Queensland’s higher coal royalties has had little impact on profits, new data shows
The Queensland government’s imposition of higher royalties for coal producers and China’s ban on imports from Australia are having little impact on super profits, despite a campaign against the taxes by the industry.
The state’s coal industry is a clear winner from the global energy shock as the world looks for new supplies, according to data released by the Queensland Treasury.
High prices stoked the value of exports to a record $79.7bn for the year until the end of September, after already more than doubling during 2021-22.
Treasury expects significant royalties to flow into the state’s coffers through to 2050.
It does not expect the state’s new royalties to have much of a bite or make a significant impact on investment decisions, as high coal prices make more profits.
For high-quality hard coking coal, the new tiers of royalties are estimated to add less than $2 a tonne to those payable by producers.
For thermal coal, prices in the medium term are expected to average below $175 a tonne, which would mean no extra royalty would be due to taxpayers.
The state budget forecast the new regime to bring in an extra $1.2bn over the next four years.
But most – around $765m – was projected to be raked in during in the current financial year, after which coal prices will begin to decline.
The outlook report also revealed China’s informal ban on Australian coal and global decarbonisation efforts are not hurting Queensland’s exports.
“Australia is a very significant exporter,” Treasury official Dennis Molloy said.
Importantly for Queensland’s coal industry, demand for metallurgical coal – used for steel-making – is more solid than for thermal coal for power generation.
“Queensland’s key trading partners in the Asian region have been pivotal to achieving its position as the world’s largest exporter of metallurgical coal.”
Molloy said future demand hinges on global steel production, particularly in China and India.
Although global production peaked almost 10 years ago, Australia’s coal tonnage is only 1% off that 2013 mark.
China was the top coal customer in 2020 before the ban, taking 55m tonnes – or more than a quarter of exports – in the year to October 2020.
But the hole left by its exit from the market was filled by India, Japan and South Korea – together totalling almost 70% of Queensland’s 202.1m tonnes of exports in the year to November 2021.
The International Energy Agency has said coal needs to bear most of the burden to achieve net zero emissions.
But any let-up in China’s coal ban, if recent signs of a diplomatic thaw extend to trade, could spark a sharp drop in the world price.
An end to Russia’s invasion of Ukraine and sanctions would also see coal prices slump.
The Queensland treasurer, Cameron Dick, will update forecasts in the upcoming mid-year fiscal and economic review.