Promoting Resource Development and Energy Security in Australia Mr Greg Evans Executive Director – Coal Minerals Council of Australia 16 October 2014

Outline Government support for the Australian coal industry Positive outlook for Australian coal trade Coal remains central to Australia’s energy security Recent policy decisions that will boost coal growth Conclusion: long-term fundamentals for coal are sound 2

Government support for Australian coal industry Prime Minister the Hon. Tony Abbott, MP o “… since 1957, Australian coal, iron ore and gas has powered Japan’s prosperity; and Japanese cars, consumer goods and electronics have transformed Australians’ lives.” o “It’s particularly important that we do not demonise the coal industry and if there was one fundamental problem, above all else, with the carbon tax was that it said to our people, it said to the wider world, that a commodity which in many years is our biggest single export, somehow should be left in the ground and not sold. Well really and truly, I can think of few things more damaging to our future.” 3

Government support for Australian coal industry Energy Green Paper, released by the Hon. Ian Macfarlane MP, Minister for Industry o “Coal is one of Australia’s largest energy export resources, forecast to earn $36 billion in 2014–15 … Australia’s success as a coal exporter has been based on being a reliable and competitive supplier.” The Hon. Andrew Robb MP, Minister for Trade and Investment o “Today in Victoria’s Latrobe Valley, we see projects exploring new uses for brown coal, such as one that could produce hydrogen for fuel-cells in a joint venture with Kawasaki Heavy Industries … There are other high-value, non-energy uses being investigated such as fertilizer feedstock, carbon fibre and carbon semi- conductors.” 4

Outlook for Australian thermal coal exports New research by Wood Mackenzie shows that Australian coal will remain a major feature of seaborne trade. Global demand for thermal coal will grow by more than 70 per cent between 2014 and 2030, driven largely by electrification and industrial expansion in Asia. Most of the economies in developing Asia lack sufficient reserves to meet increasing demand. Australia is the second-largest exporter of thermal coal after Indonesia. Australian exports are expected to show strong growth. Wood Mackenzie considers that significant investment in new and expanded infrastructure will be required in all export regions to meet growing demand in the longer term. 5

Outlook for seaborne thermal coal demand While some nuclear capacity is expected to return gradually, coal will remain the dominant source of electricity generation in Japan.

Outlook for seaborne thermal coal supply Australian exports of thermal coal will rise from 197 Mt in 2014 to 409 Mt in 2030, rising to approximately 25% of seaborne trade.

Outlook for Australian metallurgical coal exports Growing demand for steel from developing Asia will underpin rising demand for metallurgical coal, driven by China and increasingly India. The Pacific market will dominate metallurgical coal demand; however, the Atlantic market will grow at a faster rate in the longer term. Wood Mackenzie expects China’s demand for metallurgical coal to peak by 2020, but India’s to continue to grow afterwards and partially offset the overall demand slowdown in the Pacific market. As with thermal coal, most of the economies in developing Asia lack sufficient reserves to meet increasing demand for metallurgical coal. Australia will continue to dominate seaborne trade, owing to its proximity to demand centres and abundant high quality reserves. 8

Outlook for seaborne metallurgical coal demand Japan’s demand for metallurgical coal, while trending downwards over the projection period, will continue to account for a significant share of world seaborne demand.

Outlook for seaborne metallurgical coal supply Australian mine expansions are expected to capture most of the forecast growth in metallurgical coal demand, as exports rise from 175 Mt in 2014 to almost 204 Mt by 2030.

Coal remains central to Australia’s energy security Source: Australian Energy Regulator Black coal and lignite (brown coal) together account for 55 per cent of registered generation capacity in Australia, but supply 75 per cent of output.

Coal predominant in Australia’s Eastern States Source: Australian Energy Regulator Black coal is the main source of electricity generation for NSW and Queensland; and lignite (brown coal) the main source for Victoria.

Recent policy decisions that will boost coal growth Repeal of the carbon tax. Repeal of the Minerals Resource Rent Tax. Retention of public support for carbon capture and storage. Introduction of the Exploration Development Incentive. Review of the mandatory Renewable Energy Target. A renewed focus on deregulation and regulatory streamlining. 13

Conclusions The Australian Government strongly supports our coal industry and has recently made several sensible policy changes. Wood Mackenzie predicts solid ongoing demand for Australia’s thermal and metallurgical coal exports, including from Japan. Wood Mackenzie also expects Australia to remain a leading exporter. Coal continues to dominate Australia’s electricity mix. The long-term fundamentals of the Australian coal industry are sound. 14