In who's who of coal, Utah is the mine king
The Australian coal industry has come a long way since coal was first discovered in 1789 by convicts scavenging along the shores of the Hunter River in New South Wales.
Ten years later a ship called The Hunter, named after Governor Hunter, carried Australia's first coal exports to India. At that time convicts (Australia was a penal colony for Britain) worked the mines. They carried the coal by hand basket out to the ships since the governor had decreed that the coal was the property of the crown.
The giant of today's coal industry is Utah Development Company, a subsidiary of US-based General Electric. Utah operates 22 giant draglines, worth $20 million each, in Queensland and has a total investment in Australia worth $800 million.
This year, says John Wruck, manager of corporate administration at Utah, the company hopes to ship over 20 million tons of coal -- or about 25 percent of the total coal mined in Australia.
The list of participants in the coal boom reads like a Who's Who of Australia. Such well-known Australian corporate giants as BHP (Broken Hill Proprietary Company), CRA (Conzinc Riotinto Australia), CSR (Colonial Sugar Refining Company), and Western Mining lead the rush; other long-time Australian miners included in the scramble include Coal & Allied Industries and Clutha Development. Most of the major Japanese trading companies have an interest in the mines and many of the major international oil companies are vying for a stake.
One reason Utah stands out is that it owns its own port, Hay Point. The facility currently can handle over 20 million tons of coal per year. Like other mining companies, Utah is miffed over the prospect of paying more money to state governments for infrastructure costs. Central Queensland Coal Associates, a Utah subsidiary, has paid $370 million over the past 12 years for such things as water, electricity, sewage, railroads, and the port.
But the state governments, pinched by the budget squeeze going on in Canberra , have decided to add a few more taxes to pay for road upkeep. The Queensland government will ask all mining companies for $40 million more in taxes this year. The federal government similarly benefited from Utah; the company last year paid $240 million in federal taxes, a 66 percent tax rate.
Utah has been closely watching contract talks between the New South Wales mining companies and the Japanese steel mills. The Japanese agreed to a 32 percent price increase -- lifting coal prices per ton to $49.50 (Australian) free on board, meaning the seller pays shipment cost to the carrier at a designated point. The companies agreed to pay the demurrage, the delaying of the ships past contract provisions, which some estimates placed at $2 to $3 a ton. Due to a strike at Newcastle last year, ships had about a month wait to load cargo.
The 10-year contract Utah had with the Japanese for 2.9 million tons of coal delivered from its Blackwater mine expired on March 31, and now only an interim price is being posted. Utah is expecting a higher price than the New South Wales mines since the Blackwater coal is a better quality.
Price hikes will come at a good time for the companies since they are facing higher labor costs. Last year miners won a fifth week of vacation. Their wages will go this year to over $28,000 a year. Industry officials contend they would earn even more if they didn't strike so often.
Despite a deflated world steel industry, Utah's coking coal shipments increased last year. Mr. Wruck attributed this to an increased usage of coking coal and a decline in fuel oil use by the Japanese steel mills. The Japanese receive over 60 percent of all the coal Utah ships.
Even though the company is having a good year shipping coking coal, its future is in developing steaming coal deposits.However, the state of Queensland maintains that the steaming coal deposits belong to the state at cost for production of electricity. Thus, Utah has been negotiating with the state for over a year to export steaming coal from its Daunia mine project.
Johannes Bjelke-Petersen, Queensland premier, is aware of the allure steaming coal now has for the Queensland coal companies. He is offering the bait of an export contract -- up to 70 million metric tons over a 20-year period -- to any company that will agree to build a power station for the state.
Government officials expect that eventually large quantities of steaming coal deposits will be mined and exported from Queensland. Currently, only 800,000 tons a year is shipped out of the state.