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Economics Legislation Committee
Department of Industry, Innovation and Science

Department of Industry, Innovation and Science


CHAIR: We might kick off questions for resources.

Senator STOKER: Good evening. I'm not sure which of you is the right person to answer the question but I'm sure you'll work it out between you. Can you please advise how much coal Australia exported in the last financial year, breaking that down into both thermal and metallurgical.

Senator Canavan: We might need to get officials from the Office of the Chief Economist to answer that—a lot, though, is the answer.

Senator STOKER: That's an answer that will make me happy.

Ms M Bray : Are we talking volume or value?

Senator STOKER: Can you give me both?

Ms M Bray : Yes: 2017-18 metallurgical coal export volumes were 179 million tonnes; thermal coal, 203 million tonnes; and the export value was $38 billion for metallurgical coal and $23 billion for thermal coal.

Senator STOKER: Do you have any sense of where those numbers are likely to go in the year to come?

Ms M Bray : Those numbers come out of our December 2018 resources and energy quarterly. The next one is due out on 1 April. We are working through those figures at the moment.

Senator STOKER: I'll wait with bated breath then. Is this set of results higher or lower than other years? Where does it sit in the scheme of things?

Ms M Bray : Prices have been strong, volumes have been increasing and we're heading for record highs.

Senator Canavan: The figures I have is that last calendar year we exported $66.2 billion of coal. 2017, the year before, was the nearest, $57.1 billion, but before that $46 billion was the highest previously, so $66 billion is a good $20 billion higher than the years before 2017.

Senator STOKER: What can you tell me about global demand for coal?

Ms M Bray : The International Energy Agency is where we look at our information for long-term projections for demand for coal. They're projecting in their 2018 World Energy Outlook that demand for coal in the Asia-Pacific region will rise by 492 million tonnes of coal equivalent between 2017 and 2040.

Senator STOKER: Is demand expected to increase in countries Australia exports to throughout the Asia-Pacific region?

Ms M Bray : Yes, that's correct.

Senator STOKER: Can you give me some detail on what that's expected to look like?

Ms M Bray : Under that IEA World Energy Outlook, Australia is the only coal producer expected to increase coal projection over the period to 2040, by 78 million tonnes of coal equivalent between 2017 and 2040.

Senator STOKER: Is that what is contributing to coal being our top export or is it some other factor? Is it global demand, Asia-Pacific demand or something else?

Ms M Bray : Asia-Pacific demand primarily.

Senator Canavan: Almost all of our export coal goes to the Asia-Pacific region. A small amount ends up in Europe. That is the relevant market for us. On the thermal coal side, I have advice that demand is expected to be particularly strong in India and other South-East Asian countries, although it is expected to stagnate and decline in China, still leading to that overall net increase, as Ms Bray was outlining. In the Asia-Pacific region our major competitors to supply coal are Indonesia and South Africa. Vietnam, previously an exporter, is now an importer of coal, because it is building more coal-fired power stations. Indonesia in the last few years has not increased its exports—again, seemingly because of its growth in domestic coal fired power production. Things are looking up for our coal sector, because alternative sources of supply in the region are limited and demand is very strong.

Mr Lawson : It might be worth adding that the quality of Australia's coal is relatively good in terms of both its thermal content, which means it has less carbon dioxide per unit of energy, and the amount of impurities. China in particular is looking to improve its environmental outcomes, increasing demand for high-quality Australian coal.

Senator STOKER: You anticipated my question perfectly. I was going to ask whether the quality of Australian coal was a factor in all this. I have been reading in the press in recent days that coal demand for power generation is declining, yet it looks as though our exports have increased. Can you help me understand the incongruence of those two messages, please.

Mr Lawson : In part it is that issue I was just talking about.

Senator STOKER: Quality.

Mr Lawson : The quality of the Australian coal, so its relative attractiveness, but also the story about demand for coal is different in different markets: in Europe, less growth and demand for coal; in our markets, in the China market and potentially India, there is an increasing demand. There are different growths in energy demand in different parts of the world. How that's delivered is different. The markets we're focusing on for coal, Asia, are growing economies, have increasing demand for energy and tend to be coal orientated. Within that, our coal is, as we said, the high-quality coal, so we're getting an improvement in that demand.

Mr Sheldrick : Unfortunately, in the numbers that I have, which I can share with you, there is a bit of mixing. Your question was really about whether coal demand and coal-fired power generation is decreasing. If we look at the World Energy Outlook projections out to 2040, coal power's share of global energy use will drop down to about 22 per cent, but more coal is likely to be consumed in 2040 as a result of the global primary energy demand increasing. This is where I'm going to mix a few of the numbers. Primary energy demand is going to increase from 13,972 million tonnes of oil equivalent—sorry about the mixing—to 17,715 million tonnes in 2040. So, really, the story is a much larger energy pie, with a smaller component being produced by coal, but still an overall slight increase in the amount of coal being consumed over that period. The World Energy Outlook is talking about a 1.6 per cent growth in coal over that outlook period to 2040.

Senator Canavan: I think some of the misunderstanding stems from the fact that there was a reduction in coal-fired power production a couple of years ago. That was mainly associated with the economic slowdown in China. Some were projecting that that would form a trend, and some still seem to believe that. They haven't caught up with the news that the BP's statistical review of world energy showed that last year a record amount of coal-fired power was generated. So the decline that occurred a couple of years ago has been recovered—indeed, surpassed—with economic growth picking up particularly in the Asia-Pacific region. The United States is a similar story. It has a declining share of coal but increasing energy use. The figures are so enormous in our region that it is very likely that if, as Mr Sheldrick said, coal reduces as a share of energy, the absolute amount of coal use is going to be much, much greater. That's what's really important for our coal exports.

Senator STOKER: That's good news. Thank you.

CHAIR: Senator Store.

Senator STORER: I have questions for the National Offshore Petroleum Titles Administrator.

Senator Canavan: Chair, there are no more questions for Resources?

CHAIR: There are no more questions for Resources.

Senator SINODINOS: The minister is doing an excellent job, so I can't give him any more questions!

Senator Canavan: Okay, so Resources can go home.

CHAIR: Senator Storer.