Resources minister believes China ‘not the only game in town’ but acknowledges global demand for coal will fall as percentage of overall energy mix

This article is more than 4 years old

This article is more than 4 years old

Australia’s resources minister has predicted India’s demand for coal will increase, even as some analysts warned him against relying on “overly bullish” forecasts.



In a speech in Canberra, Josh Frydenberg said China – which is undergoing an economic transition – was “not the only game in town” and strong economic growth in India would drive increased demand for Australian resources.

India is seeking to increase its own domestic coal production and also boost its reliance on renewable energy. Frydenberg acknowledged global demand for coal would fall as a percentage of the overall energy mix from 40% now to 30% in 2040, but said India would become the largest coal importer in the world by 2020.

Coal price won't improve for years and mining downturn will last: professor Read more

Frydenberg said absolute demand for energy in Asia was rising because of dramatic increases in population, urbanisation and a rising middle class.

“The reality is that there will be significant demand for our energy and minerals going forward and this forms the basis for long-term optimism for these sectors of Australian industry,” he told the National Press Club on Tuesday.

“Consider this: today India has 18% of the world’s population but represents only 6% of global energy use.”



Last week, Frydenberg met with the Indian minister for coal, power and renewable energy, Piyush Goyal, who has previously suggested the country could stop importing thermal coal by 2017 except to supply coastal plants.

When asked on Tuesday to reconcile India’s ambitious target with his own rosy outlook, Frydenberg said there was a “real market for Australian coal, which is low in sulphur, low in ash”. He said when considered alongside “still evolving” carbon capture and storage technology, “the picture for coal is not one-sided”.

“When it comes to India, Goyal has made very clear that they still will need to import coal, they are looking for clean coal, or cleaner, that Australia has an important part to play,” Frydenberg said.

“We export $5bn worth of coal annually to them. It is their real key form of baseload power. They are investing in renewables, and that’s a fantastic story, but if they are going to expand the grid, the way to do that, he made it very clear, is coal and Australian coal has a role to play.

“I got the clarification that he will need Australian coal for some time to come.”

Pressed on whether that demand would increase, Frydenberg said: “Based on the arithmetic I have seen, I think it will.”

But Tim Buckley, the director of energy finance studies at the pro-renewables Institute for Energy Economics and Financial Analysis, urged the government to tread cautiously.

Adani freezes investment in Carmichael mine until world coal price recovers Read more

“Josh Frydenberg’s general disposition is very bullish for Australian coal but several of his points are factually inconsistent with the existing data,” said Buckley, a financial markets expert.

“For example, he doesn’t clarify the distinction between India’s increasing reliance on coking coal imports versus the declining Indian reliance on imported thermal coal, which is down 15% year on year.”

Buckley said while four-fifths of India’s coal usage comprised thermal coal, or the type used in power plants, just 20% comprised coking coal, or the type used in steel production. This meant that coal imports were likely to experience an overall decline, with India aiming to double its domestic thermal coal production by 2020.

“Energy minister Goyal has made it very clear his top priorities are driving improvement in grid efficiency, energy efficiency, solar, wind, hydo capacity expansions and a diversification away from coal over time,” Buckley said.

During his speech, Frydenberg also indicated the government was looking at ways to support mineral exploration in Australia, including using Geoscience Australia’s technical expertise to map deposits near the surface and to depths of hundreds of metres.

Frydenberg waded into industrial relations, saying the government wanted to “restore some balance” to union right-of-entry laws because officials had, in some cases, made hundreds of site visits over a short period of time.