Higher prices, lower taxes needed for expansion in coal

Canada’s coal miners expressed relief that the financial and labor problems that shut down the Balmer, Greenhills and Fording mines in southeastern British Columbia have been resolved. Otherwise, little optimism was evident at the recent annual meeting of the Coal Association of Canada in Calgary.

Stunted growth in domestic electrical consumption has virtually killed major utility construction in Canada and no additions will be required until the middle of the decade, said Robert Engler, general marketing manager for Luscar Ltd. of Edmonton.

“Domestic thermal coal production will likely remain static at 37 million tonnes per year for the remainder of the ’90s,” Engler said. On the brighter side, new power plants in Pacific Rim countries, including Korea, Taiwan and Hong Kong, are being constructed at an unprecedented rate. And demand for thermal coal is increasing as a result.

Canadian producers shipped only about three million tonnes of thermal coal to these markets in 1992, representing just 4% of the 78 million tonnes imported by these countries from competitors around the world.

At the rate the Pacific Rim market is growing, if Canadian exporters simply maintain their 4% of the pie, they would have to double current thermal coal export volumes by the year 2000, Engler said.

Canada is a preferred supplier of overseas utilities, but various government taxes have conspired to limit export potential, he added.

“Real price increases will be required to promote investment in new capacity.”