwealth and State
governments in the form of corporate taxes, natural resource royalties and payments of cargo
and shipment charges. In 2008-2009 the royalties paid by the said industry was worth $3.1
billion to the Queensland Government and $1.3 billion to the New South Wales Government.
These funds are returned back to the society and for the well-being of the citizens in the form
of state funding for public amenities such as hospitals, schools and road construction and
improvement.
Further to this, the coal industry also added to tens of millions of dollars per year to finance
societal public infrastructure. The said funding is over and above the advantages that flow
from its daily workings – comprising of jobs and business prospects, additions to civic
infrastructure and sustaining for education, instructing and trainees (minerals.org.au. 2017).
However, to the surprise, the above mentioned details would make a reader construe that
without coal the economy of Australia would have become stagnated, but research suggests
that the economy of the continent may not be hit if production of coal is phased out slowly
and steadily across the country. The Australia Institute-commissioned study discovered that
there would be very less implications on the economy if the Government forced a suspension
on fresh coal mines or the expansion of existing ones. Further to this, they also said that the
managed winding back of production of coal as the present mines are exhausted would be of
economic breakdown, as it contributes to 0.04 percent of employment of the total Australian

workforce. Thus it is predicted that the growth in the economy would be there even if the said
phase out happens but with a difference of just 0.06 percent by 2040. It is expected that the
coal mining will not diminish in the coming decade or so as there are adequate coal still
available in the mines even now that are still working or will be productive to continue the
level of exports that is viewed presently. However, post that time period, the production of
coal is expected to stagnate or at least the pace would be slowed down as new mines which
may have thought to come on, would not be permitted to. Although the same is not bad for
the economy of Australia, but even if the impact is minimal on a national basis, the phasing
out of coal would be hurting for the regions who are dependent on the said industry
(Ryan,2016).
CONCLUSION
Thus on analysing the entire write up about the demand and supply of coal in Australia and
its implications on the economy of the continent, it is construed that Australia is one such
continent which has adequate amount of coal supply for at least a decade. The demand is also
high as the other nations do not have so much of coal and it is one of the cheap sources of
energy due to which countries are not being able to let go off it. The exports of coal are what
helped Australia sustain well even during the recessionary period of 2008-2009. Further to
this, it has a major contribution to made on the economical development of the regions
specially than the nation as a whole as statistics clearly prove that if coal production is phased
out, then it would not have a stark impact on the economy nationally but the regional
implications would be hard to manage. Coal in any form whether metallurgical or thermal,
Australia is seen to be in a win-win situation, at least as per the present condition.

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