Column: Coal optimism in Australia hides unease about long-term problems FacebookTwitterLinkedInEmailPrint分享Reuters:BRISBANE—Coal miners supplying Asia’s rapidly growing economies have plenty to be optimistic about as prices and demand appear robust, but they should be wary of getting caught up in the positive feedback loop that nearly destroyed them before.This week’s inaugural Energy Mines and Money conference in Brisbane, the heartland of the industry in top coal exporter Australia, was a sea of optimism about the outlook for the industry. Prices have been on an upward trend since bottoming in 2016 after five years of losses, and miners are once again making good profits amid strong demand from top importers China and India, new consumers such as Pakistan and the reliable veteran buyers like Japan and South Korea.But at the back of the minds of many Australian miners is the fear that they have seen this movie before, and they don’t want the same ending. In 2012, the industry was cock-a-hoop over forecasts that pointed to massive import demand growth in Asia, led by China and India. Problem was it was pretty much all wrong.A well-respected industry consultant and forecaster boldly claimed in early 2012 that China would be importing 1 billion tonnes of coal by 2030, and India would be up to 400 million tonnes. But these forecasts now look hopelessly optimistic, given China’s coal imports were 270.9 million tonnes in 2017. While imports have risen for two years, they are still well below the record 327.2 million tonnes from 2013. While China’s coal imports may rise slightly this year, it’s unlikely they will reach 300 million tonnes, and that 1 billion tonne forecast looks well out of reach.The [new] optimistic forecasts also fail to account for political pressure to move away from coal, not only in China, but increasingly in India. It’s likely that those countries planning on building coal plants powered by imports will also come under mounting pressure from environmental activists, who have become increasingly sophisticated in targeting how coal plants are financed and insured.In fact, if there was another common theme to this week’s conference in Brisbane, it’s that the coal sector still doesn’t fully grasp that array of forces now being deployed against it. The mantra of coal as ‘cheap and reliable and the only way to electrify the masses of people still without power’ was still repeated, and clearly believed.But scratch a little further and miners will tell you of the incredible difficulties in developing projects, with increased government scrutiny and regulation, the rising threat of public opposition and the dearth of financing, notwithstanding a seemingly large pool of investment funds. The inability of India’s Adani to actually start building its Carmichael mine in Queensland, the world’s largest planned mine aimed at supplying the seaborne market, plays on the industry’s mind, as does the virulent public opposition to the mine’s development.More: COLUMN-Resurgent coal exporters should be wary of blinkered optimism: Russell
Group CEO Galvin said views of USS had been “pulled to and fro by the 2017 valuation and commentators with polarised agendas”.“At various points we were accused of being reckless for taking too much risk in our investment strategy, or of being recklessly prudent for our plans to invest more in ‘safer bonds’,” he added.Objective observers, argued Galvin, would find neither of these statements to be true, just as they would with regard to accusations the scheme was “creating ‘smokescreens’ to hide bigger funding problems” or “manufacturing” deficits.Compared with many other private pension schemes, USS was “an excellent pension plan” and “doing a good job in difficult circumstances”, he said.The figuresUSS’ funding deficit fell from £12.6bn (€14.1bn) to £12.1bn as at 31 March, on a monitoring basis using 2014 valuation assumptions. The scheme has not yet completed its 2017 valuation due to the disagreement between universities and members. The ongoing 2017 valuation has reported a £7.5bn deficit (89% funded).Its assets grew by £3.9bn to reach a total £64.4bn, the vast majority of which are assets in the DB section (£63.6bn).Investments supporting the DB section of the scheme gained 6.2% over the year under review and 10.6% per annum over five years, which amounted to an outperformance of 1.4% and 0.8%, respectively.The DB fund also outperformed UK government bonds by £5.6bn over five years to the end of March.USS also highlighted its performance on value for money, noting that an independent assessment found it was able to achieve its five-year investment performance at a cost £61m less than that incurred by comparable pension funds in the latest 12-month period assessed.Investment in internal investment capabilities, which was partly behind a £2.1m increase in staff wages, helped reduce overall investment costs, as a proportion of assets under management, to 31bps, 16bps lower than in 2013/4, according to the scheme. The chief executive of the UK’s largest pension scheme – the Universities Superannuation Scheme (USS) – has expressed alarm at the “confusion, concern and distrust” generated among its members as a result of commentary about the scheme’s funding position.Commenting on USS’ annual report and accounts for 2017, Bill Galvin said that “whatever the contributions of others might have been in that outcome, we clearly failed to communicate simply enough, convincingly enough, or from a basis of sufficient trust, to make the key messages clear”.USS would therefore review its process for the scheme’s valuation with employers, in particular “the early discussions regarding their risk appetite and capacity,” he said.The 2017 valuation of USS led to the scheme proposing to close its defined benefit (DB) section to future accrual, which in turn led to strike action across UK universities and heated debate about the scheme’s approach to the valuation.