Australia's New South Wales (NSW) state has amended legislation to allow a cap on coal prices, to who coal can be sold to and to control its use, as part of a national plan to manage electricity prices.
The amendment allows the NSW premier to trigger the new powers by declaring an emergency if the state government believes that coal prices are, or are projected, to increase to a level that will adversely affect the public, or if there are shortages of coal for domestic electricity generation. The new powers are part of Canberra's broader plans to impose price caps on coal and gas to limit the impact of higher power prices on Australian consumers.
NSW, which is Australia's largest exporter of thermal coal, joined Canberra and the Queensland government in agreeing to impose a 12-month cap of A$125/t ($83/t) on domestic sales of thermal coal. But the amendment passed by the NSW parliament on 21 December does not state any time limit on the state government's ability to take control of the domestic coal market.
At a price cap of $84/t many Australian suppliers of domestic coal will post an operating loss, including Thai-owned Australian coal producer Centennial that had an average cost of sales of A$142.18/t during July-September. But many domestic suppliers are already subsidising their domestic sales, which are locked in at term contract prices, through exports sold at significantly higher prices.
The ability of NSW to direct where sales must be made could see coal removed from the export market if coal-fired power utilities struggle to secure supplies, as occurred at Origin's 2,880MW Earring power plant earlier this year.
NSW produces around 200mn t/yr of saleable coal and exports around 175mn t/yr. But three years of above average rainfall has seen production and exports fall, with the key port of Newcastle tracking 21mn t behind a year earlier during January-November.
Argus assessed high-grade 6,000 kcal/kg NAR thermal coal at $409.52/t fob Newcastle on 16 December, down from a peak of $444.59/t on 9 September. It assessed lower grade 5,500 kcal/kg NAR coal at $138.10/t fob Newcastle on 16 December, down from $200.81/t on 2 September and from a peak of $287.15/t on 11 March. The heat-adjusted premium for higher grade thermal coal on a NAR 6,000 kcal/kg basis was $258.87/t on 16 December, down from a peak of $264.65/t on 9 December but up from $177.93/t on 1 July.
