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Coal is cranking but still a ?dirty word? for some

Highlights
  • Reports of coal?s ?impending death are greatly exaggerated?.
  • The commodity remains Australia?s second-largest export.
  • Thermal coal exports to rise from A$16 to A$24 billion in 2021-22.

Coal is not dead but it?s still considered a dirty word to some.

According to a Department of Industry, Science, Energy and Resources report, Australia?s metallurgical and thermal coal export earnings are expected to rise in 2022-23.

Exports are forecasted to recover to 212 million tonnes by 2022?23, as Asian economies return to normal conditions with export values expected to rise from A$16 billion in 2020?21 to A$24 billion in 2021?22.

The Australian government has listed 116 major coal and gas projects in the pipeline and under development, each valued at more than A$50 million, each with the potential to reach a final investment decision (FID) in the next five years.

However, not all will reach FID and be built.

Minister for Resources and Water, Keith Pitt, recently said reports of coal?s impending death are greatly exaggerated and the commodity will remain a significant contributor to the Aussie economy well beyond 2030 as global demand continues to grow.

However, today (December 10), reports suggest Australia?s coal power plants are retiring two to three times faster than anticipated and the country needs A $12.5 billion of urgent transmission projects to counter the trend.

Almost two-thirds of coal generation capacity is likely to be gone by 2030, the Australian Energy Market Operator said.

Australia remains the world's biggest coal exporter and has not signed up for a zero carbon emissions target by 2050 even as other countries outline stricter and more ambitious targets.

While coal remains Australia?s second largest export, it accounts for 6% of the world?s total annual production behind China (50%), India (10%) and Indonesia (7%).

As it stands, coal is still a dirty word to some.

Australian coal companies are an outlier, with continued low prices resulting in losses. While coal prices have subsequently increased to record levels through to October 2021, this is expected to be temporary, and an unsettled future remains.

Coal is multifaceted and it continues to have a tough time.

Only four coal miners remain in the mid-tier 50 (MT50) down from six in 2019, and coal comprises just 7% of the total market capitalisation (down from 22% in 2019).

Some companies, such as mining giant BHP (ASX:BHP), are exiting coal.

BHP is offering A$275m for a suitor to buy its Mount Arthur coal mine. It?s also divesting the Cerrej?n mine.

While the world transitions to a net zero global economy it seems Australia still can?t let go of the dark sedimentary rock.

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