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Coal & Community
<p>Ella Rubeli/The Global Mail</p>

Ella Rubeli/The Global Mail

Coal’s Over — Anyone For Wine And Cheese?

Australia’s Prime Minister conceded the boom is fading — and got cracking on trade talks with China. Can Australian farmers hope for the same advantages their Kiwi counterparts enjoy?

Kevin Rudd, on Thursday, July 11, called time on Australia’s long-running mining boom. In a speech to the National Press Club, Prime Minister Rudd — who was returned to the office two weeks ago when he and his Labor Party colleagues ousted Julia Gillard — called a blunt end to the good times which have largely accounted for Australia’s record run of 22 years of economic growth.

“The truth is, in 2013, the China resources boom is over,” he said.

The Prime Minister’s call might seem paradoxical given that it was only in April that the Government’s Bureau of Resources and Energy Economics put out its much anticipated bi-annual major projects report, which graphically illustrated Australia’s golden decade. In the 10-year period 2003 to 2012, about 390 major projects in the resources and energy sector progressed to the ‘Committed Stage’; their combined value was $394 billion, of which $268 billion worth of projects are still under construction.

Another 287 projects, valued at more than $400 billion, were either at the early ‘Publicly Announced Stage’ or at the ‘Feasibility’ mark in the April 13 list. Many of these projects — 76 in total — were new coal mines.

Not all of these mines will go ahead — some will bite the dust before raising any.

The reason, as the Prime Minister made clear in yesterday’s speech, is the plummeting price of Australia’s coal and iron-ore exports – which have been the great drivers of our resources boom. Growth has slowed in China. The Chinese are also moving, rapidly now, to contain their carbon emissions by accelerating their uptake of renewable energy sources such as solar power.

The price for thermal coal has fallen from a peak of around $US190 a tonne in July 2008 to about $US93 in May this year. Lay-offs in the industry were inevitable, and travellers need not go far from Sydney to see and feel the effects of this downturn. As The Global Mail reports in a new multimedia feature about one town’s battle to stop a coal mine expanding at Bulga in New South Wales’ Hunter Valley, businesses in coal-mining area are already feeling the effects of a forecast coal-mining winter.

<p>Ella Rubeli/The Global Mail</p>

Ella Rubeli/The Global Mail

Paul Burgess, owner of Bulga’s pub, the Cockfighter Creek Tavern, laments that he no longer has a crowd of mine contractors lining up for dinner and drinks on Thursday nights — the traditional end of the mining week — before they commuted back to their homes in Newcastle or Sydney. Others in the village who hold full-time jobs in the mines dotted around the Hunter are fearful that they are about to be laid off.

James Van der Heyden, who drives a monster mining truck at Rio Tinto’s Mount Thorley Warkworth mine, says, “There’s only a certain number of employers out there and times are getting worse and worse. Not just for mining, but for everything. We’ve got no manufacturing left. That’s all sort of shut down. So you’ve got to work for one of the fast-food chains or something.”

The coal industry estimates some 9,000 jobs have been lost in the past year since the slowdown in coal began, including 3,000 jobs in New South Wales — predominantly in the Hunter Valley. Already big coal projects are being shelved. At the end of June, Aquila Resources delayed construction of its vast Queensland Eagle Downs mine. The month before, Port Waratah Coal Services, which is backed by a consortium of big miners led by Rio Tinto and Xstrata, shelved plans to build a new, highly controversial $5 billion coal-export terminal at Newcastle.

But it is not just the economic slowdown in China that has slowed the coal trains. Big investors have realised that the threat of global warming now means that coal consumption the world over will have to drop dramatically.

After the Australian Climate Change Commission warned last month that much of Australia’s large coal and coal-seam-gas reserves would have to be left in the ground if the world was to keep global warming to less than two degrees, the executive chairman of Macquarie Bank in Melbourne, Simon McKeon, said what might have been unthinkable for an Australian banker in recent years:

Anyone who believes they have literally hundreds of millions of tonnes of first-rate, high-emitting CO2 coal can no longer blindly believe there will be a strong market for that in 20, 30 years. Putting my Macquarie hat on, the best of resource investors are absolutely on to this.”

No one is suggesting, of course, that Australia’s coal industry will fade away immediately. But the question is, what lies beyond coal for the raft of small communities throughout the Hunter Valley, the Queensland coal towns, and the regional cities that have become coal dependent?

In yesterday’s speech, Prime Minister Rudd aptly described this as a crossover period for Australia. The lower dollar — artificially induced by the mining slowdown — provides opportunities, he said, for a new phase of investment in other sectors of the Australian economy.

