Coal news and updates

Almost 1km below the rolling hills of southern Poland, four men, their faces coated in a slick layer of coal dust and sweat, pilot a colossal grinder as it rips metre-wide chunks of glistening black coal from the walls of a narrow tunnel.

At temperatures above 30C, by the dim light of torches and surrounded by the deafening cacophony of the screaming grinder and a thundering conveyor belt, such men and their machines work 24 hours a day, six days a week, churning out a fuel that was supposed to be the answer to Poland’s energy problems. But it has not worked out that way.

 

 

Over 300km north, in Warsaw’s government meeting rooms, lit by bulbs that rely on coal for almost 90 per cent of their power, the country’s politicians and bureaucrats have been debating how to rescue an industry in existential crisis: chronically lossmaking, inefficient and under threat from external pressures.

Poland’s vast coal reserves, the second-largest in Europe, were seen as the energy ace up its sleeve – offsetting reliance on Russian resources and providing enough cheap, domestic fuel to power decades of economic growth.

But then the US shale boom sent coal prices tumbling and exposed vast inefficiencies across the country’s state-owned miners. At the same time, environmental concerns have led to pressure from the EU for Poland to wean itself off the black stuff. From a blessing, coal now feels like Poland’s curse. “It seems like it is the biggest challenge for the country’s public policy,” says Wlodzimierz Karpinski, Treasury minister. “Put simply, it is one of the biggest challenges for the economy where the treasury still has assets.”

 

Poland’s mines lost a cumulative 1bn zloty ($300m) from sales of coal in the first half of the year. It costs more to extract coal in Poland than in Australia, where salaries are higher. Britain’s coal mines, slimmed down after a drastic and highly contentious restructuring in the 1980s, produce more than four times as much coal per employee as Polish ones.

“Mining here is not efficient,” says Jarosław Zagórowski, chief executive of Jastrzebska Społka Weglowa (JSW), Poland’s third-largest coal miner. He says that political leaders have dodged difficult decisions for years and the recent falls in the coal price mean that the industry is facing a “catastrophe”.

Miroslaw Taras, chief executive of the largest producer of hard coal in Europe, agrees.

 

Kompania Weglowa, the company Mr Taras runs, loses 50 zloty for every tonne of coal it mines and last year it dug 34m tonnes out of the ground. Prices of coking coal, which is used mainly to produce steel, and thermal coal, for power stations, are both down by roughly a quarter so far this year. Thermal coal now costs less than half its 2011 peak.

Coal mining in Poland employs more than 100,000 people, and the trade unions that represent them wield considerable power. But dependence on coal is creating strains between Poland and its EU partners, who want states to reduce carbon emissions.

Warsaw has been the biggest opponent to the EU’s tough new 2030 emission reduction targets which are scheduled to be agreed this week at a summit in Brussels, worrying that reduced coal usage will increase its energy costs.

But many in the industry hope the EU pressure will act as a spur for long-overdue reform. “Poland is aware that we will have to adjust to EU directives, which will restrict the coal industry, just like Germany and the UK, so it is high time for the government to not keep its head in the sand,” said Mr Taras.

 

JSW says its 110-year-old mine in Knurow makes a profit. But overall the company’s five mines lost 340m zloty in the first half of the year. Mr Zagorowski and Mr Taras say losses will continue unless there is reform of the rigid labour laws they say tie the hands of mining companies that need to restructure when the business cycle turns.

KW has managed to extract some concessions from the unions as its financial plight becomes increasingly stark, allowing it to limit salaries for administrative workers and curb pension contributions. It is also close to a decision on reducing miners’ pay.

But labour continues to account for 50 per cent of costs across the industry. Executives say union power means mining companies are forced to pay for perks such as workers’ holidays – although JSW recently insisted on selling a 400-bed holiday resort it once owned for the use of employees – and their children’s schoolbooks. All KW employees are entitled to seven tonnes of coal each year or the equivalent value in cash.

“We seem to still approach [mining] in the same way as we did decades ago during communist times,” says Oktawian Zajac, principal at the Boston Consulting Group in Warsaw.

But with local, parliamentary and presidential elections all due in the next 12 months, there is little hope that Poland’s ruling politicians have the appetite for big changes.

 

 

Source: ft.com