Some industry participants are operating at a loss, bound to produce in Australia by the constraints of long-term contracts.
Melbourne, Australia (PRWEB) November 16, 2014
Black coal is a key input to steelmaking and energy generation. While black coal deposits are found all over the world, Australia is one of the world's lowest cost producers and a major coal exporter. Domestic reserves are high grade, economic to access and far in surplus of domestic requirements. According to IBISWorld industry analyst Alen Allday, “as exports account for more than three-quarters of industry revenue, industry performance is volatile, relying on trends in global commodity prices and the strength of the Australian dollar.” In the past five years, operators in the Black Coal Mining industry in Australia have come under pressure from global trends in coal demand and domestic production hurdles. Industry revenue is expected to decline at a compound annual rate of 1.1% over the five years through 2014-15, to $49.8 billion.
Over the past five years, increases in global supply and decreases in global demand have put downward pressure on world coal prices, especially for steaming coal. After a strong drop in world coal prices in 2011-12, prices have continued to fall as additional production capacity has come into operation globally. “Adding to the industry's woes have been extreme weather events, industrial action and increased taxation,” says Allday. Softening commodity prices signal that the industry is transitioning to cost management rather than expansion. Major players are fighting to achieve economies of scale through higher output to remain globally competitive. As prices continue to fall in 2014-15, industry revenue is forecast to decrease by 3.8%, despite higher production. Some industry participants are operating at a loss, bound to produce in Australia by the constraints of long-term contracts. The number of mine stakes up for sale or changing hands is increasing, and production has stopped at some higher cost mines in response to the lower prices. The industry exhibits medium levels of market share concentration. Major players include BHP Billiton Limited, Glencore Coal Investments Australia Pty Limited, Rio Tinto Plc - Rio Tinto Limited, Mitsubishi Development Pty Ltd and Anglo American Australia Limited.
Higher production and improving global demand are forecast to lead the Black Coal Mining industry back to a growth path in the next five years. The main driver of growth will be improving global economic conditions and growing demand for imports from emerging economies such as India. These factors are forecast to support demand for Australian coal exports for use in electricity generation and steel manufacturing. While this is a positive sign for the industry, the five-year price outlook remains subdued, as the growth in China's demand for imported coal is forecast to slow.
For more information, visit IBISWorld’s Black Coal Mining industry in Australia report page.
Firms in the industry mine black coal for either domestic use or export. Black coal is mined by open-cut and underground methods. Mining includes the extraction of the coal and associated activities such as coal washing.
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