Platts Coal Trader International
Vol. 11, Issue 67, Pages 5-6

Australia faces serious challenges over the next 20 years in maintaining its hard-won place as a leading coal exporting country and capturing new market share, according to a research paper published by Stanford University's Program on Energy and Sustainable Development April 5.

Following earlier papers on China, Indonesia and South Africa's coal industries, the latest PESD paper, entitled Australia's Black Coal Industry: Past Achievements and Future Challenges, has been written by coal industry expert Bart Lucarelli.

The paper sketches the development of Australia's export coal industry, from its shaky start in the aftermath of the Second World War amid a glut of cheap oil, to the "phenomenal success story" of today.  The renaissance of Australia's coal industry was assisted by the discovery of vast deposits of high-quality coking coal and thermal coal in Queensland's Bowen Basin and the

Hunter Valley of New South Wales respectively, along with new mining technologies and the economic expansions of Japan, South Korea and Taiwan, Lucarelli said.

During the Australian coal industry's competitive phase - 1987 to 2003 - export coal prices were relatively stable, but the growth rate of Australia's coal industry slowed as Indonesia became a significant coal exporter.  Since 2003, Australia's coal industry has been in a "volatile price phase," as export coking and thermal coal prices have soared to record highs with the entry of China and latterly India into the international seaborne market, while weather events have affected supplies from coal exporting countries.

Looking to the next 20 years, Lucarelli forecasts serious challenges to the preeminence of Australia's export coal industry in the shape of infrastructure constraints, regulatory risks and under-investment in railways and ports by government-owned companies.  "The most pressing and immediate technical challenge to the black coal industry of Australia is the shortage of rail and port infrastructure to support its further growth," said Lucarelli in the research paper.

‘Chronic infrastructure shortages' Governments in Queensland and New South Wales have proposed projects for expanding their rail and port networks to support a significant increase in Australian coal exports, which are forecast to grow to 540 million mt by 2020 from 240 million mt in 2010.  "Part of the reason that chronic infrastructure shortages are likely to persist has to do with the type of technology being implemented - large rail and fixed land port systems," Lucarelli explained.  Large port and rail projects are required for economies of scale, but involve long lead times, high upfront costs and complex regulatory clearances. 

"A second reason for the chronic shortage of infrastructure has been the reliance on state-owned entities to make the necessary investments in the rail and port systems," Lucarelli said. Government-owned rail and port companies tend to be less nimble and entrepreneurial in their decision-making than the private sector, though some port and rail companies have been privatized recently - most notably Queenslandbased rail company QR National and the port of Brisbane.  Regulatory uncertainty stemming from the Australian government's stop-start policy on curbing carbon emissions and its proposed Mineral Resource Rent Tax on coal-mining profits are additional factors clouding the expansion of Australia's coal industry.  "Potential coal mining projects most at risk due to regulatory uncertainty are the massive new steam coal projects planned for the Galilee, Gunnedah and Surat basins," Lucarelli said.  Illustrating the potential for expansion within Australia's coal industry, Lucarelli said that if only two of the advancedstage projects in the Surat Basin in Queensland started production on schedule, they could add 110 million mt/year of thermal coal exports by 2015.  This is almost as much thermal coal as Australia exported for the whole of 2008, at 115 million mt. 

 

"The challenges Seoul faces in the coming years will be how to balance its military alliance with the United States and its economic partnership with China," suggested Gi-Wook Shin, director of the Stanford Korean Studies Program, in a recent interview with the Korea Times. Shin suggested the idea for involving universities more in regional diplomacy discussions, and he briefly described his new research project which explores an alternative approach for South Korean diplomacy.

On Friday, April 1, Stanford University hosted twelve North Korean officials making an unprecedented economic tour of the United States. Organized by Professor Susan Shirk of the University of California Institute on Global Conflict and Cooperation, the two-week tour of American businesses and academic institutions was an opportunity for the visitors to see firsthand what improved relations with the United States might mean in terms of economic cooperation.

The North Koreans included senior and mid-level officials responsible for economic, trade, financial and foreign affairs. Their visit took place despite the lack of diplomatic relations between the United States and the Democratic People's Republic of Korea (DPRK) and the continuing U.S. and UN sanctions against the country for its development of nuclear weapons and long-range missiles.

Welcoming the visitors to a luncheon in Encina Hall, David Straub, associate director of the Korea Program at the Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC), briefed them on the Freeman Spogli Institute for International Studies at Stanford University (FSI) and its research centers, including Shorenstein APARC and the Center for International Security and Cooperation (CISAC). Straub also introduced representatives from FSI and the School of Medicine who have been involved in policy, academic, and humanitarian engagement projects with the DPRK.

Mr. Henry S. Rowen, co-director of the Stanford Program on Regions of Innovation and Entrepreneurship (SPRIE), then outlined the history and organization of Stanford University and its leading role in the development of Silicon Valley. Mr. John Sandelin, senior associate emeritus of the Stanford Office of Technology Licensing, described the university's policies on sharing university-generated intellectual property with the private sector. Following the presentations, American guests at the luncheon, including CISAC's Dr. William J. Perry and Dr. Siegfried S. Hecker, had informal discussions with their North Korean tablemates about the possibilities of, and obstacles to, economic collaboration between the two countries.

The North Koreans' visit to Stanford concluded with a stop at the Hoover Tower observation deck for a panoramic view of the Stanford campus, where they were able to see how Stanford graduates had developed Silicon Valley literally around the campus. DPRK delegation members expressed appreciation for the hospitality they were shown at Stanford and underlined their hopes for economic exchanges with the United States.

The most recent previous visit to Stanford by a DPRK delegation took place in January 2008, when CISAC Professor John W. Lewis, Shorenstein APARC director Gi-Wook Shin, and the School of Medicine's Dr. Sharon Perry hosted five public health officials for discussions about collaboration on tuberculosis control. Out of that visit evolved Stanford's DPRK Tuberculosis Project, which, in association with the DPRK Ministry of Public Health and NGO partners, is developing the country's first laboratory with the capacity to diagnose drug-resistant tuberculosis.

Scheduled to open in January 2012, construction is well underway for the Stanford Center at Peking University (SCPKU), a state-of-the art, multimillion dollar facility with research and event space available for the use of all Stanford departments. The center is anticipated to further develop the university's ties with and presence in Asia, and to increase the amount of Stanford activities taking place there. Jean C. Oi, director of the Stanford China Program, will also serve concurrently as the director of SCPKU. She and Andrew G. Walder, the Denise O'Leary and Kent Thiry Professor of Sociology, have played a key role in the development of SCPKU since originating the idea for the center in 2006.