A new report from the Institute for Energy Economics and Financial Analysis (IEEFA) warns that the Hunter Valley's coal industry is entering a cost death spiral, driven by falling demand, rising transport costs, and difficulties accessing debt finance. The analysis, titled 'Hunter Valley coal contracts point to terminal decline,' found that producers have reduced contracted volumes by 40 per cent to 2034, indicating shrinking demand for thermal coal.
According to the IEEFA, this reduction creates a supply-chain cost death spiral, as lower volumes lead to exponential increases in transport costs, further pressuring the economics of remaining mines. Additionally, access to debt finance for coal production is becoming more costly and difficult. The IEEFA has urged the state government to consider these cost impacts when approving future mine lease extensions and expansions.
However, the coal industry has rejected the analysis. A NSW Minerals Council spokesman noted that the IEEFA has been incorrectly predicting the imminent end of the coal industry since at least 2014, while NSW coal export volumes have been at or near record levels every year since then, with record global coal demand over the last three consecutive years. He added that NSW has 38 coal mines, and while some will close, at least ten others are seeking planning approval to operate longer into the future.
The Australian Rail Track Corporation (ARTC), which operates the Hunter Valley Coal Network, also dismissed the IEEFA's claims. ARTC chief executive Wayne Johnson said the company's proposal to extend its voluntary access undertaking to 2031 reflects economic principles and agreement with customers, not a lack of confidence in the coal industry. He acknowledged that industry demand will change over the long term but emphasised that this is not about a five-year period.
Port Waratah Coal Services chief executive Hennie du Plooy said the company's plans are based on firm contracts with coal producer customers, indicating stable export volumes through at least 2030. This aligns with forecasts from the International Energy Agency for the traded coal market, particularly in south-east Asia, where growing energy demand is leading to investment in all energy sources, including new thermal coal generation capacity.
