COAL PRICING IN POLAND – INTRODUCTION

During the communist era, prices of coal were published in official, annually updated price-lists. Prices were referring to so called “coal grades” (or “coal classes”), which were systematized in regards to the coal quality, more specifically: calorific value and ash content. The prices were also diversified depending on who was the final consumer (different for industrial and retail customers). Since the economy was centrally planned, prices of coal were only a resultants of production costs of certain “coal grades”. In the new economic conditions, the system had to be changed taking into consideration rules of the free market.

When considering the coal pricing system in larger scope of economy, there are two key elements. The first one creating this composition is “level of prices”, which is a result of negotiations between the seller (producer or trader) and a buyer (consumer or trader). Sellers should try to get a price that would cover the costs of production or buying the commodity with a certain profit margin. Buyers on the other hand should seek for prices that in the end would make their production efficient enough to sell their final products (energy, heat, sugar, cement etc.) for the price that is both acceptable for their clients and economically justified. Although both sides have different objectives, the negotiations should result with mutual benefits.

The second element is called “structure of prices”, which determines how the price should adjust in case if certain coal parameters would change (in respect to the “reference coal quality”), but also other factors that might have impact on the prices (freight costs, volume, international prices etc.). Most certainly though, the key parameter is always calorific value of the coal. Some experts are using the term of “fair price” which refers to the price paid by the consumer for the certain amount of energy that could be produced from given commodity.

Following articles will cover: coal pricing formulas, import parity, review of historical projects of Polish coal price indices.

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