The Economic consequences for the Coal Industry in Australia from the earthquake and Tsunami of Japan, March 2011
Friday May 20th, 2011
WORD COUNT: 1429
On March 11th, 2011 Japan suffered an Earthquake of significant magnitude just off it’s Eastern Coast, measuring 8.9 on the Richter scale. The ‘Sendai Earthquake’ as it is now known has had disastrous influence on the Japanese economy as well as global economic impact. Australia has felt the effects within its booming Coal Industry. In this report, we will comment on the economic role Australian Coal production plays for Australia, the economic ramifications this natural disaster has caused currently, and forecast the ...view middle of the document...
Australia is a major supplier of coal for Japanese Demand (refer to figure 1.1) with 39.8% of the total Australian Coal product sent to Japan. This is estimated to be worth over $50 billion annually to the Australian Economy.
Figure 1.1 (http://www.australiancoal.com.au/the-australian-coal-industry_coal-exports_coal-export-details.aspx)
Japan and Australia exchanged general opinions on coal, oil, natural gas, uranium and other minerals through the Japan-Australia High Level Official Meeting on Energy and Minerals, which is held annually since it’s creation in 1985. Japan and Australia have developed Agreements based on the mutual benefits and value to be gained from trade, government, industry and research in both countries. They work together to share information, address similar challenges and achieve common goals. These agreements display a healthy relationship between the two nations, necessary because of Australians rich natural resource and Japan’s large population. Trade of Coal between Australia and Japan is governed by 1 major Japanese Entity (JCOAL) and 5 Australian Entities (CSIRO: The Commonwealth Scientific and Industrial Research Organization, ACR: Australian Coal Research Ltd, ACARP: Australian Coal Association Research Program, ACALET: ACA Low Emission Technologies Ltd and ACA: Australian Coal Association Ltd.). These Entities are in charge of monitoring and discussions of trade revolving around Coal policy, supply & demand and technology development.
Coal is a vital resource to Japan, and is an important asset to Australia in Trade as it offers Energy Solution that is:
* Safe: Coal is stable and hence the safest fossil fuel to transport, store and use
* Secure: Abundant reserves mean that coal supplies for both domestic and industrial users are guaranteed at competitive prices.
* Clean: using current technologies, coal can now be used far more cleanly and with less environmental impact than ever before.
* Cost-effective: globally, coal is the most competitive fuel for the generation of electricity without which modern life would be virtually impossible.
In January 2011, Australia suffered floods that effected coal production. Queensland was the most devastated with three quarters of the state declared a disaster zone. Supplying approximately 50% of the world’s coking coal, Analysts indicated that between 40 and 80% of Australia’s coking coal export were forced offline due to the Queensland floods. With an expected cost of at least $1 billion in production plus hundreds of millions in repairs, the Queensland Resources Council also estimated a $2.3 billion loss in sales.
Mines were closed temporarily and prices rose 4.5% to $131.80 per metric tone as demand remained constant while supply was impacted (refer to figure 1.2)
Figure 1.2 - impacts of supply from QLD Floods, 2011
When the Earthquake first occurred, the initial impact was negative on Demand for Australian Coal as...