Some mines running at a loss, but future strong for Australian coal

September 09, 2014

Demand for Australia's high-quality coal will remain strong for decades into the future as global energy needs continue to rise toward 2050, according to Glencore Coal's Mick Buffier.

Addressing the Sydney Mining Club, Mr Buffier acknowledged that Australian mining, in particular the coal sector, is facing significant economic challenges and he estimated that around one third of Australia's coal mines are currently operating at a loss.



Pictured: Mick Buffier with Julian Malnic, Chairman of the Sydney Mining Club

He said there are a number of reasons why costs have risen. "The first one is the high Australian dollar, which is not helping. You can say that during that boom period we did lose control of our costs.

Mr Buffier cited data from the Minerals Council of Australia showed that between 2006 and 2011, the cost of an installed tonne of new mine capacity rose from about $US70 to about $US170 a tonne. "The rest of the world was sitting at about $US120. That's part of the explanation."

But he debunked some of the myths about coal and its future as a source of energy, siting independent analysis showing that prices would again rise despite current economic challenges.

The world's population is forecast to rise from 7 billion to 9 billion by 2050 and he said global energy demand would continue to drive growth from all sources, including coal, for many years.



"Both supply and demand are continuing to rise. Ultimately that oversupply will be caught up. Will it occur at the end of next year? Probably not, but eventually it will come back. Over time, with less investment, that will correct. You only have to go back through the past 30 or 40 years and this has happened many times."

Mr Buffier cited the quickening urbanisation in Asia, in particular in India and China, as well as the hundreds of millions of people in the developing world that will still be without access to electricity in 2030, as to why coal and carbon capture and storage will be part of the answer to the world's growing energy needs.  


Glencore Coal is the world’s largest exporter of seaborne thermal coal used to generate electricity and one of the largest producers of coal used to make steel and other industrial applications.

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