Mining Division Strategy Case Australia

1. Introduction

Mining division contributes significantly to global energy sustainability which comprises exploring and extracting minerals such as oil, gas, coal and metal ores (Williams 2012). Despite the risk of low global economic growth of 3.5% in 2012 due to financial market and sovereign stress in Europe, Australian mineral exports (excluding oil and gas) are expected to increase by 7.1% in 2012 which represent 60% of total Australian goods and services exports (MCA 2012).Soon after the discovery of coal during late 18th century in Australia, the country's future changed. Australia is now the fourth largest producer of black coal and it becomes a vital national resource which contributes in providing more affordable fuel for electricity generation and steel making, strong economic and employment growth. One of the principal reason of Australia to grow economically since the Great Depression was the continued coal exports which have grown by more than 50% over the past decade (ACA 2012). This report will discuss the general black coal market and significant trends of black coal industry which impact the employment opportunities within the medium to large organization in Australia. Besides, this report will also cover the emerging occupational trends, environmental issues and policies. Lastly, career path as well as some limitations and reliability of research will also be included.

2. Analysis of Trends

2.1 Product and Services

There are two different types of black coal which are metallurgical (coking) coal and steaming coal. Coking coal is mainly use in the production of iron and steel. Besides, it is also used in smelting and casting base metals in much smaller extent. While steaming coal and soft coking coal which contains less carbon than coking coal and thus unsuitable for steelmaking, are commonly used in electricity generation (70%) and also used in particularly cement industry (20%). Steaming coal is mostly used in Australia especially Queensland, New South Wales and Western Australia for power generation (Williams 2012).

Australia 2012-2013 Coal output volume (%) Total Coal Export (%)

Coking Coal 40.5% 46.1%

Steaming Coal 59.5% 53.9%

100% ($59.7B) 100%

2.2 Demand Determinants

Coking Coal Steaming Coal

* Levels of steel production * Demand of electricity

* Trends in demand and output of pig iron and steel * Share of coal among the fuels for power generation (alternative)

* Change in relative prices of electricity and coking coal

* Ready availability of steel scrap to switch production from blast to electric arc furnaces which requires less amount of coke ( new technology changes volume of coke required to produce pig iron)

2.3 Business Locations

The location of coal resource is a major determinant of industry's geographic spread. Black Coal production in Australia is mainly based in Queensland and New South Wales. Besides, the coal is also mined in other states such as Western Australia, South Australia and Tasmania but in much smaller quantity. There are two types of mining methods which are underground and open cut mining. There has been a rapid expansion of coal output in Queensland and New South Wales from large, capital-intensive, open cut mines mining. Open cut mining in Queensland and New South Wales has produced 85% and 74% coal output subsequently. However, during 2010-2012 flooding and industrial action on BHP Billiton mines have disturbed the production output level. In 2012-13, 52.8% of Australia's black coal output is expected from Queensland and about 86% of it is exported. The next biggest coal output is from New South Wales and it contributes to 72% of the total coal export will be expected from there. Many of the newer mines in Queensland are even dedicated to export trade; the construction was based on overseas bulk quantity buying agreements (Williams 2012).

2.4 Australian Black Coal Overall Industry Trend

Australia is a major global coal producer and the biggest exporter of black coal which is expected to generate revenue of $59.7 billion in 2012-13 (9.5% growth), compared to previous five years of $37.9 billion. Japan, China, Korea, India and Taiwan are the top five destinations in which total export quantity reached approximately 256.85 tonnes in 2011 (ACA 2012). Overall expected industry's performance is favourable during the next five years as the improving global economic conditions strengthen the growth in demand for coal. Hence, industry revenue is predicted to expand at 2.1% over the next years with revenue amounting to $66.4B by 2017-2018 but the profit will grow slower than revenue as the rising wage; fuel costs as well as Mineral Resource Rent Tax and carbon pricing outweigh the benefit of economies of scale (Williams 2012).

However in short term, slower global growth causes weaker demand for goods and energy which in turn reduces prices for both coking and thermal coal. Besides, ample coal supplies along with strong competition from natural gas in electricity generation will also constrain coal prices. Lower coal prices offset the favourable impact of higher export to revenue. Thus, industry revenue is expected to fall by 4.0% in 2012-13. The industry is expected to generate $12.2B profit with 2.2% share of total GDP in 2012-2013 (Williams 2012).

Besides, it is also expected 400 million tonnes of saleable coal with about 349.1 million tonnes for export purpose. Bigger capacity in capacity at coal loading ports in the past few years has positively impact export expansion. The size of domestic market ($11.4B) is much smaller than the industry revenue ($59.7B) due to export orientation and absence of coal imports (Williams 2012).

Generally, coal industry is mature but with potential elements of growth. The expansion reveals high growth production and large price increases. Currently, the industry's switch from coking coal (old) to steaming coal (renewed) is continuing. Originally, the surging demand of steaming coal is due to the search for alternative forms of energy aside from oil which had dramatic price hikes in early 1980. Even though, the pace of growth in steaming coal production has alleviated now, it continues to exceed coking coal output growth (Williams 2012).

Australian Coal mining is a sophisticated industry