Price cap on coal should be rejected | Statement from NSW Minerals Council CEO Stephen Galilee

The imposition of a price cap on domestic coal sales in NSW will have little impact on electricity prices, but will have significant unintended consequences. It is a bad policy proposal that should be rejected.

A price cap on domestic coal supply will distort the coal market, potentially disrupt existing commercial arrangements, create disincentives for coal producers to supply local power stations, and may force some producers to supply coal at a loss, threatening jobs, predominantly in regional coal mining communities.

The NSW Government needs to carefully consider the full implications, and consult in detail with the coal sector, before making any commitments on this issue.

The facts relating to coal supply in NSW provide strong evidence that price caps on domestic coal sales will have little impact on NSW electricity prices.

The NSW coal sector exports around 160 million tonnes of coal to over 20 countries around the world. Coal is our state’s most valuable export commodity.

Around 20 million tonnes of NSW coal is also supplied to power stations here, and at much lower prices already than global prices for our high quality export coal.

Around 80 percent of the coal supplied to NSW power stations is on existing contracts at prices much lower than the global coal price received for exports.

The remaining 20 percent of coal needed by NSW power stations is purchased at ‘spot’ prices.

However, because they are generally older, NSW power stations use a lower quality coal than many of our export customers.  This means the spot prices paid for coal here in NSW are also much lower than the higher prices paid for our higher quality export coal.

Further, these lower spot prices in NSW are currently at similar levels to before the war in Ukraine.

Like other industries, coal producers have experienced increased costs due to inflationary and other pressures. Cost increases have been experienced across a range of inputs, including for fuel, labour, equipment, and services, as well as transport costs.

Imposing price caps on coal sales in NSW will have little impact on energy prices, but will cause significant damage to the sector, regional mining communities, and the NSW economy.