Back to school: first article of the series on factors influencing the final coal price. Basics of the basics, so if you’re “from the industry” you should just skip it.
The first factor taken into consideration when analyzing differentiation of prices depending on parameters of coal itself should surely be the size of coal grain. It is easy to follow this relationship, since on the Polish market coal of size 0-31.5 mm accounts for around 85% of total traded coal and it is by average 2/3 less expensive than the coal of larger grain size. In the table bellow there are presented shares in the market of coal of a certain grain size with its prices.
Since coal of size 0-31.5 mm accounts for around 85% of total coal trade in Poland, only this type should be taken into consideration when creating the index for Polish market, which is also an international practice (though all global indices are calculated for steam coal of size 0-50 mm).
Second most important element of coal pricing (and the first one when considering creation of the Polish price marker) is the coal quality. Basing on the official pricelist from Katowicki Holding Węglowy for coal of grain size 0-31.5, it can be noticed how the price of Polish coal vary depending on changing calorific value and sulphur content.
In W. Blaschke’s Formula for calculating the import parity price was changing proportionally to the changes in the calorific value of the traded coal. Katowicki Holding Węglowy uses its own equation, in which for every additional 1,000 kJ/kg the price increase by 10-11%. The same goes for sulphur content, though the numbers are different; in W. Blaschke Formula the price of coal was changing by 1% for every 0.1% change in the sulphur content, meanwhile KHW’s equation includes increase of price only by 0.75-1% for every 0.2% decrease in sulphur content. Table bellow reflects this relationship.