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. 

Japan's massive earthquake and tsunami three weeks ago and the challenging recovery process continue to make news headlines around the world. It is difficult to separate fact and reasonable speculation about the future from the terror-filled coverage about radiation leaking from the Fukushima nuclear complex. In an effort to make sense of recent events, the Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC) convened a panel of experts for a discussion about the possible future implications arising from this complex and emotionally charged situation for Japan's energy policy, economy, and politics.

Addressing an audience of one hundred students, faculty, and members of the general public on March 30, Shorenstein APARC associate director for research Daniel C. Sneider expressed the center's deep sympathy for those affected by the natural disasters and its profound admiration for the way in which the people of Japan are dealing with the aftermath. Members of the panel echoed these sentiments throughout the event.

Michio Harada, Deputy Counsel General at the Consulate General of Japan in San Francisco, cited official government figures indicating that, as of March 28, twenty-eight thousand people were dead or missing and one-hundred-and-eighty thousand people were still in evacuation shelters. Faced with such staggering figures, Japan remains in a rescue and recovery phase, he said, but is receiving a tremendous amount of global support. More than one hundred and thirty countries have provided financial assistance, and eighteen countries and regions have sent rescue teams. Collective public spirit is currently very strong, Deputy Counsel Harada emphasized. Japan's challenge moving forward, he suggested, will be to adopt pragmatic measures to fund reconstruction projects in the areas destroyed or damaged by the natural disasters.

Understanding the situation at the Fukushima nuclear power facility and the information circulating about the potential health risks of radiation exposure is complicated, stressed Siegfried S. Hecker, co-director of the Center for International Security and Cooperation. He described the intricate design and structure of the reactors and outlined the sequence of events up to the present, explaining the immediate, crucial challenge of continuing to cool the reactors and deal with the leakage of radiation from them. While there are definite and potentially very serious health threats from radiation exposure and contamination, Hecker said, fear and stress about the situation could also negatively affect mental and physical wellbeing. It is too soon to know the long-term implications for energy policy in Japan and other countries, he suggested, emphasizing the significance of learning from this experience in order to improve any future use of nuclear power.

Robert Eberhart, a researcher with the Stanford Program on Regions of Innovation and Entrepreneurship, proposed that the global supply chain is flexible enough to absorb any manufacturing disruptions in Japan. He noted that in the past twenty years most of Japan's heavy manufacturing has moved overseas, and that the components made there are a comparatively less significant part of the supply chain. In terms of the overall impact on Japan's economy, Eberhart suggested that the net effect on the GDP would be neutral over the next two years, explaining that the imminent loss of business and investment in some areas would be offset by the growth of firms involved in the reconstruction process.

Phillip Lipscy, a center fellow at the Freeman Spogli Institute for International Studies and an assistant professor with the Department of Political Science, stated that events and immediate needs during the early stages of reconstruction may have long-term affects on policymaking and the government structure in Japan. For example, the continued use of nuclear energy—a relatively clean and efficient source of power accounting for 30 percent of Japan's total energy consumption—will face public opposition due to rising concerns about safety and pressing energy needs. In addition, while Prime Minister Naoto Kan's prompt response after the natural disasters helped boost popular sentiment for him and the Democratic Party of Japan (DPJ), how they fare in the long term—especially with regard to the DPJ's relationship with the opposition Liberal Democratic Party and reconstruction-related modifications to its key economic policies—remains to be seen, Lipscy said.

Sneider closed the event with a comparison between the events in Japan and the April 2010 Gulf of Mexico oil spill, pointing to criticism that the Obama and Kan administrations have received for not regulating large corporations closely enough. A prompt resolution to the dangerous—and contentious—situation at the Fukushima nuclear complex is the most immediate concern, and one that will help foretell the long-term political implications for Japan's government, he concluded.

Although there is still a long road ahead in Japan—especially until the accident at Fukushima's nuclear reactor is contained and the actual after-effects of radiation are better understood—the underlying message during the panel discussion was that Japan will indeed recover and that the terrible events of the past weeks have brought people—and even the competing political parties—closer together.

North Korea conducted its first nuclear weapons test in October 2006, prompting the UN Security Council to establish military and economic sanctions in an effort to block further development of the country's nuclear program. After North Korea conducted another test in May 2009—a move that U.S. President Barack Obama described as "directly and recklessly challenging the international community"—the UN Secretary General, at the request of the Security Council, convened a Panel of Experts to advise and assist the UN committee that enforces the sanctions (the "1718 Committee," after the UN Security Council Resolution that brought it into being).

John Everard, 2010-2011 Pantech Fellow with the Stanford Korean Studies Program at the Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC) and former UK Ambassador to North Korea, left Stanford at the end of March to take up a position with the panel.

The seven-member panel comprises independent experts from the Security Council's five permanent member countries—China, France, the Russian Federation, the United Kingdom, and the United States—and from South Korea and Japan. Some experts come from academic institutions while others have been lent to the panel by national governments. As part of its efforts to advise the 1718 Committee, the panel often travels to inspect banned goods—such as materials that could be used for nuclear purposes—in intercepted cargo shipping to or from North Korea. 

During his diplomatic service in North Korea from 2006 to 2008, Everard closely observed and took photographs of the details of everyday life, discovering that the mindset of ordinary people frequently does not match official government ideology. "There is an openness toward warm relations with Americans if political relations improve," he says. Everard is currently working on completing a book describing his observations of the everyday life of non-elite North Koreans, as well as his experience as a foreigner living in North Korea. It also addresses how North Korea as a country has evolved over the past sixty years and provides suggestions for how better to deal with its government.

Although Everard looks forward to his new position with the Panel of Experts, he will not soon forget his time at Shorenstein APARC. "It has been a great experience," he emphasizes. "It has been a real delight to be surrounded not just by this beautiful architecture and the wonderful facilities that Stanford has, but also by the very friendly, very intelligent people here."