BEHIND THE COAL PRICE: FREIGHT COSTS

Costs of transportation are essential in the coal trade, since they have significant share in the final DAP price of delivered coal. In the sea freight from ARA market to Polish ports, cost of vessel transportation is usually based on the Baltic Dry Index. When considering purchasing coal imported via ports in Gdańsk, Gdynia, Szczecin and Świnoujście, buyer needs to remember about additional costs of reloading from a vessel to rail wagon.

Rail freight is generally the only type of transportation of coal within the Polish borders, since there is no developed infrastructure of barge freight on the largest rivers in Poland. PKP Cargo is the company dominating the commodity rail freight market with almost 50% of share in the market, (in which coal takes a significant part) and PKP Cargo’s tariff is a benchmark for their competition. Other companies operating strictly on the coal transportation market are DB Schenker, CTL Logistics and Freightliner.

Freight cost secures also position of Polish mines in the southern Poland. Polish import of coking coal is an unusual event, since shipping it to Polish ports would later require to transport it to the steel mills located in the south for over around 600 km (although such case happened year ago during JSW’s labor unions strikes).

Most of the coal consumers from the mid-size industrial sector do not care about the volatility of transportation costs, since they are interested only in receiving DAP price, so securing the best charges of freight stays on the sellers side. Meanwhile, the larger consumers (power plants, the major paper plants like International Paper Kwidzyn or Mondi Świecie, chemical plants like Grupa Azoty etc.) have their own long term contracts with the rail freight operators.

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