{"id":6271,"date":"2017-05-08T16:26:36","date_gmt":"2017-05-08T08:26:36","guid":{"rendered":"http:\/\/chinggislaw.com\/?p=6271"},"modified":"2021-09-14T18:47:58","modified_gmt":"2021-09-14T10:47:58","slug":"does-every-cloud-have-a-silver-lining-recent-developments-in-australias-mining-sector","status":"publish","type":"post","link":"https:\/\/chinggislaw.com\/?p=6271&lang=en","title":{"rendered":"Does every cloud have a silver lining? \u2013 recent developments in Australia\u2019s mining sector"},"content":{"rendered":"

Paul Mills, Senior Economic Adviser<\/strong><\/p>\n

Mr Mills previously worked with Skills Australia, an Australian government agency where one of his key responsibilities was to assess demand for skills from Australia\u2019s mining sector<\/p>\n

Introduction<\/strong>
\nThere has been speculation that flooding arising from the massive rainfall dumped by Cyclone Debbie would have a major impact on metallurgical or coking coal production in Queensland Australia (sometime stylised as the world capital for metallurgical coal (Yeo, 2017: 1).<\/p>\n

Figure 1: Road blocks to metallurgical coal supplies in Queensland<\/strong>
\nSome commentators have speculated that that the supply disruptions would benefit Mongolia\u2019s coking coal industry (Business Council of Mongolia 2017: 1).\u00a0 Indeed, many major miners including BHP Billiton, Glencore and Anglo American shut down in the lead up to the cyclone.\u00a0 Spot prices for metallurgical coal rose rapidly after the cyclone as commentators attempted to understand potential supply disruptions.\u00a0 After all, Australia supplies 50 per cent of metallurgical coal to world markets (Janda 2017: 2).<\/p>\n

Yeo notes the metallurgical coal market has proven in the last 14 years to be particularly supply sensitive.\u00a0 Cyclone Debbie also came at a critical juncture, as premium met coal prices have fallen from a high of $310\/metric tonne FOB Australia on November 18, 2016, to $151.50\/metric tonne FOB on March 24, just before the cyclone hit (Yeo 2017: 1).<\/p>\n

The outlook for Australia\u2019s metallurgical coal production<\/strong><\/p>\n

Nonetheless, major Queensland miners have resumed production quite quickly.\u00a0 Following previous cyclones, mining companies have worked hard to install infrastructure to minimise cyclone related production disruptions. Reflecting this, BHP Billiton announced that it had resumed production on April 4th 2017, shortly after Cyclone Debbie passed (BHP Billiton 2017: 1) and Glencore has also resumed operations.\u00a0 Most port facilities have also resumed work.\u00a0 However, rail logistics are a problem, with several lines needing repairs, but operator Aurizon expected most repairs to be completed quickly.\u00a0 There are also usually considerable supplies dockside waiting to be shipped, suggesting port coal stockpiles will fall rather than failure to ship supplies.\u00a0 Hence there seems no positive news for Mongolia here.<\/p>\n

Indeed, the Australian Government has been quite calm in its reactions to post cyclone supply problems.\u00a0 The most recent projections by the Department of Industry, Innovation and Science, released in early April 2017, suggests Australian metallurgical coal exports in 2017 will be very similar to exports in 2016.<\/p>\n

Figure 2: Steel making metallurgical coal, actual and forecast, millions of tonnes<\/strong><\/p>\n

Source: Australian Government Department of Industry, Innovation and Science, April 2017, Resources Energy Quarterly<\/p>\n

Other markets<\/strong>
\nObviously trends in the international price for copper, as well as gold prices are key concerns for Mongolia.\u00a0\u00a0 Australia is also a significant producer of copper and gold.\u00a0 Australian Government recent reviews of potential copper and gold prices are discussed below.<\/p>\n

Figure 3: Recent Australian government projections for copper prices<\/strong>
\nThe Australian Government suggests the outlook for copper prices is quite positive, as shown in Figure 3 to the left.\u00a0 This outlook, if realised, is positive news for Mongolia, given the prospective ramp up in OT copper production in the years ahead.\u00a0 The Department of Industry also suggests the outlook for gold prices to 2022 is solid, although possibly not as exciting as some in Mongolia would like!<\/p>\n

Figure 4:\u00a0 Australia\u2019s official view \u2013 gold prospects<\/strong><\/p>\n

Source: Australian Government Department of Industry, Innovation and Science, April 2017, Resources Energy Quarterly, p. 97<\/p>\n

Other factors influencing coal prices<\/strong>
\nChina remains the key to the world metallurgical coal outlook.\u00a0 The Australian Government Department of Industry, Innovation and Science notes that the main driver for China\u2019s increased import demand in 2016 increase was reduced domestic supply availability, after domestic production and capacity cutbacks (Department of Industry, Innovation and Science 2017: 54).\u00a0 Chinese decisions concerning China\u2019s own production of coking coal will again be a key influence for its import demand and hence coal prices in 2017.<\/p>\n

China\u2019s refusal of supply from North Korea is also important.\u00a0 Recently China has refused to allow coal ships from North Korea to enter Chinese ports.\u00a0 This reflects China\u2019s concerns with political developments in North Korea.\u00a0 Reuters reported that China\u2019s customs department issued an official order on April 7 telling trading companies to return their North Korean coal cargoes (Reuters 2017:1).\u00a0 If China maintains this policy stance, potentially this could result in increased Chinese demand for coking coal from Mongolia.<\/p>\n

On the other hand, iron prices have slumped recently.\u00a0 The main factor seems to be a decline in demand for steel to support residential construction in China.\u00a0 The Chinese dragon\u2019s head and feet are all moving, but sometimes the head does not seem to connect well with the feet!\u00a0 As noted by Australia\u2019s ABC News, uncertainty seems the only certainty for mining, oil and gas as 2017 unfolds (McHugh 2017: 1).<\/p>\n

http:\/\/en.mongolianminingjournal.com\/content\/64410.shtml<\/p>\n","protected":false},"excerpt":{"rendered":"

Paul Mills, Senior Economic Adviser Mr Mills previously worked with Skills Australia, an Australian government agency where one of his key responsibilities was to assess demand for skills from Australia\u2019s mining sector Introduction There has been speculation that flooding arising from the massive rainfall dumped by Cyclone Debbie would have a major impact on metallurgical […]<\/p>\n","protected":false},"author":2,"featured_media":6739,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[59],"tags":[],"_links":{"self":[{"href":"https:\/\/chinggislaw.com\/index.php?rest_route=\/wp\/v2\/posts\/6271"}],"collection":[{"href":"https:\/\/chinggislaw.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/chinggislaw.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/chinggislaw.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/chinggislaw.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6271"}],"version-history":[{"count":3,"href":"https:\/\/chinggislaw.com\/index.php?rest_route=\/wp\/v2\/posts\/6271\/revisions"}],"predecessor-version":[{"id":6971,"href":"https:\/\/chinggislaw.com\/index.php?rest_route=\/wp\/v2\/posts\/6271\/revisions\/6971"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/chinggislaw.com\/index.php?rest_route=\/wp\/v2\/media\/6739"}],"wp:attachment":[{"href":"https:\/\/chinggislaw.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6271"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/chinggislaw.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6271"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/chinggislaw.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6271"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}