TIME continues to tick down to Adani Australia’s deadline of late 2021 for first coal exports from its giant Carmichael coal mine located in central Queensland’s unmined Galilee Basin coalfield.
Adani finally received approval for its Carmichael mine and rail project from the Queensland government last year, more than a decade after the Indian-domiciled company had first submitted its project application to Queensland planning authorities in the late 2000s.
An Australia-based spokesperson for Adani Mining said in an emailed statement to AMR that the project was proceeding to schedule.
“We look forward to the completion of the mine and rail construction in 2021, and for our first coal to also be exported later that year,” the spokesperson said.
“The Carmichael mine will produce 10mt of coal per annum.”
Rail infrastructure will be critical for the project which had an original mining capacity of 60mtpa for thermal coal, now scaled back to an initial 10mtpa.
Adani needs to link its Carmichael mine to the port of Abbot Point in northern Queensland where it operates a coal shipments terminal and is planning to build another.
Without access to adequate rail capacity to deliver coal from its mine to port, Adani may find it difficult to ramp up production at its mine beyond 10 mpa and to ship coal in meaningful volumes to overseas customers.
To address the issue of rail capacity, Adani has received approval to build a 189km rail line to connect Carmichael mine to the existing Central Queensland Coal Network used for railing coal exports to the ports of Hay Point and Abbot Point.
The Adani Mining spokesperson said construction of the railway has started.
“Works on the Carmichael Project are well underway and the construction schedule is on track, with more than 200 people onsite and about 50 pieces of plant and equipment, including bulldozers, scrapers, graders, compactors, water carts, and tractors,” he said.
“Construction activities on the mine site include, but are not limited to, land clearing and surveying, fencing works, civil earthworks and other construction activities including building roads, pads, site office establishment and dam construction.”
Adani has placed equipment orders with manufacturers and engineering firms for its rail project, demonstrating its commitment to see the Queensland coal project through to completion.
Siemens is to provide rail signalling systems for its Carmichael rail project, and Martinus Rail is contracted to lay the rails for the new system.
“We have also awarded more than $500m in contracts on the line and rail project, with more to come, ensuring works will continue to ramp up over the coming weeks and months,” the spokesperson said.
Rail capacity required
The rail network will have a handling capacity of 40mtpa for Adani coal exports, and more than enough to cover its Carmichael mine’s start-up production rate of 10mtpa.
However, the CQCN serves existing export coal mines in the Bowen Basin coalfield of Queensland and most of its rail capacity has already been committed to them.
These Bowen Basin mine operators have signed long-term contracts with the system’s operator Aurizon to secure capacity in its CQCN for their coal exports.
As a result, their coal exports will have priority in the rail system over those of newcomer Adani, raising the possibility that Adani could face a severe bottleneck at the point at which its coal trains leave its rail network and enter the CQCN.
This is unless Adani can secure adequate capacity for its 10mtpa of Carmichael coal exports on Aurizon’s railway.
The Adani Mining spokesperson said the company is still working on securing shipment capacity on the CQCN for its thermal coal exports..
“We are progressing with our connection to the existing rail network as per standard regulatory processes that are in place to facilitate rail connections,” he said.
Rail infrastructure is critical to Adani for another reason, as the Indian company has traditionally taken a holistic approach to its coal business.
This is because Adani prefers to have some measure of control over most if not all aspects of the supply chain for this commodity.
In India, Adani is the largest importer of thermal coal into the country through its extensive trading operation, and the company also has interests in ports in India and power stations.
The company explained its integrated approach to its coal supply operations in its last annual report.
“Adani group has evolved as a diversified conglomerate based in India having global operations with primary interests in the energy sector, while the company continues to operate as the flagship company of the group,” the report stated.
“The group was primary involved in the coal logistics business and gradually it has backward integrated its operations in domestic and overseas coal mining through the company, along with forward integration in ports, logistics, power generation and transmission through various other group companies.”
Coal market weakens
Time is a critical factor for the Adani thermal coal project in another way.
Delays to the Carmichael project have not only added to the cost of the mine – Adani said it has already spent $3.3b on the project since 2010 – but have delayed the start of its coal shipments.
Boom time prices for thermal coal on international markets at around 2012 have given way to a depressed market where current prices for the mineral are in the doldrums.
Lower international thermal coal prices may affect the profitability of the Carmichael mine which has relatively high shipping costs to market because of the mine’s 400km distance from railhead to port. These additional costs have to be covered by sales prices for thermal coal sold on the international market otherwise the mine’s viability could be affected.
The market for thermal coal is unlikely to change for the better in the near term, at least according to official Australian government forecasts.
According to the Australian government’s Office of the Chief Economist in its December 2019 Resources and Energy Quarterly update, the outlook looks flat for the key thermal coal benchmark price centred on Australia’s Newcastle port.
“The Newcastle benchmark thermal coal spot price is forecast to drift from an estimated average of US$74/t in 2019 to US$72/t in 2021, as supply continues to outpace demand,” the report stated.
The Asian seaborne market for thermal coal remains well supplied from mines in Australia and Indonesia, and Russian coal producers in Siberia have been shipping more product to Asian customers through enlarged export facilities on Russia’s Pacific seaboard.
Australian export volumes of thermal coal going into the seaborne market are expected to grow to 214mt in the 2020-2021 financial year, from 209mt in the 2019-2020 year.
More Australian export volumes supplied to an already slack thermal coal market are likely to weigh on seaborne prices of the commodity at a time when Adani’s Carmichael mine starts its exports.
The Australian government’s Office of the Chief Economist stated that although there is a large pipeline of potential projects in Australia, “weak prices and growing challenges in developing greenfield projects could weigh on final investment decisions and export growth beyond the outlook period”.

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