The declining fortunes of the coal industry are expected to deliver a $1.87 billion royalties blow to Queensland’s coffers in 2020-21.
Budget papers show coal royalties totalled $3.5 billion in 2019-20, 19.6 per cent lower than in 2018-19, and they are expected to drop a further 53.3 per cent in 2020-21 to just over $1.64 billion.
Overall, resource royalties and land rents earned from pastoral holdings and mining and petroleum leases are expected to be $2.054 billion (43.8 per cent) lower in 2020-21 than the previous year.
“The COVID-19 pandemic has seen an unprecedented downgrade to the outlook for global economic growth in a short period of time,” the Budget papers stated.
“It has also resulted in reduced demand and substantially lower prices for key commodities, including coal and oil, to which LNG prices are linked.”
Ports data from Queensland’s major coal export ports indicates that exports dropped 13.5 per cent in the year to October 2020.
On a year average basis, the premium hard coking coal price decreased by around 26 per cent in 2019-20 to around $US152 per tonne.
That is expected to decline by a further 28 per cent to $US109 per
tonne on average in 2020-21 before partially recovering to $US140
per tonne by mid-2023.
“There remain significant downside risks in the short-term, including any further impacts from China’s reported import restrictions,” the Budget paper stated.
“Reflecting the reduced demand in the first quarter, the continued impacts of COVID-19 and the uncertainty surrounding Australian access to the Chinese market, coal prices are expected to weaken further in early 2021.
“However, as the global economy begins to recover and demand for coal rebounds, prices are expected to move back towards a longer-term price of around US$140/t.”
As a result, coal royalties are expected to rebound 44.3 per cent in 2021-22