July 29, 2014
The spin is that coal is the future and that the boom is eternal. The reality is otherwise: low profits, declining demand, collapsed global prices. Despite this the federal government has approved Adani's giant Carmichael Coal Mine in the Galilee Basin in Queensland and associated rail link to the coast that it says will generate as much as $300 billion for the Australian economy and help lift 100 million Indian consumers out of poverty.
Who are they kidding? The 60 million tonnes of coal a year from the Carmichael Coal Mine will push global coal prices down further, double the price of electricity for Indian consumers and is not financially viable, given the amount of infrastructure that needs to be built to get the coal mine operational. The Carmichael Coal Mine is a potentially stranded fossil fuel asset.
Adani's plans include clearing over 20,000ha of bushland to build the mine, six open cut pits and five underground mines with a total area of 28,000 hectares, a private railway and expanded port facilities, as well as pulling billions of litres of water every year from local rivers and aquifers.
These plans make no financial sense given coal mining is unprofitable in today’s tough market conditions. Adani needs $100 a ton but commodity prices are around $50 a ton due to excess supply, with the outlook for global prices to recover being quite low given declining Chinese demand for coal.
Presumably, Adani is waiting for a big uplift in the market environment for coal. They are dreaming.