Back to the future as coal fires up JAMES KIRBY December 13, 2009
WHAT a great week for the coal industry! Surely not, you say, what about the Copenhagen conference, and the emissions regulations and Victoria cancelling coal exports to India? Well, be that as it may, it's been a great week for the coal industry … here's why.
Money is flowing back into the coal sector because - for better or worse - the debate in Copenhagen and Canberra on climate change is forcing people to think about the future … and the market decided coal has a future and there's money to be made.
Stanmore Coal, a Queensland-based coal company, listed on the stockmarket last Wednesday and finished the week with a gain for investors of 70 per cent.
That's a one-off you say, but it's not; rather, it is part of a remarkable pattern over the past few months. Since July 1 the average return from the six biggest locally listed coal miners - Centennial, Gloucester, Macarthur, New Hope, Riversdale and Whitehaven - was 27 per cent. That is dramatically better than the benchmark ASX 200, which was up 18 per cent in the same period.
And if you thought smart investors might have been moving into renewable energy stocks in the same period, you'd be sadly mistaken - that sector (admittedly undeveloped with few serious players) is up 17 per cent … the weakest of the three measures.
What's happening? Coal might be a dirty resource, and brown coal the dirtiest, but it works as an industrial fuel, and the world - especially, China, Japan and Korea - wants it. ABARE figures show coal export volumes have reached a record high for the September quarter. The Liberal Party's rejection of the emissions trading scheme is relevant, along with some tenuous notions of what pollution regulation may look like post-Copenhagen.
But the most interesting change has been evidence showing that big energy companies are moving back towards coal. Last week, Rio Tinto dumped a gas-based clean energy deal it had been co-financing in Saudi Arabia, confirming it had switched focus to a cleaner coal project in the US.
Money talks, and when you need it you do what you have to do.
But we don't have to go as far as the US to see the powers that be making money moves that confirm a long-term faith in coal. Queensland's Bligh Government has just announced a $4 billion float of Queensland Rail - the freight operations of the Queensland Government … and what's the key business of Queensland Rail? … you guessed it, transporting coal.
