Last week saw the NSW Planning Department recommend the Planning Assessment Commission approve the proposal to spend A$4.8 billion to develop a further 70 million tonne per annum (Mtpa) coal export facility at Newcastle Port.
Market conditions that suggest that Newcastle’s T4 coal terminal is extremely unlikely to be built.
Demand for Australian coal is flatlining, and is likely to decline over the next few years.
Demand is unlikely to ever recover, with long-term deteriorating global market conditions.
Analysts and investors who look at this project will quickly see that it is an extremely risky proposition. Current coal loading facilities are under-utilised by 30 per cent – even they are on shaky ground at the moment. The last thing that the Port of Newcastle needs right now is another massive coal loader sitting idle.
Newcastle’s three existing coal export facilities have a combined capacity of 211Mtpa, and in the 2012/13 peak of the last coal boom operated at 71% utilisation. With 60Mtpa or 29% spare capacity on the existing coal port, it is commercially illogical to be even contemplating the further 30% capacity expansion with ”T4”.
There is a significant global surplus capacity in the seaborne coal markets. With many mines currently operating at a loss even on a marginal cash basis, further mine closures are being debated, constrained against doing so by the legal liability of long term take-or-pay rail and port contracts.
Tim Buckley is the Director of Energy Finance Studies, Australasia for the Institute for Energy Economics and Financial Analysis. He has 25 years of financial markets experience, including 17 years with Citigroup culminating in his role as Managing Director and Head of Australasian Equity Research. IEEFA’s latest thermal coal outlook report is available here. This excerpt is from an opinion piece published here in Renew Economy.