COAL PRICING FORMULAS: E. RUPIK

Two years after introducing W. Blaschke’s Formula, coal prices in Poland were released from mandatory using the governmental price systems, but were still used for calculations of contracts values between energy industry and mining sector for habitual reasons, despite the fact that formula clearly preferred producers interests. The Ministry of Finance’s objective was achieved and the quality of Polish coal increased, but energy industry did not needed coal of that high quality. Also, energy-consuming industry in Poland was in deep recession and soon coal market was dominated by the consumers, which eventually led to modification of W. Blaschke’s formula.

In 1993 E. Rupik presented his new idea for coal pricing, that was suppose to be the model for 1994 coal prices. Since for energy industry the low ash content was not that important anymore and because it was using only coal of size 0-31.5 mm, coefficient We was standardized to 0.8 and coefficient re was removed from the formula. New equation, called Rupik’s Formula or Bytom Formula was used from 1994 to 2003, mainly in the contracts between energy sector and coal producers. All the coefficients used in new formula were the same as in W. Blaschke’s Formula.

erupikform

In the process of restructuring Polish mining sector, the whole organization of the industry has changed. What is more, since 2nd half of 2003 also international market conditions were vastly different: rising coal prices increased Polish export. Limited production and larger import resulted again with domination of producers on the Polish coal market. Until then, mining sector was often selling coal with a loss, since consumers were forcing to the agreements clauses containing penalty payments for inadequate coal quality (on the other hand, if the coal quality was higher than the one specified in the contract, consumer did not had to incur any extra charges).

Since the market situation was reversed, some producers were still using Bytom Formula to calculate the payment differences in regards to the coal quality. More often though each company was introducing their own individual pricing system. Also, it has become more common for the producers to publish prices expressed in PLN/GJ instead of PLN/Mt.

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