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The rise of the juniors and the future of Australian seaborne coal

04 August 2021 | BBMC Events

BBMC JULY NETWORKING LUNCHEON WRAP UP

The fourth BBMC luncheon for the year was held last week in Mackay. We changed up the format, and the audience were treated to two exceptional speakers, Mark Gresswell, Director, Commodity Insights and Nick Jorss, Executive Chairman, Bowen Coking Coal.

The event was sponsored by Coxons Group and CIVEO.

If you couldn’t make it, here is what you missed:

The rise of the Juniors and the future of Australian Seaborne Coal
Coking and thermal coal have undeniably strong futures, based on Asian economic growth and demand for electricity. Although the public perception is that thermal coal is in inevitable decline, the hard data indicates just the opposite.

Both speakers strongly affirmed the buoyant future of coking and thermal coal, backing up their assertions with economic data from around the globe.

Global perception
Mark pointed out that global perceptions of coal are largely framed by the North Atlantic players – USA and Europe. Both those continents have access to relatively cheap gas for electricity, which has displaced some coal-fired generation.

According to Commodity Insights’ research, “Asia will account for over two-thirds of global
electricity demand growth by 2040. Asian electricity generation growth will be equivalent to the current generation of North America plus Europe. This will be supported by over 150,000MW of new coal-fired capacity being built across Asia. And regarding steel, the potential for growth in consumption from the current low per capita level is massive.”

Conversely, Asia has minimal competitive gas supply and requires coal, the cheapest energy alternative, to feed economic growth based on its strongly increasing demand for energy and steel, and its emerging economic status on the world stage.

The reality of Asian growth
The reality is that forecast growth by every metric for ‘the Asian juggernaut’ will continue to create a sustained and growing demand for both coking and thermal coal.

The current strong coal prices have rebounded from sub-US$50 per tonne 12 months ago to an all-time high for thermal coal (over US$150), with high prices and increased demand also bolstering metallurgical coal exports. According to the OECD, in 2019 Asia accounted for 42% of global GDP. This will rise to 54% by 2050, and Asia will include 4 of the world’s 5 largest economies (China, India, Indonesia and Japan).

Supply-side challenges
While the outlook is decidedly bullish on coal exports from Australia, supply-side challenges threaten to hamper the country’s ability to meet forecast demand. The regulatory approval process is sluggish to respond to calls for rationalisation, and sourcing capital is becoming an issue as banks and financial suppliers bow to negative social pressures. Overall, Mark forecasts that “slowing of supply and ongoing demand growth will result in a period of high prices and ‘super-normal profits’ for coal producers globally.”

Subscription-based analysis
Mark introduced a new subscription service for the mining sector. Commodity Insights deliver information services so that anyone in the industry can access trade statistics and flows, global catalysts, and research covering every pertinent aspect of the global coal markets.
CLICK HERE for more details.

Bowen Coking Coal gathers steam
Nick Jorss, Executive Chairman, Bowen Coking Coal (BCB) reiterated Mark’s overall optimism for the future of the Queensland coal industry. The Bowen Basin owns the most favourable geography for seaborne coal to Asia, and Bowen Coking Coal are poised to emerge as the Basin’s next significant coking coal producer.

The company sees no credible threats to metallurgical coal for the bulk of steel production. Because all renewables require steel for manufacture, even the projected growth of renewable energy will increase the current demand for steel manufacture, backed by coking coal.

With four sites currently under development, they plan to export coking coal by mid-2022. All projects are located near infrastructure and operating mines to maximise synergies. Between them, the Board and management have opened 11 and operated 25 mines, and are actively pursuing complementary project opportunities focused on the development of high-quality coking coal projects in the Bowen Basin. “While sourcing capital funding can be a major stumbling block to development, there are still pools of capital out there, both institutional and individual,” said Nick.

As a smaller and more nimble company than the majors, BCB are able to take an opportunistic position, and are proud to be fostering the next generation of the coal industry. They’ll be leading the way in changing public perception by proudly telling the success story of the Bowen Basin.

What does this mean for Bowen Basin’s suppliers?
The two projects anticipating to gain 2021 approvals, Broadmeadow East and Isaac River, are expected to create 270 jobs from 2022. Scaling and upgrading of these, plus continuing development of the Hillalong and Cooroorah projects will bring corresponding boosts to local contractors and suppliers.

“It’s encouraging to consider both the enormity of ‘the Asian juggernaut’, as well as the exciting future of this upcoming junior producer in the Bowen Basin,” said Jodie Currie, Director of the Bowen Basin Mining Club.

Book Recommendations
During Nick’s presentation, he recommended two books that everyone read.
Click the links below to view.

We look forward to hearing your feedback and discussing them with you.

Our event sponsor, Coxons Group Australia is the largest cooling component repair specialist in Australia, servicing the heavy industries for over 35 years. Operating in the Bowen Basin region from their Mackay and Rockhampton workshops, Coxons’ specialises in radiator and heat exchanger rebuilding and overhauls with their Repair & Return and Service Exchange services.