Logistics, Ports & Terminals, Mining and Heavy Industries

Aurizon bullish on coal

Aurizon is feeling the force of struggling coal and iron ore markets. Photo: RailGallery

Increasing global demand for steel and Australia’s export infrastructure advantage will help drive strong business in the coming decades for Aurizon’s bulk haulage division, the rail operator said on Monday.

The Queensland-based rail business on Monday released its annual Sustainability Report, detailing its ongoing efficiency drive, and assessing the outlook for its key market sectors.

Coal represents 68% of Aurizon’s revenue. The company says 73% of Australian coal exports are carried on Aurizon trains or Aurizon railways, or both.

So it should come as little surprise the ASX-listed operator sought to paint a good picture for the future of both thermal (i.e. energy) and metallurgical (i.e. steel-making) coal in its 2016 report.

“We believe Aurizon’s assets are well placed to serve continued demand for Australian coal as demonstrated by the steady  increase in Australia’s coal exports since 2010,” the company said.

Aurizon believes demand for metallurgical coal will increase as India and other major emerging economies are entering “a highly steel-intensive period” of economic growth. “China, Japan and South Korea are also expected to maintain a high level of steel consumption,” it added.

Australian miners will benefit especially from a significant imbalance of met-coal production and consumption in Asian countries, Aurizon said, thanks to the country’s “export infrastructure advantage” over international rivals.

“Australia has the lowest average transportation and port costs compared to other significant metallurgical coal exporting nations,” the operator said.

According to Aurizon’s figures, met coal rail haulage costs an average of just US$8 per tonne in Australia, compared with US$20 a tonne in Canada, US$23 a tonne in Russia, US$26 a tonne in the United States, and US$36 in Mozambique.

As for thermal coal, Aurizon said global electricity demand will be driven by economic demand in China, India and other emerging Asian economies.

“Over one billion additional people will gain access to electricity by 2040 while an additional two billion will double their current levels of per capita consumption.”

While Aurizon believes a greater share of investment in Asia will go towards renewable energy capacity, the operator still expects coal-fired generation in the region to increase 43% in absolute terms by 2030.

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