A VISION for the eventual large-scale export of Latrobe Valley’s brown coal is economically unviable and unlikely to ever be realised, according to an economic report commissioned by Environment Victoria.
The week after Latrobe City Council chief executive Paul Buckley told The Express a recent trade mission to China had revealed genuine investor interest in developing local brown coal for potential export, a report by Economists at Large concluded new markets were “unlikely to emerge in the new future”.
The report, Undermined or Overburdened? Victoria’s brown coal: an economic perspective found the low quality and high moisture of the Valley’s coal, coupled with the need to process it to higher grades and the transport costs of getting it to Asian markets, all inhibited the financial viability of current proposals.
The report comes as the State Government is expected to soon announce guidelines around tenders for new local coal allocations – a move Mr Buckley said would address questions Chinese investors had raised about their potential access to the resource.
While the report, released publicly today, said transport costs presented “very significant challenges to entering world markets”, Mr Buckley said talks with Chinese investors indicated they would be prepared to contribute to potential export infrastructure costs.
Report author Rod Campbell, however, said no market currently existed “for coal of such a low rank, aside from local electricity generation”.
“Even if our coal could be processed cheaply, we are at a major disadvantage compared to producers closer to Pacific buyers, such as Queensland, Indonesia or Mongolia,” Mr Campbell said.
“Even if proposed projects were viable, proponents’ estimates of employment impacts and royalty revenue to the state government are utterly implausible.
“Victoria needs to accept that it is unlikely to ever export large quantities of coal-derived products. Any attempt to develop a major export industry is a gamble that commodity prices are going through a historic shift that other suppliers will not respond to.”
The findings prompted Environment Victoria campaigns director Mark Wakeham to call on the State Government to “get over” its “obsession with developing the coal resource”.
“Allocating more coal is not just a poor environmental decision, it’s a poor economic one too,” Mr Wakeham said.
“We’ve seen from past experience that coal companies promise projects and jobs which never materialise and that’s because the economics just doesn’t stack up.
“The report concludes that commercial interest in receiving a coal allocation is less about developing actual projects and more about speculation and attempting to on-sell coal allocations.”