SWISS mining giant Xstrata is strongly backing the demand for coal to continue rising and for the sought-after commodity to remain the dominant source of energy for developing countries, underpinned by its cost advantage over new green initiatives.
Andrew Fickkers, marketing manager of Xstrata Coal, said the existing trend in China and India's coal would see demand double in the next 10 to 12 years.
"We see robust demand for coal in the medium to long term, underpinned by demographics and urbanisation," he said at Xstrata's investor seminar in London on Tuesday night. "Coal has a fundamental cost advantage in the marketplace."
The major miner operates six coalmines in Queensland and 13 in NSW and has plans to develop one of the largest coal operations in the world -- the $6 billion-plus Wandoan project in the Surat Basin.
The project has faced strong community opposition, with concerns about the impact on farming land in the region, but Xstrata's coal boss Peter Freyberg said the significant development was "ready to go".
He told analysts at the briefing that comparing other coal-producing areas, such as the emerging Galillee Basin, to the well-established Surat Basin was inappropriate. "There is a lot of talk in Australia about other basins that can be brought on," Mr Freyberg said.
"We have spent a number of years taking this project through its stages . . . and we think it is well ahead of any other project.
"We are now getting into the stage of mining leases . . . the project is ready to go and sensitive to market conditions. We will bring it forward when the time is right."
Mr Fickkers also outlined the strength of the thermal and coking coal prices in the future, saying that a constrained supply response compared with the increasing demand ensured the price would remain high.
"The supply response continues to underperform and faces escalating time and cost pressures," he said. "Ongoing growth of Chinese demand underpins pricing for the future."
The marketing manager also backed the future of coal in a western world that is pushing new green energy technologies, highlighting the needs of China and India for cheap power.
"Renewables in the context of Asia are reasonably competitive but their opportunity is very small and the ability of those fuels to make a difference with electricity generation is small," he said.
"LNG into the Asian market is a high-cost alternative.
"This leaves coal the second-lowest energy generation source -- well placed to grow into the future market."
MTE Price at posting:
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