02/05/14 – Polish coal industry under pressure amid falling prices

It is reported that a significant drop in global coal prices is the main reason for the current problems of Polish coal mines.

The price of thermal coal has fallen by 13% over the past 2 years and coking coal by 23%. The industry was additionally hit by mild winter.

Poland has hoarded 7 million tonnes of coal stocks, while the energy industry has also amassed vast inventories of the commodity. Trade unionists describe the situation as dramatic and are calling for government intervention.

Experts said that the current coal price level of USD 76 per tonne in European ports is poised to remain unchanged throughout the year.

Mr Henryk Paszcza, the head of the mining department of Poland’s Industry Development Agency, said that “The problem has been growing for two years. The United States, having invested in shale gas, earmarked an increased amount of coal for exports, practically flooding the market. The other problem is weakened economic growth in China and the whole of Eastern Asia, Indonesia and Australia.

“The Polish Coal Company (KW), which is Europe’s biggest coal miner and employs 55,000 people, stopped production on Monday until 5th May amid growing inventories and low prices. KW has almost 5 million tonnes of unsold coal.

Consultancy Roland Berger said that the Polish coal industry’s competitiveness is eroded by ineffective use of machinery, high and inflexible labour costs, unprofitable longwalls and overproduction of coal.

Mr Paszcza said that the next two largest Polish coal miners, the JSW and KHW, posted profits in 2013. However, this year JSW could also report a loss.

Mr Janusz Piechocinski, Polish deputy PM and Economy, said that KW must become more rational. Today labour and labour-related costs make up 63% of its coal mining costs, while in the Bogdanka (mine) near Lublin the figure is 36%.

Although, Poland is one of the world’s leading coal producers and exporters, it imports roughly the same amount of the commodity as it exports (10.8 million tonnes versus 10.6 million tonnes in 2013, respectively).

The imported coal is of better quality and Polish energy companies mix it with domestic coal to secure better parameters.

In the face of the crisis in Ukraine and related concerns over EU energy security, numerous Polish politicians have reiterated coal’s role in securing the country’s energy independence.

Source – Xinhua, CoalGuru.com