In terms of demand, in the past China has been one of the main consumers of Australian coal. However, as Coal Investing News reported last month, China has introduced a "control coal" policy aimed at reducing pollution by curbing its coal consumption. Its goal is to limit its annual coal use to 4 billion MT by 2015 or 2016.Parkinson's article highlights that point, noting that China's "major ports are currently overstocked with [coal] imports that are not required because of a fall in demand, which in turn has caused the closure of half of its mines in some regions." The country simply does not need Australia's product as much as it did in the past. The issue of demand is highlighted by statements made by Yancoal at its annual meeting. While according to Platts, the company's CEO, Peter Barton, told investors that "forecast production growth from Australia" means that "prices are expected to remain under pressure," he also noted that the company plans to increase its output by 70 percent, to 24 million MT per year, by 2017. His statement shows that though some companies are lowering their output, others are not, meaning that Australia is failing to adequately curb its coal output even as the fuel has nowhere to go. GVK and Adani push forward Despite these circumstances, GVK Group and Adani Enterprises (BSE:512599), India's largest importer of coal for power stations, are forging ahead with a "$21 billion bet" on Queensland's Galilee Basin, which covers over 247,000 square kilometers and is estimated to contain 14 billion MT of coal, Bloomberg reported. As GVK moves forward with both its Carmichael and Alpha mines, the latter of which is expected to begin exports by 2017, Adani is set to begin construction this year on its Carmichael mine, whose first output is slated for 2016.
Debasish Mishra, a partner and head of energy practice at Deloitte Touche Tohmatsu India in Mumbai, told Bloomberg that "GVK and Adani have reached a point of no return" and it is thus "very difficult for them to exit," suggesting that perhaps they are moving forward with their projects simply because they have no choice.However, the two companies remain optimistic: undeterred by China's new coal policy, GVK believes the Alpha mine will begin producing in time to meet "Asian demand that's forecast to increase 24 percent by 2018." Adani intends to export the coal from the Carmichael mine to India. Shedding light on GVK's positivity, Paul Mulder, managing director of infrastructure and coal at Hancock Coal, which is owned by GVK and Hancock Prospecting, said he believes that coal developers are "taking a short-term view of a mature industry with bright long-term prospects," according to Bloomberg. "If you look at what China's done in the last two years, going from 2010 to 2012, they've become a net importer of coal of some 250 million tons per year. Korea is lifting and Japan is starting to expand its baseload also. There's going to be cyclical up and downs," he concluded in conversation with the publication. Only time will tell if the companies' optimism is merited. Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. Related reading: All Eyes on Australia as Coal Miners Face Royalty Hikes, Lower Output Will China's "Control Coal" Policy Impact the US? GVK, Adani Believe Hope Remains for Australian Coal from Coal Investing News