China’s ban and Queensland’s higher royalties for coal producers have little impact on super profits, with exports hitting a record high.
The state’s coal industry is a clear winner from the global energy shock as the world searches for new supplies, according to data released by the Queensland Treasury.
The high prices took the value of exports to a record $79.7 billion for the year to the end of September after already more than doubling in 2021/22.
China’s informal ban on Australian coal and global decarbonisation efforts are not hurting Queensland exports, the outlook report found.
“Australia is a very significant exporter,” Treasury official Dennis Molloy said.
Importantly for Queensland’s coal industry, demand for metallurgical coal used for steelmaking is stronger than for thermal coal for power generation.
“Queensland’s major trading partners in the Asian region have been pivotal in achieving its position as the world’s leading exporter of metallurgical coal.”
He said future demand depends on global steel production, particularly in China and India.
Although global production peaked almost 10 years ago, Australia’s coal tonnage is only 1% lower than in 2013.
China was the biggest coal customer in 2020 before the ban, taking 55m tonnes, more than a quarter of exports in the year to October 2020.
But the hole left by its exit from the market has been filled by India, Japan and South Korea – together accounting for almost 70% of Queensland’s 202.1 million tonnes of exports to November 2021.
The International Energy Agency said coal must bear the bulk of the burden to achieve net zero emissions.
But the Treasury expects significant royalties to flow into the coffers until 2050.
The Treasury also does not expect the new state royalties to weigh much or have a significant impact on investment decisions, as higher coal prices generate more profits.
For high-quality hard coking coal, the new royalty tranches are expected to add less than $2 per tonne to those payable by producers.
For thermal coal, medium-term prices are expected to average below $175 per ton, which would mean that no additional royalties would be due to taxpayers.
The state budget projected that the new scheme would bring in an additional $1.2 billion over the next four years.
But most – around $765 million – is expected to be raked in in the current fiscal year, after which coal prices will start to fall.
Any loosening of China’s coal ban, if recent signs of a diplomatic thaw extend to trade, could trigger a sharp drop in the global price.
An end to the Russian invasion of Ukraine and sanctions would also cause coal prices to fall.
Queensland Treasurer Cameron Dick will update the forecast in the upcoming Mid-Year Budget and Economic Review.