A confidential report obtained by the ABC says coal prices will fall significantly and exports from Australia's biggest coal port will decline if Adani's giant coal mine in north Queensland goes ahead.
- Report found mine could add about $40 million tonnes a year of capacity to the market
- Queensland believed to be offering Adani discount on mining royalties during initial phase
- That could amount to almost $1.2 billion in lost revenue
The research has come amid a major split in the Labor Party over plans to offer the giant Carmichael mine subsidies and a reduction in mining royalty payments.
And it has highlighted deep divisions behind the scenes in the coal industry over the federal and Queensland governments' support for subsidies for the giant mining project.
A key finding of the report was that if Adani's coal mine in north Queensland went ahead, it would add about $40 million tonnes a year of capacity to the market.
And global coal prices would fall by nearly $3.80 a tonne — from a base case consensus forecast of $68.80 a tonne to $65.
The report said competition from Adani's Queensland mine would reduce exports from Australia's largest coal terminal at the port of Newcastle by 11 to 12 million tonnes a year — equivalent to the output of a Hunter Valley coal mine employing about 1,400 people.
Output from Adani's planned mine would "impact Newcastle supply through influencing the price forecast for thermal coal" with "a bearish price impact of increased new supply from the Carmichael [mine] into the seaborne market", the report said.
'Report should send alarm bells across the industry'The prospect of jobs and mining royalties in New South Wales being displaced by a giant new Queensland coal mine subsided by the federal and state governments sparked a major schism in the ALP.
"This modelling from a reputable firm commissioned by a leading NSW coal producer should send alarm bells across the industry in NSW and in the halls of government," said NSW Labor spokesman Adam Searle, after being briefed by the ABC on the research.
"This is yet more evidence that the proposed Adani Carmichael mine in Queensland represents a clear and present threat to the NSW coal industry, and the NSW economy."It will dampen the demand for the high-quality NSW coal. The coal that would come out of the Adani mine is of significantly inferior quality.
"This is not only bad for the environment, but it's bad for the NSW economy, bad for existing NSW thermal coal mines and their workforces.
"And bad for the NSW Government, because it will drive down the royalties that the State Government currently gets."
Additional thermal coal supply 'will drive down price'The NSW Government has said that due to the superior quality of coal produced at the Hunter Valley mine, it would not be displaced by coal from the Galilee Basin.
"The quality of coal from the Adani Carmichael coalmine represents a market segment that generally constitutes less than 3 to 5 per cent of exports of coal from New South Wales," NSW Resources Minister Don Harwin recently told State Parliament.
But Mr Searle said people needed to understand that demand for thermal coal over the medium to long term was predicted to be "at best relatively flat".
"So significant additional supply caused by the Adani mine going ahead will drive down the price of existing coal," he said.
Adani has claimed that coal from its planned mine would not affect global prices, as it would be supplying Adani's own power stations in India.
Yet sworn court evidence said the Carmichael mine would be producing coal for premium Asian markets.
As well, the mine and the power stations are owned by separate publicly listed companies, so Adani should be supplying coal at an arms length market price.
Reports Queensland wooing Adani with offer of 'royalties holiday'It remains unclear whether Adani's Queensland mine will go ahead.
The Queensland Labor Government is believed to be wooing Adani by offering a discount on mining royalties during the initial phase of the project.
They are reportedly negotiating for a deal on royalties for the Adani Group, which could involve an initial "royalties holiday", followed by a gradual phase-in or "ramp up" of royalty payments.
That could amount to almost $1.2 billion in revenue forgone, according to analysis by the Australian Institute, based on an estimate of the cost of a five-year "royalty holiday" and a four-year phase in.
A spokesperson for Queensland Treasurer Curtis Pitt said commercial arrangements were still being finalised and taxpayers would "receive royalties".
But the Government has refused to be drawn on just what concessions might be given.