Kevin Rudd might well have been casting an envious eye across the Tasman when he picked up the phone to speak to the Chinese President, Xi Jinping, on the evening of Monday, July 8, and discussed how Australia and China might accelerate their long-running talks on a free-trade agreement.

The Kiwis have had such a trade deal with China since 2008, and it is paying off big time for them. In the first half of this year, New Zealand’s exports to China — mostly dairy, meat and wine — shot up by 33 per cent. Over the same period Australia managed just a 9 per cent jump. Negotiating a similar trade deal will be crucial for Australia’s life after coal, as it will be the vehicle for a push into China by Australia’s next big thing — agricultural exports.

On Wednesday, Kiwi exporters got another jump on their Australian counterparts. New Zealand — very quietly, lest it upset the Chinese — signed a breakthrough trade deal with Taiwan. It will bring immediate tariff cuts of 50 per cent for New Zealand goods entering Taiwan. And the Kiwis will undoubtedly use Taiwan’s proximity to China to generate extra business with China.

New Zealand, of course, has never had a resources boom, so it has had to work a lot harder and smarter to develop markets for its major export — agricultural products.

Because New Zealand never became coal dependent, it is now well-positioned to sell big into China and elsewhere.

That’s the catching up that Kevin Rudd has his sights set on — after the resources boom.

Australia’s runaway mining boom has, however, left a bad taste — literally — in the mouths of those industries that stand by the best chance of filling the gap left the mining slowdown.

Rosemount Estate long ago abandoned its award-winning Edinglassie and and Roxburgh vineyards in the Hunter Valley because of pollution from nearby coal mines.

At the time, Philip Shaw, the former chief winemaker for the brands, said: “There was a sort of oniony, garlicky flavour to the crush.”

He blamed the mines.

5 comments on this story
by Thomas

This year Australia has exported a million tonnes of beef earning the country over 5 billion dollars in income. This includes a dramatic increase in exports to China. So we might think beef farmers would be feeling pretty good but the industry is in crisis. Caused by the kick in the guts Gillard gave the trade with Indonesia and brought to crisis by drought. Dairy farmers are doing it tough and wool producers are getting the prices of 20 years ago. For some reason our Trade Minister seemed pre-occupied with other matters so while America and New Zealand have negotiated trade agreements with countries like Korea we haven't. Things are tough on the land. It's hard to cope with the prices of 20 years ago while input prices rise remorselessly. So unless we get governments better prepared to support agriculture than the present one there's no assurance the talk of a boom in agricultural exports will be anything more than talk.

July 14, 2013 @ 11:00pm
by Dean

We can keep digging up coal for a little while yet. The Chinese are not burning it all, they are dumping it in shallow coastal waters so they can use it later.

I also think it would be great if Australians got smarter and we developed higher quality agriculture, manufacturing and service industries. However, we are not an ant colony. To produce these industries we need people to pursue individual goals in these areas but the catch is that those who support this path also advocate policies that stifle individualism. The Labor party of old achieved high levels of equality through good pay for blue collar industries that almost anyone could work in. However, that will not cut it at the pointy end where if you cannot stay mentally focused or produce creative ideas then there is no place for you. So which one will it be, high quality or equality?

July 17, 2013 @ 1:56am
Show previous 2 comments
by gabrianga

Considering Australian mining occupies less than 1% of Australia's total land mass it is hard for people with an IQ larger than their shoe size to blame all ills on mining though the "usual suspects" still rush to condemn.

Just look around you and name 10 items in your home, office, tent that isn't produced by the resources industry starting with the computer this article was written on.

July 20, 2013 @ 2:55pm
by IB

So which one will it be, high quality or equality? - Why should this be the choice? The Nordic countries, for instance, generally leave us for dead when it comes to both quality and equality. Read "The Spirit Level" (Wilkinson & Pickett, 2009) to understand why.

July 23, 2013 @ 1:31pm
by Michael Croft

Firstly, New Zealand's 33% increased trade with vs Australia's 9% over the same period has much more to do with our dollar being higher in value and hence making our agricultural produce less competitive than that of NZ. The Aussie dollar over the period was some 25% higher than the NZ dollar over the period. So which do you really believe had the more impact? A 25% or more price advantage, or a free trade deal?

Second, free-trade agreements are a double edged sword and the reason our orchards are being bulldozed and we are down to one only tomato processor/cannery in this country. Free trade without a fairness test is a race to the bottom of comparative advantage and she who can cut the most corners wins (externalising social and environmental cost).

Under free-trade agreements, Australia will predominantly export grains, wine and meat, and import most else unless we can level the playing fields with fair-trade agreements. Minimising the "collateral damage" (Australian farmers have double the average rate of suicide) depends on it. Free-trade comes at a cost that is not measured in dollars.

July 28, 2013 @ 6:57am
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