Australia's Queensland state government — which oversees coking coal regions — expects its coal royalty revenue to halve over the 2024-25 fiscal year to 30 June, driving a budget deficit. Royalty obligations could also reduce coal production.

Queensland's state government expects to collect A$5.5bn ($3.6bn) in coal royalties over the 2024-25 financial year, down from A$10.5bn in the previous year, it said in its 2025-26 annual budget released on 24 June. The decline is partly driving a A$8.6bn budget deficit this year.

State royalty revenues will remain depressed until at least the 2028-29 financial year because of continued coal price weakness, the government said. It will collect A$5.8bn-6.2bn/yr of coal royalties over the next four financial years.

But royalty obligations may still be too high for many Queensland producers.

Australian coal producer Bowen Coking Coal (BCC) — which runs the 5.5mn t/yr Burton mine complex — reported significant financing challenges on 20 June that it attributed to weak hard coking coal prices and unsustainably high Queensland royalty rates. The company may need to temporarily close its flagship complex if it is unable to raise capital.

US–Australian coal miner Coronado is also facing cash availability challenges. It started talks with Queensland's state government over coal royalty relief in January-March, and signed a A$150mn financing deal with state-owned utility Stanwell on 10 June.

Hard coking coal prices have been falling since 2022. Argus' metallurgical coal premium hard low-vol fob Australia price was last assessed at $174.40/t on 24 June, down from a high of $662.65/t on 16 March 2022, weeks after Russia launched its large-scale invasion of Ukraine.

By Avinash Govind