Goldman Sachs has called the fallout from the Russian invasion of Ukraine as the biggest upheaval in commodities since 1973 and it has direct implications for Queensland’s biggest export – and climate change.
Coal prices have soared and awakened a sector that was facing a long road to oblivion. However, any hopes of a domestic revival are likely tempered by the growing public and political opposition to coal, despite its financial benefits to Queensland.
In the middle of it all is billionaire Clive Palmer who has vast interests in coal in the Galilee Basin as well as in the Styx Basin in central Queensland that now appear to be heading for a clash with the Australian Defence Force.
Palmer’s highly problematic plans for his Central Queensland Coal project have been found to be in potential conflict with the ADF’s Shoalwater Bay training area, which is where the Singaporean Army has a use agreement. Decades ago, plans to mine Shoalwater’s sands were knocked back because of the proximity to the training area.
Activist group Lock the Gate discovered documents through Freedom of Information showing the Federal Government starting to get nervous about Palmer’s plans when it realised the mine overlapped the Shoalwater training area.
Palmer’s project has also been criticised by the Independent Expert Scientific Committee over its potential impact on groundwater and the State Government, which issues the mining leases, has recommended against it while the Federal Government has yet to make a decision.
Palmer’s Galilee Basin projects have also stalled although there was a plan to develop a 1400-megawatt coal fired power station at Barcaldine which he attempted to have approved through the local council. However, that has been called in by Planning Minister and Deputy Premier Steven Miles and the Government has said that any new coal-fired power station would mean that an existing one would have to close.
It comes as coal prices jumped to record levels. China, which used to import huge amounts of coal from Australian before its trade embargo, now plans to lift production by 300 million tonnes and build a massive stockpile of 620 million tonnes in an attempt to overcome shortages which led to winter blackouts in parts of the country.
ANZ said those plans would normally crash the coal price, but it hasn’t and it expects the price to remain high because China would still need 100 million tonnes of imported coal as the country increases output from its power stations.
“This is likely to dent the emission reduction efforts of China and the world,” ANZ analysts Daniel Hynes and Soni Kumari said.
But mining companies were unlikely to open up new mines to meet demand because of what ANZ described as “investment headwinds”, which is really a lack of financial backing for coal.
The Russian-Ukraine war has meant Europe, which sourced much of its gas from Russia, would switch to coal.
The other major coal producer is Indonesia, but it is facing its own domestic shortages and its Government recently banned the export of coal so that it could rebuild inventories. That ban has been lifted but Indonesia now has a mandated domestic coal market obligation that will impact exports.
Goldman Sachs head of commodity research Jeff Currie said he had never seen anything like the supercycle the sector was now experiencing.
“Apart from the actual war, you also have an economic war in the sense that you have a decoupling between Russia and the West,” Currie said.
“The actual physical decoupling – which will be seen in the commodity space – hasn’t really started yet. We have seen boycotts but the actual transition to do this is going to be a very painful process and difficult to physically achieve.”