There are growing global calls for banks and financial institutions to stop funding new or expanded metallurgical coal mines, including in the Illawarra, as the race towards green steel speeds up.
A new report from French NGO Reclaim Finance says metallurgical coal has been a blind-spot for the banks, many of which have ruled out funding for thermal coal projects, but continue to finance metallurgical projects which produce coal used in steelmaking.
This is despite the burning of coal for steelmaking being responsible for 11 per cent of global emissions and the largest industrial emitter of CO2.
Currently, Australia is the second largest producer of metallurgical coal, after China, and has 28 per cent of the global pipeline for coal developments, which is only two per cent behind the world leader.
The Port Kembla Coal Terminal exports roughly 14 million tonnes of coal a year, 94 per cent of which is metallurgical coal.
Author Cynthia Rocamore said the report showed banks and financial institutions were critical in the metallurgical coal supply chain.
"The idea of this report was to lay the groundwork for finance campaigning, who to target, who had exposure and who we should prioritise in terms of trying to have policies," she said.
Australian banks including ANZ, NAB Commonwealth Bank and Westpac were major financiers of metallurgical coal projects, with ANZ providing the most financing at nearly $3 billion, according to the report.
Super funds also played a role, with AustralianSuper the seventh highest global investor in metallurgical coal developers as of June 2023, with investments of $4.129 billion.
Each of the Australian banks set rules around financial support for coal mining, with CBA requiring clients, including metallurgical coal projects, to provide a transition plan, and Westpac and NAB requiring transition plans by 2025.
ANZ has committed to exit thermal coal by 2030, but increased its exposure to metallurgical coal projects in 2023, up to $650 million this year from $500 million last year.
In the Illawarra, South32 is currently funding works at Appin mine without external finance.
"There is no loan funding associated with our investment in Illawarra Metallurgical Coal," a spokesperson for South32 said.
However Wollongong Resources, the current owner of the Russell Vale colliery went through a major debt restructure and refinancing deal in 2020. Its predecessor, Wollongong Coal Limited was forced to delist from the ASX after being unable to raise more capital and unable to afford the costs of listing on the stock exchange.
The now owner of Wollongong Resources, India's Jindal Group, has 2.7 million tonnes per year of metallurgical coal production capacity in development.
In 2020, the company was approved to extract 3.7 million tonnes of coal over the next five years at Russell Vale, however an underground explosion in 2023 limited operations for months.
Illawarra anti-coal campaigner Deidre Stuart, secretary of Protect Our Water Catchment Incorporated, said finance was essential for the operation of a number of metallurgical mines in the Illawarra.
"If banks weren't willing to finance metallurgical coal, there'd be local metallurgical coal operations that would disappear," she said.
While banks may be willing to continue to fund coal for steel production for now, the International Energy Agency has said current global reserves of metallurgical coal are sufficient for demand through to 2050.
They may be more than what is needed, it says, as the transition towards green steel accelerates.
A June 2023 report from German think-tank Agora Industry found coal could be phased out of steel making by the early 2040s.
In this framework, Australia had a significant role to play in the production of 'green iron' with its vast reserves of iron ore and renewable energy potential, Agora said.
If this happened, plans for the extension or continuation of metallurgical coal - and coal-based steel making, which happens at Port Kembla - could leave behind a slew of uneconomic assets, Ms Rocamore said.
"What we're putting forward to financial institutions is that there is a very high risk of continuing to finance those companies who continue to produce these mines, or expand existing mines, that risk becoming stranded assets," she said.
Ms Stuart said the findings were a wake-up call for local regulators and politicians who continue to approve new coal mines.
"The NSW government should stop opening up new areas to any kind of fossil fuel exploration," she said.