Australia’s two major bulk-mining commodities – iron ore and coal – are travelling along different paths, as reflected in recent price developments, reported information company Resources Monitor.
In the case of iron ore, after hitting a peak in July 2019, prices dropped steadily for several months, but have since risen almost to last year’s peak. This can be attributed to strong demand in China as well as ongoing supply disruptions in Brazil.
For thermal coal, however, prices are half their level of two years ago, when they exceeded US$110 per tonne. This fall reflects weakening demand outside Asia, weakening demand in Asia in the face of the coronavirus pandemic, and increased production in China. Prices for metallurgical coal (used in steel production) are also under pressure.
Bouyed by strong iron-ore prices, producers in Australia are highly profitable and spending more than $10 billion on expansions, according to Resources Monitor.
Nearly all this expenditure is being undertaken by the three major producers: Rio Tinto (Koodaideri, Western Turner Syncline, Greater Paraburdoo, Robe Valley, West Angeles), BHP (South Flank) and Fortescue Metals Group (Eliwana, Iron Bridge, $1-billion expansion of electricity infrastructure). However, some smaller producers (e.g. Atlas Iron) are also expanding.
By contrast, recent expenditure on new coal developments has been limited.
At the same time, not all the signs for coal are negative. First production at the Adani Group’s Carmichael project, where construction is underway, will be in 2022. New mines are under consideration in New South Wales or Queensland by Glencore Australia, South 32, Pembroke Resources and Malabar Coal.
Ongoing or planned expansions of mining and/or processing include those at Tahmoor, Wambo, Bulga, Glendell and Angus Place (New South Wales), and Isaac Plains and Jellinbah (Queensland).
“Furthermore, notwithstanding their struggle with prices, coal producers in Australia are probably suffering less than those elsewhere, e.g. Indonesia, United States, Colombia,” concluded Resources Monitor.