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Coal industry decline in Hunter inevitable

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Lee Rhiannon 22 May 2014

This article was published in The Newcastle Herald on 22 May 2014.

Federal member for Hunter Joel Fitzgibbon responded to the recent loss of 500 more jobs in Hunter mines by saying the region would be an economic "basket case" if the coal industry is withdrawn.

He is ignoring the fact that the industry is withdrawing anyway, and that we need a government willing to support the diversity of the Hunter economy and help coal workers transition to a low carbon future.

The coal industry is facing decline, and communities are bearing the costs of an industry that is ignoring economic logic. While the list of proposed coalmines and expansions is long, internationally the price of coal is falling - this oversupply of coal is to blame for these job losses.

Reports of a structural decline in coal and the risk of stranded assets are becoming daily news items, as demand for our coal from both India and China slows.

In our communities, farmers, winemakers, horse breeders, rural business people, workers, parents and grandparents are calling on governments to recognise that our future does not lie in coal, and that we need to plan ahead for a diverse and sustainable economy that is not reliant on mining.

Mining is not in the top five employers in the Hunter. It is ninth (at 5 per cent) behind healthcare and social assistance (13 per cent); retail; manufacturing; construction; education and training; accommodation and food services; public administration and safety; professional, scientific and technical services.

The price of coal has dropped from $US130 a tonne in 2011 to $US81.50 now. At least half of Australia's mines operate at a loss when the price of coal is below $US87.

The coal industry has responded with attempts to improve "efficiency" by up to 25 per cent. Between August 2012 and August 2013, 11,000 jobs were lost nationally. It is clear that the times of having a well-paid, lifetime job in the mines are over.

International demand for coal is declining. Japan, our key long-term customer, is pushing the downward trend in coal prices.

Xstrata Coal has locked in a contract for the power station operator Tohoku Electric Power Company, setting the benchmark for export coal that indicates there is little hope for any price recovery.

Australia is vulnerable to these changes, as has been highlighted in a recent report by academics from the University of Oxford.

They note that the impact of the numerous mining projects proposed here will put further downward pressure on the price of coal, and that we are at risk of creating a swath of stranded assets if we do not plan properly.

The Institute for Energy Economics and Financial Analysis highlighted a decline in demand for coal from India, and said coal projects proposed for the Galilee basin were likely to be financially unviable because of this.

They expect India to follow China's lead and move towards renewable energy, which is becoming increasingly cheaper - the cost of solar in India has fallen 65 per cent in three years.

Much of the recent growth we've seen in exports from the Port of Newcastle was an expansion into the Chinese market.

In 2008-09 our coal exports to China were 3.75 per cent of the make-up of exports.

Now they are nearly 20 per cent.

Yet China is moving away from coal.

Campaigns in China by communities concerned about air pollution have led to the Chinese government setting solid targets for reducing coal consumption, with 12 of 34 provinces committing to controlling the use of coal.

These provinces cover 44 per cent of China's total coal consumption.

The NSW and federal governments here ought to heed these warnings.

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