“There is some short-term volatility, especially for companies exposed to China, but I don’t think it changes the fundamentals.”
Some local coal businesses have suffered as a result of the uncertainty out of China. New Hope Group slumped another 6.7 per cent on Monday to $3.03 as the company’s slide deepened from its recent high of $4.30 just a week ago.
A key piece is the underlying demand out of south-east Asia.
Adani’s Lucas Dow
The company has acknowledged issues with China had contributed to negative investor sentiment but, like Adani, signalled it did not believe the problems would remain in the long term. Whitehaven Coal has also slipped from $4.61 in early March to $4.07 on Monday.
“It is probably a near-term situation and long-term fundamentals are still strong in terms of demand,” Mr Dow said. “It is a knee-jerk reaction [from investors].”
He said the predicted growth in demand from countries like Vietnam, Thailand and the Philippines would underpin the development of additional coal resources in Australia, including Adani’s Carmichael project in Queensland’s Galilee Basin.
“A key piece is the underlying demand out of south-east Asia,” he said.
“We are not overly worried about it if you look at the size of addressable market.”
Mr Dow said while the project’s first stage, which will produce 10 million tonnes a year, was destined for the Indian market, future development would be available to serve other customers in those developing countries.
Mr Dow said one potential impact of a strong drop in Chinese demand could be in the margins for Australian coal companies as customers in countries such as India were less prepared to pay more for this country’s cleaner burning product.
“China will have an implication for price around the place,” he said.
Mr Dow said the company was continuing to work on management plans with the Queensland government which would govern how it ran the Carmichael mine particularly on local wildlife such as the black-throated finch and issues related to underground water.
Expressing frustration at the time the state was taking to work through the plans, he said the company still had avenues available to it to force a decision and to legally challenge one.
Mr Dow said that some critics of the project did not accept that if Australian coal was not available to developing countries they would likely source higher-emitting product from other countries.
“We don’t create demand, we just respond to it. We are not the only jurisdiction that provides coal,” he said.
Mathew Dunckley is business editor for The Sydney Morning Herald and The Age. Based in our Melbourne newsroom, Mathew has almost 20 years experience as a journalist and editor.