Slowing Chinese, European coal demand to smash Qld royalties

The lucrative amounts of coal royalties netted by the Queensland government are set to fall as coal prices drop below controversial high-tax thresholds.

The lucrative amounts of coal royalties netted by the Queensland government are set to fall as coal prices drop below the recently introduced and controversial high-tax thresholds.

Nationally, coal exports are expected to drop $58bn a year by 2024-25 amid a slowing Chinese economy and as coal use in Europe stays in a long-term decline.

But slowing demand for coal from Europe, as countries seek to reduce emissions, is being offset by growing demand in developing Asian nations, according to the Resources Energy Quarterly report to be released on Tuesday.

Coal at the Port of Brisbane. Picture: AAP Image/John Gass

It also found Australia only has enough capacity in its coalmines to meet demand through the 2020s, with significant uncertainty after that with a lack of new projects coming online.

Metallurgical coal is expected to drop in price from an average of $265 a tonne, where it was hit with up to a 30c in the dollar royalty, to about $200 a tonne, which is charged at just 20c in the dollar.

Thermal coal is forecast to drop below the $175 a tonne royalty threshold, meaning it will be charged at 15c in the dollar.

The coal royalties, which include the highest rates in the world, netted a whopping $15.3bn in coal royalties and contributed to the $12bn surplus in the June budget.

But the Queensland budget did forecast a sharp drop in coming years, with just $5.3bn in revenue from coal expected in 2023-24 and $4bn in 2024-25.

Resources Minister Madeleine King. Picture: NCA NewsWire/Naomi Jellicoe

This should prevent a hole being punched in the state government’s coffers.

Federal Resources Minister Madeleine King said Australia remained a reliable supplier of energy and resources, but noted it would be the nation’s critical minerals that would be in demand as the world shifted toward net zero.

“While overall export revenue is easing from record highs, Australia’s resources and energy exports remain strong and continue to underpin Australia’s economic wellbeing,” Ms King said.

“Demand for Australian minerals is growing as the world works to build the technology needed to decarbonise.”

Australian coal exports are expected to drop $58bn a year by 2024-25. Picture: Cameron Laird

The report found Australia’s thermal coal exports to China had returned to levels seen before the unofficial ban imposed in October 2020.

But it warned that China was seeking to become more energy-independent, investing heavily in nuclear, renewables and domestic coal product, which could affect its future imports.

China’s metallurgical coal imports from Australia have not risen much because of the slowing residential construction and increased reliance on Mongolian coal.

China used to buy about $10bn of Queensland coal each year, but in 2022-23 it was just $1.5bn because the unofficial ban was lifted only in April this year.