DROWNING INDUSTRY CLUTCHED TO AN ANVIL

Coal market commentators who put all the fault for the current condition of the coal mining sector on falling international prices resembles a drowning man, clutching to an anvil lying on the bottom of the lake and blaming the water level for his dramatic situation.

Quick reminder: on 23rd September we quoted Zygmunt Łukaszczyk, CEO of Katowicki Holding Węglowy, who said that if the coal prices will fall bellow 50 USD/Mt, the existence of Polish producers will be at stake. Shortly after the magic line was crossed and many commentators were panicking that this situation is a disaster on an unprecedented scale.

Polishcoaldaily reminded them, that only 12 years ago ARA prices were at a level of 44 USD/Mt. Going further and further back in time, some explorers would even find the record-breaking year 1999, with average level of prices at 29 USD/MT (in summer ‘99 the prices went even bellow 27 USD/Mt). In general, ARA coal prices for the first time crossed the Rubicon of 50 USD/Mt in October 2003 (52.85 USD/Mt).

How is it possible that the industry managed to survive so many years of low prices? Basics of economy: low costs. Figure bellow shows how the Polish producers managed to oversleep the prosperity years in the global coal market and how the sector decided to devour all the extra incomes (values expressed in PLN/Mt).

cenkoszt

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