Outlook for coal market worse than at the bottom of the GFC, Solid Energy says; 'Reason why full Crown ownership is not suitable'

"Releasing the company’s annual results for the year to June 30, Palmer said on Friday that the risk profile of Solid Energy’s business model – its commodity nature and the ability of its fortunes to make a huge about-turn in a matter of months - meant it was unsuited to full Crown ownership."

Is it any more suited to private ownership?  Who would buy it (other than China)?  Is ownership the issue or just management?  Is it possible to even change the business model in today's changing economic environment?

One wonders whether the proposed sale by the govt. is part of what's prompting the review and job cuts ...?

Of course there has been no suggestion that the man in charge is any way affected by this appalling result - his[ and his board level cronies] bloated salary and benefits package is totally imune from the reality of his organisations pathetic lack of foresight /planning - As usual it is the workers who actually produce more than just hot air who  are the ones who are sacrificed on the alter of expediency! 

In my humble opinion it is way past time to start chopping the fat cats off at the knees- and making them pay for the chopping equipment !

very believable comments from insiders probably hoping to pocket big time from sale process.

It's somewhat encouraging if there is not a good business case for coal mining, from an environmental perspective.

If you think we have problems .....Watch the Aussies take steps to weaken the Au$ in the next few weeks , they cannot sustain the massive drop in Iron Ore and Coal prices which  form the backbone of their mining sector .

Boatman: I have a different view. The largest miners are the foreign owned miners BHP, RIO, and Xtrata. They are the ones affected by falling commodity prices. The recipients within the AU community of the proceeds of commodity exports are the States in the form of royalties, and wages and expenditures on extracting and shifting product to shipping facilities. On the other side of the coin is the $400 billion pipeline of planned capital investment in developing new mines (or expanding old ones) and bringing them on line. That expenditure does stick to the sides of the country. Export revenue tends to be offshore, accounted for offshore, and spent offshore. It's only when it comes back in, in the form of new Capital Investment does it benefit the country. As to royalties, both BHP and RIO have a special arrangement with the West Australian government that gives them a special reduced 1% royalty from the Pilbara, and the agreement has run for 40 years and the state is trying to break the agreement. NSW and QLD charge 6% which is the standard. But, if you go and have a look at the Northern Territory Web site relating to royalties your head will hurt trying to read all the carve outs and exemptions. SPOT prices for Iron Ore and Coal have fallen 40% over the past 3 months, yet the AUD is still above parity. I would be careful betting against it.

If all that makes sense, you will understand why the Federal Government is so keen to introduce an MRRT (mineral resource rent tax) because the country has not benefitted from the massive hike in prices over the past few years. The offshore foreign owned miners did. There is a huge message there for new zealand selling off its assets to foreigners.

Fresh ideas for the Westcoast !

In the current environment the whole world is drilling and mining prices to dead. Why not export fresh water ?

Could the government with the private industry together not develop potential green industries ? The Westcoast with it’s massive rainfall and unemployment rate offers many opportunities.

Example: Minister Steven Joyce it would be far economical and sustainable for our county to instruct our R & D department to find solutions transporting fresh water to Australia and other countries, then do the same economic activities  100 other countries/ companies do exploring/ drilling oil.

With so much potential - why don’t we do things different in this country ?

Persuing our own destiny !

"worse than at the bottom of the GFC"

That's a bit of a pre-ejaculation, we aren't anywhere near the bottom of the GCF yet. There are still years of deleveraging and economic contraction before this Great Depression 2 gets anywhere near close to a bottom.

 

And then, to paraphrase a certain Aussie band, it's a long way to the top, if you have a SPOT of coal..."

@Iconoclast I rerspect your views , but its contrarian views that make a market work.

Remember the mining Coys incur their expenses in AU$.

A strong $ and falling prices = disaster.

I believe the Aus$ strength is driven by two elements , firstly the problems in the Euro , US and Japan with money printing and near zero rates .

The second is the earnings from resources have propelled Austarlia to near full employment , and created a boom and Dutch disease.

My reasonoing is that the fall in coal and ore prices will need to be offset against a weaker AU$ simply to stay in business

The Aussie Central bank must know this and must act now 

yeah boatman & iconclast

they are all a bit surprised over here about the ore price fall. I am  with the rate cut as rich as they are the gfc is finally been felt here in OZ. 17% down on building in july even with the last cuts!!!  NZ wont buckle we will stay the course to capacity destuction. 

The implication is that an SOE cannot be commercial, or make tough choices regarding having an efficient staff level. While possibly accurate, that seems a massive cop out from an outgoing Chairman, and a fairly poor excuse for not having driven tough commercial decisions.

If indeed this is the culture/ expectation of SOEs, it needs to be publicly outed and condemned. They must be run efficiently is the answer, and that needs to be stated very clearly; with a little bit of government backbone in supporting it.

Selling them off for this reason is another cop out.

What a tangled economic web we have weaved!

Coal use down - bad for the economy/ good for the environment.

NZ dollar high - bad for the dairy industry's returns,  but good for the input side costs.

Import cheaper kiwifruit pollen, and then get hammered by PSA

Use antibiotics to game the system, then watch as resistance builds faster than mans' 'intelligence' can cope!

Interest rates are low - bad for the savers, but great for the borrowers.

Seems that the path to economic salvation is getting oh so narrow now, and that it is increasingly  hard to get all those factors just right! 

Lets face it, we are approaching the endgame for the current economic model. A major part of the problem comes from not calculating GDP correctly. For instance, why doesnt the reduction in coal reserves/ environmental quality/ opportunity cost of capital ever get deducted from the value of export receipts. What then are the returns on mineral exploitation or dairy farming. Or, as recently revealed, what value loss has occured from Cadmium contamination of our soil/food.  

Until all costs are recognised, we will continue with malinvestments, and continue to reward the wrong players.

A car crash still adds to GDP. Economics is not a miserable science because it is NO science at all. Failed engineers playing fools poker more like.

Nature bats last, or something along the lines ...' mother nature grinds slowly, but ever so finely"

The risks inherent in state-owned coal miner Solid Energy’s business are the “very best reason” why the company should not be under full Crown ownership, the company’s outgoing chairman John Palmer says.

Using this logic Landcorp should go as well......

We didn't hear this message when the coal price was bolting...

Some would think that govt. was just the patient investor needed....

Unless the problem with govt ownership are the often trotted out excuse of the rubbish mgt and board of govt. owned busiesses. Is that what Palmer means?

.. worse than at the bottom of the GFC ..

Well that's a tellingly dumb statement to start - given it assumes the GFC has already bottomed out.