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China, Indonesia and India emerge as miners of Australia's coal

Coal News - Published on Fri, 22 Mar 2019

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Nikkei reported that the face of Australian coal production is changing as investors focused on environmental, social and governance factors push local miners to sell off fossil fuel assets, often to emerging players in Asia who must feed the region's growing appetite for energy.

Mr Jean-Sebastien Jacques, the CEO of Anglo-Australian miner Rio Tinto, said that "Given our decision to strengthen our business and exit coal, we are now the only major mining company with a fossil-fuel-free portfolio, which means we are well-positioned to continue to a low-carbon future."

Rio Tinto completed the sale of its remaining coal assets in August. The divestment was responsible for a drop in profit, but net profit still surged 56% in 2018 thanks to rising copper prices.

Australian conglomerate Wesfarmers also exited coal production in December with the sale of its Bengalla mine. Switzerland's Glencore, which produces about 80 million tons of coal in the country, said Feb. 20 that it would cap coal production.

Compared with counterparts from developed countries, emerging-nation resource developers do not face as much scrutiny from shareholders over environmental issues. They also must keep up with growing energy demand in the region, especially in India and Southeast Asia, where renewable energy cannot keep pace with economic growth. Coal use in those regions is expected to double over the next two decades.

An executive from a competing mining company said that coal is cheaper than other fuels like natural gas but emits more carbon dioxide when burned. Environmentally conscious investors are therefore stepping up pressure on miners to exit the coal business. Glencore made $8.6 billion in 2018 from Australian coal alone, but the company "had to take action."

Emerging Asian companies have rushed in to fill the vacuum. China's Yanzhou Coal Mining, through local unit Yancoal Australia, bought Rio Tinto mining subsidiary Coal & Allied in 2017. It also acquired Mitsubishi Corp.'s stake in the Warkworth mine last March.

After acquiring Coal & Allied the company said that it was now a leader in Australia's resource industry and a key player in the international market. Yancoal sold about 30 million tons of thermal coal for energy production in Australia last year, surpassing Anglo-Australian miner BHP to become the country's second-largest seller behind Glencore.

Indonesia's Adaro Energy teamed with a fund last year to buy a mine that produces coking coal used in steelmaking from Rio Tinto for USD 2.25 billion. President Director Garibaldi Thohir said the purchase would underpin long-term growth. Thailand's Banpu bought an Australian coal company in 2010 and now controls several mines.

Global demand for coal in 2040 will total 3.63 billion tons, a 4% drop from 2020 estimates, according to a market forecast by BP. India's market, however, is expected to roughly double from 2020 levels to 900 million tons. Even when excluding India and China, Asian coal demand is predicted to more than double.

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Posted By : Rabi Wangkhem on Fri, 22 Mar 2019
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