A report just released by Australia’s Bureau of Resources and Energy (BREE) underscores the coal sector’s ongoing value to the Australian economy as the country’s second most valuable export industry. BREE’s quarterly September 2013 forecasts that the value of Australia’s metallurgical coal exports will grow by an average annual rate of 3.2% to reach A$35 billion in 2017-18. The value of thermal coal exports is predicted to rise by an annual rate of 6.3% to exceed A$24 billion.

BREE states: “These results will be achieved off the back of continued growing demand from emerging economies, including China. New projects in New South Wales and Queensland’s Galilee Basin are forecast to support annual increases in thermal coal exports of 8% a year to a total of 271 Mt in 2018.”  The BREE report points to the increased energy demand of emerging economies concluding that the “low cost and reliability of coal-fired electricity generation capacity will continue to make it appealing.”

BREE forecasts continued demand growth from South Korea, India and China where it predicts more rapid growth in the use of gas, nuclear and renewables in the energy mix are expected to lower coal’s share of China’s energy mix rather than a decrease in coal consumption. For metallurgical coal, China’s imports are forecast to rise to 107 Mt by 2018, an average annual growth rate of 7%. Demand from Brazil and India is also expected to record strong annual growth of 6% and 3.7% respectively. Australia’s exports of metallurgical coal are forecast to reach 196 Mt in 2018 with an annual growth rate of 4.5%. BREE concludes that even stronger results are possible if producers in Australia can reduce their operating costs and lower their positions on the global cost curve.

The BREE analysis verifies coal’s continued contribution to the national economy and the significant potential for new investment and growth. BREE’s analysis also underscores the need to tackle the structural competitiveness problem which will determine if Australia secures maximum returns from future minerals resource development. Abolishing the carbon tax – which adds more than A$1.2 billion in deadweight costs to the mining sector – and the Minerals Resources Rent Tax will also lift some of the burden off Australia’s coal sector.