Coal projects planned by some of Australia's biggest mining magnates and port developments backed by the federal government may be delayed or become unviable because of sagging demand for the resources from China, an Oxford University study has found.
Clive Palmer's China First mine and Gina Rinehart's 21 per cent-owned Alpha Coal Project - both in Queensland's Galilee Basin - are likely to have production costs well above the current price for thermal coal of about $94 a tonne, according to the Stranded Down Under? report.
Doubts about the projects come after Environment Minister Greg Hunt last week approved the expansion of Abbot Point port that will serve the Galilee Basin mines.
Environmental groups argue that approval, which will mean three million tonnes of dredge spoil will be dumped in the Great Barrier Reef Marine Park, should at least wait until the mines have secured final financial approval to go ahead.
The Great Barrier Reef Marine Park Authority has set itself until Christmas Eve to approve the port expansion or seek an extension.
The Oxford study, commissioned by HSBC, said Australia has proposals for 89 coalmines that may more than double annual output from about 430 million tonnes in 2011 to about 980 million tonnes by 2020.
Global coal prices, though, are likely to come under pressure as Australia's expansion will account for between about 20 to 40 per cent of global growth by the decade's end. Other exporters, such as Indonesia, are also increasing coal exports.
But the main factor undermining the viability of the big new Australian mines may well come from China itself, the report said.
''China's demand for coal is changing as a result of environment-related factors, including environmental regulation, developments in cleaner technologies, air pollution, improving energy efficiency, developments in gas markets and political activism," Ben Caldecott, co-author of the report and director of the Stranded Assets Program, said.
"These developments are not factored into the positions that most coal owners and operators are currently taking.
"Policy makers need to wake up to these risks as well."
Shanghai has lately joined Beijing in reporting long periods of hazardous smog, adding pressure to leaders to find less polluting forms of energy.
India-based GVK, which owns 79 per cent of the Alpha Coal Project, has rejected reports raising doubts about the mine's viability
''Our projects are financially robust, with some of the lowest operating costs in the global coal industry [$US55 a tonne free on board] and represent a very large, high-quality and new source of low-ash, low-sulphur, low-gas thermal coal,'' the company told Fairfax Media in June.
The Oxford study said the Alpha mine would probably need a coal price of at least $US90 ($100) a tonne to proceed, and possibly more than $US150 to generate returns. "Given the outlook of demand from China, this appears unlikely," it said. The China First mine, owned by Mr Palmer's Mineralogy company, will need a "cash cost" of $US93 a tonne to be viable once built but $US130 a tonne to provide adequate investment returns, the report said.
