06 Sep 2023

Australia's Nsw to Raise Coal Royalty Rates

06 Sep 2023  by argusmedia   
Australia's New South Wales (NSW) state government will increase its coal royalty rate by 2.4 percentage points from 1 July next year.

The flat rate increases to 10.8pc for open-cut mining, 9.8pc for underground and 8.8pc for deep underground is forecast to add A$2.7bn ($1.7bn) to the NSW budget over the next four years. Neighbouring Queensland state earned an additional A$5.7bn from its royalty rate increase in the 2022-23 fiscal year ending 30 June.

NSW has opted for a flat rate increase compared with Queensland's addition of upper tiers to capture up to 40pc of earnings above $300/t. NSW consulted with 13 coal firms ahead of its rate hike, while Queensland imposed its upper tiers with little consultation on 1 July 2022.

The lower quantum of increase and the period of consultation is designed to limit backlash from NSW coal producers. Some mining firms, including BHP, have withdrawn from all investment in Queensland following its royalty rate increase. NSW coal mining firms were initially unsurprised by the scale of the NSW royalty hike announced.

The higher royalty regime will come into effect a day after NSW's temporary A$125/t domestic coal price cap comes to an end. This makes it highly unlikely that the price cap will be extended, leaving NSW coal-fired power producers more exposed to seaborne coal market prices.

NSW coal firms are more thermal coal focused than their more heavily metallurgical coal-oriented counterparts in Queensland.

Argus last assessed high-grade 6,000 kcal/kg NAR thermal coal at $156.51/t fob Newcastle 1 September, up from $133.87/t on 28 July but down from a peak of $444.59/t fob on 9 September 2022. It assessed low-grade 5,500 kcal/kg NAR thermal coal at $84.24/t fob Newcastle on 1 September, down from $86.18/t on 28 June and from $199.12/t fob on 9 September 2022.

Argus assessed the premium hard low-volatile metallurgical coal price at $270/t fob Australia on 5 September, up from $246.50/t on 8 August but down from $365.55/t on 3 March.


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