Old King Coal Still Rules The Land Down Under

Posted on Mon 10/11/2021 by

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By Duggan Flanakin ~

Politics makes strange bedfellows and even stranger divorces. Take the Chinese boycott of Australian coal, which began about a year ago. China is upset over Australia’s assertions that China was at fault for the COVID-19 pandemic and egregious human rights violations. [China in response accused the U.S., Australia, and NATO of human rights violations in Afghanistan.]

A year later, Australia is getting record high prices for its coal, while China is suffering through shortages of its primary fuel for electric power generation. The Sydney Morning Herald reports that the market price for Australian metallurgical coal has risen from about $US100 per metric ton to $US220 per ton, while Chinese steel mills, barred from buying Australian coal, are paying up to $US440 per ton for lower grade metallurgical coal from other nations.

Business columnist Stephen Bartholomeusz explains that Australian coal producers found new buyers in Japan, India, the European Union, and South Korea. People were happy to purchase high-quality Aussie coal, initially at bargain prices (as Australia had to quickly sell coal originally bound for China).

China, however, was reduced to purchasing metallurgical coal from Mongolia, South Africa, Russia, and North America, all involving greater distances and therefore higher shipping costs. Too, COVID-related border closures impacted Chinese access to Mongolian coal. Some Chinese mines endured shutdowns over safety and environmental concerns.

The bottom line, says Bartholomeusz, is that the super-premium price China is paying is one of the unintended consequences of China’s efforts to punish Australia for demanding proper investigations of the origins of the pandemic, for criticizing Chinese treatment of the Uighurs, and for its unwarranted premature seizure of Hong Kong.

The surge in Australian coal prices, together with increasing demand for coal in Europe, India, and worldwide is also causing a general apoplexy among anti-coal advocates as it also impacts markets worldwide. U.S. climate czar John Kerry has condemned Australia for being one of 20 countries most responsible for 80 percent of worldwide carbon dioxide emissions. Kerry demanded that the Aussies take “bold action” to stop burning and mining coal.

Australian physician David Shearman, an anti-coal advocate, says his nation has a “duty” to end its reliance on coal. Shearman singled out three Australian political leaders with opposing views. Aussie energy minister Angus Taylor lambastes “the new climate religion,” federal resources minister Keith Pitt describes himself as “Mr. Coal,” and environment minister Sussan Ley pushes for faster tracking for approval of resource development projects.

These tough-minded Aussies, however, are at the front lines of protecting world populations from bitter winters while also ensuring that poor nations have a chance at economic development. By contrast, China’s self-imposed ban on Aussie coal has been devastating to its people. Two-thirds of China’s provinces are currently rationing power, factories have closed or reduced hours of operation, traffic lights are turned off, and households have gone dark.

China’s power crunch is also impacting food processing, and thus food security. Making matters worse, should La Niña weather conditions return (and NOAA says there is a 70 percent chance they will), China will likely experience a colder than normal winter.

The South China Morning Post reports that, as of September 21, the Chinese had only a 15-day stockpile of thermal coal (used to generate electricity), a third below minimum needs for energy security. Sinolink Securities estimates that China’s coal needs through the coming winter will be 12 to 19 percent lower than its minimal need to avoid major blackouts. Already, 20 of 31 provincial jurisdictions have begun rationing electricity.

China’s arrogant boycott of Australian coal has been a boon to the Indian economy, thanks to the bargain prices for Aussie coal initially targeted for Chinese markets. Coal is still king in India, The BBC reports that coal provides jobs for up to 4 million Indians, mostly in the eastern states of Jharkhand, Chhattisgarh, and Odisha.

According to union leader Sudarshan Mohanty, India cannot live without coal, which is “the lifeline” that enables economic growth. Even slowly phasing out coal production would devastate his nation.

On the other hand, Europeans, who are realizing their error in condemning coal, are also feeling the impacts of the Chinese boycott. As natural gas prices rise, European power producers are begging Russia – which has increased its exports to China in the wake of the boycott — for more coal to ease their energy crunch even prior to the onset of winter.

The Russians, however, had become less interested in placating European demands as EU nations began shutting down thermal coal power stations. Now, Russia has long-term contracts in Asian markets (including China), leaving little excess coal production that Russia can allocate back to EU nations. Other disincentives for Russian producers include the lack of transportation capacity and the need for additional processing of coal to meet EU environmental standards that makes supplying European markets less profitable.

As the UN’s COP26 climate conference in Glasgow nears, the pressure is mounting on Australia to bow its knee to the catastrophists and commit to ending its production of fossil fuels. But, despite the International Monetary Fund’s threats of much higher borrowing costs for nations that fail to commit to Net Zero, Australian Prime Minister Scott Morrison says his nation has no intention of folding.

Deputy Prime Minister Barnaby Joyce justified his government’s firm stand on economic grounds. Fossil fuel exports are a major factor in the Australian economy, as the nation leads the world in coal exports and is also a major exporter of natural gas. Joyce says proceeds from mining and agriculture industries are vital for people in regional towns, from hairdressers to auto service providers. “If you take away your nation’s largest export, you’ve got to accept a lower standard of living.”

Duggan Flanakin is the Director of Policy Research at the Committee For A Constructive Tomorrow. A former Senior Fellow with the Texas Public Policy Foundations, Mr. Flanakin authored definitive works on the creation of the Texas Commission on Environmental Quality and on environmental education in Texas.

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