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The Queensland Resources Council (QRC) has called on the Queensland government to finalise approvals for the New Acland Stage 3 project, as coal prices spike amid the Russia-Ukraine crisis.

“The world, especially Europe, needs Queensland’s high-quality commodities now more than ever,” QRC CEO Ian Macfarlane said.

“Queensland’s high-quality coal has a role to play in ensuring energy security and stability for export nations.

“Delays in finalising approvals for the New Acland mine have not only cost jobs and hurt the Darling Downs economy, but they are also undercutting Australia’s capacity to supply global markets at a time when they need our commodities the most.”

Coal miner New Hope has been battling to gain approval for the Stage 3 development of its New Acland mine, in Queensland, and was last month backed by the Queensland Land Court which recommended that the mining leases and environmental authority applications for the project be granted.

New Hope subsidiary New Acland Coal currently operates the existing New Acland mine as a 4.8-million-tonne-a-year opencut coal mine, however, the mine’s reserves are depleted. The Stage 3 expansion project will increase the mine’s yearly output to 7.5-million tonnes and will extend the operation’s life by 12 years beyond the current end-date of mid-2020.

Once approved the New Acland Stage 3 project will create 187 new jobs within the first six months, 487 jobs within 18 months and inject A$7-billion into the economy.

“In December the Land Court of Queensland recommended the New Acland Mine Stage 3 mining leases and environmental authority amendment application be granted, subject to conditions,” said Macfarlane.

“Queensland’s energy exports, including coal and liquefied natural gas (LNG), have a role to play as nations work towards net zero emissions goals, especially as export nations take the time needed to implement new technologies, including renewables, carbon capture and storage, and to further develop hydrogen potential.

“Queensland has the resources to be at the centre of each of these markets, but lengthy project delays are holding the state back and could compromise future opportunities.

“Australia has built its reputation as a trusted global supplier of commodities. The Queensland government cannot drag out a decision on New Acland any longer.”

The QRC’s call comes amid reports from advisory firm Wood Makenzie (Woodmac) that the Russia-Ukraine crisis had shocked the coal and broader energy markets, with price spikes observed over the past few days.

“European thermal coal prices have surged to record highs with futures prices above $400/t until Q4 2022. Some buyers in Japan and Europe have already indicated they are looking to replace Russian supply, and non-Russian thermal coal in Europe is attracting a significant premium over Russian material,” said Woodmac principal analyst Rory Simington.

“Prices in the Asian market have also responded with Newcastle physical prices reaching $400/t. Metallurgical coal, used in coke production and injected into blast furnaces, spiked with PCI prices – a key Russian export – leaping to an unprecedented level and nearing towards $400/t.”

However, Simington noted that relatively normal import activities remain the most likely outcome.

“Heavy reliance on Russian coal imports in the current tight market means a prolonged cut-off would bring damage to both Russia and importing countries and is unlikely in Wood Mackenzie’s view. Russian coal accounts for roughly 30% of European metallurgical coal imports and almost 70% of European thermal coal imports.

“North Asian buyers South Korea and Japan also have significant exposure to Russian coal with Russian thermal coal representing 20% of South Korea’s imports and over 10% of Japan’s, while Russian metallurgical coal represents over 15% and 5% of the North Asian markets’ imports, respectively. 

“Together, Europe, Japan and South Korea imported around 90-million tonnes of Russian thermal coal and 25-million tonnes of Russian metallurgical coal in 2021. These coals are predominantly high energy thermal coal and PCI and cannot conceivably be replaced in the currently tight global supply market.”

Simington noted that power plants currently using this type of coal are specifically designed to run on high-energy coal and are unable to switch coal types. Furthermore, steel mill operators would also be challenged to replace Russian PCI and metallurgical coals given the current global spot supply shortages especially out of Australia.