Australia’s Adani coal mine faces uncertain future as election looms and analysts claim boom has ended
- Australia is one of the world’s biggest coal suppliers but faces an increasingly competitive future as buyers shift towards cleaner or renewable fuels
- Ports in China, a major buyer, have been restricting imports from Australia this year, claiming environmental concerns
A crash in Australian thermal coal prices is raising fresh questions about the viability of a controversial US$4 billion coal mine just a week ahead of a national election in which climate change is a key issue.
Final approval of the Carmichael coal mine in Queensland, owned by India’s Adani Enterprises, should come in “a matter of weeks, not months” following nearly a decade on the drawing board, the company’s mining chief executive, Lucas Dow, said last month.
But a 40 per cent slump in benchmark Australian thermal coal prices since mid-2018 to a two-year low last month, points to tight profit margins and questions as to whether the economics will support the launch of the mine as soon as next year.
Adani has said it is aiming to start producing 10 million tonnes a year of coal from March 2020, but analysts say the target date is optimistic.
“I think a lot of people are doubting as to whether it will see the light of day,” said Wood Mackenzie analyst Victor Tanevski in Sydney.
Adani estimated in January that total costs of bringing the coal to port via rail would be A$54 a tonne (US$39). Based on current market prices, the selling price for the mine’s lower-grade thermal coal would be just over US$47, suggesting a profit margin of US$8-US$12 per tonne.
