CLYDE RUSSELL: Australia has minerals for renewable energy, is too reliant on coal and LNG
One of the refrains of the environmental lobby is that Australia is extremely well-placed to become a renewable energy superpower, and that this will replace the loss of revenue from coal and natural gas exports.
The problem is that only one of these two assertions is accurate, namely that Australia is in pole position when it comes to many of the minerals that will be critical to the energy transition.
These include lithium, where Australia is already the world’s top producer, as well as copper, nickel, zinc and other metals.
Even iron ore can be viewed as vital to moving the world from fossil fuels to renewables, given the essential role of steel in building out electric grids, power networks and wind turbines.
But the idea that Australia can compensate for ending the export of coal and liquefied natural gas (LNG) by boosting output of energy transitions metals is somewhat fanciful.
It would take an absolutely astonishing increase in production of lithium and other renewable energy metals to come anywhere close to the present level of export revenue from thermal, coking coal and LNG.
The Australian government’s commodity forecasts give an indication of the scale of the challenge.
The June quarter Resources and Energy Quarterly forecast that Australia’s mined lithium output would rise from 218,000 tonnes in 2020-2021 to 438,000 tonnes by the 2023-2024.
The value of lithium exports is forecast to rise from A$1.06bn ($750m) in 2020-2021 to A$8.71bn by 2023-2024.
A rise of more than 700% in export revenues from lithium certainly looks impressive, and the Australian government also expects the country’s share of global output to rise slightly by 2024 to about 46% from the current 41%.
But even these bullish figures show that lithium will remain well behind the export revenues for coal and LNG.
Exports of metallurgical coal, used to make steel, were valued at A$58bn in 2021-22 and the government expects they will fall to A$41 bn by 2023-24 as the global price softens.
Thermal coal exports were valued at A$39bn in 2021-2022, and are forecast to fall to A$31bn by 2023-2024.
The combined export value of both grades of coal is A$72bn in 2023-2024, and this is a conservative forecast, especially in the light of the current high price of thermal coal caused by Russia’s invasion of Ukraine disrupting global energy markets.
LNG export revenue was A$70bn in 2021-2022 and is expected to remain stable at about A$68bn by 2023-2024, according to the government forecast.
As with coal, this LNG price estimate is on the low side, with the government predicting about $10.79 per million British thermal units (mmBtu) in 2023-2024.
This is substantially below the current spot price of about $44.71 per mmBtu, and while it is unlikely the current near-record high prices will go on for long it is possible that they will exceed the forecast, especially if Europe continues to seek to replace piped gas from Russia.
Australia is the world’s third-biggest exporter of copper and sixth-largest producer, and export revenue is forecast to rise to A$15bn in 2023-2024 from A$12bn in 2021-2022.
Exports of nickel are forecast at A$5.8bn in 2023-2024, down from A$6.7bn in 2021-2022.
Exports of zinc, which is mainly used to galvanise steel, but also has potential as a battery metal, are forecast at A$3.8bn in 2023-2024, down from A$4.2bn in 2021-2022.
Taking lithium, copper, nickel and zinc together gives forecast export revenue of A$34bn in 2023-2024, which is less than a quarter of the A$140bn forecast for LNG and both grades of coal.
It is likely that Australia’s production of metals for the energy transition will continue to accelerate in the years beyond the 2023-2024 horizon, but for them to overtake and replace the revenue from shutting down coal and LNG exports will take enormous investment in mines, infrastructure and processing plants.
Reuters