Jun 22, 2023 – 9.58am (Financial Review)
Of the 2040 number, India is forecast to account for 228 million tonnes. This is 42 per cent of forecast total export demand and reflects a 226 per cent increase from 2022 demand levels of 70mt.
In the shorter term, Wood Mackenzie expects global steel production to grow by 2.9 per cent in 2023. Last year, output retreated 3.7 per cent, the result of China’s prolonged pandemic lockdowns and raw material shortages stemming from the war in Ukraine.
But overall steel output does not tell the whole story of coking coal, which is ultimately used in traditional blast furnaces.
As its name suggests, coking coal is converted into coke, the key source of carbon that is vital for the process of converting iron ore into steel.
Electric arc furnaces – which produce steel mainly from scrap – are increasingly popular. But as Wood Mackenzie notes, blast furnaces are likely still to account for more than 50 per cent of production by 2050 – underpinning demand for high quality metallurgical coal.
An Australian lens
In 2022, Australian ‘met’ coal producers have been affected by wet weather-related disruptions. But they have also strongly benefited from record prices that saw premium hard coking coal briefly soar above $US600 a tonne in March 2022.
“Last year was exceptional because of the pricing environment; it was a strong year for most producers,” says Douglas Thompson, recently appointed chief executive of the ASX-listed Coronado Global Resources.
A rare pure-play met coal producer, Coronado operates mines in two premium locations: the Curragh complex in Queensland’s Bowen Basin and the Logan and Buchanan complexes in the US states of West Virginia and Virginia.
A decade ago, Coronado produced only 500,000 tonnes per annum from its now-idled Greenbrier project in West Virginia. But through its acquisitions and organic growth strategy, Coronado has transformed its business into a sector leader that expects to produce around 17 million saleable tonnes in calendar 2023.
Recently appointed Coronado Global Resources CEO Douglas Thompson.
Coronado listed on the ASX in 2018 under the ticker CRN, the same year the company acquired the Curragh complex – the company’s largest met coal acquisition– from Wesfarmers for $700 million.
The company’s underground Buchanan mine is one of the most productive and lowest-cost met coal mines in the US.
Thompson says the mid-to-long term demand outlook for met coal remains buoyant, with blast furnaces accounting for the lion’s share of the forecast increased steel output.
“Unless there is a developed substitute for steel – and we don’t see that happening – we see a huge undersupply for met coal and that plays out positively for pricing in the mid-to-longer term,” he says.
Thompson adds that demand will be most evident for the higher-quality met coals supplied by Australia and North America – where Coronado operates – as steel makers strive to reduce emissions.
Cornerstone of energy transition
On that note, Thompson points to the role of steel – and met coal – in the unfolding renewables revolution.
According to the World Steel Association, every electric vehicle requires 900 kilograms of steel, which requires 690kg of met coal to make. The average wind turbine requires 285 tonnes of steel, and 220 tonnes of met coal. These statistics alone underpin met coal’s position as a critical material in the ever-expanding energy transition to reduce global emissions.
Coronado’s own abatement strategy aims to reduce the company’s scope one and scope two greenhouse gas emissions by 30 per cent by 2030, with sustainable projects in place to meet this target.
In July last year, Coronado commissioned its first ventilation air methane (VAM) regenerative thermal oxidation unit at Buchanan. The VAM project converts fugitive methane gas emissions to carbon dioxide, significantly reducing the mine’s carbon footprint.
From July to December 2022, more than 70,000 tonnes of CO2-equivalent emissions were removed from the Buchanan mine.
At Curragh, the company is progressing a gas pilot project targeting the capture and use of waste mine coal gas as a diesel substitute for operating fleets. Drilling works have started, and it is expected that five to six trucks will be on gas in the first half of 2024.
“Coronado is committed to being a sustainable miner and these carbon reduction projects are important for our long-term future,” Thompson says.
Meanwhile, Thompson refers to a “smorgasbord of growth opportunities” for Coronado – both organic and potentially acquisitive – underpinned by buoyant demand from steel makers.
“Customers want our product,” he says. “They have been buying our coal for years and want surety of supply.”
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