CHEAP COAL? PRICEY COAL? – IT’S BAD EITHER WAY

The whole Polish coal industry is complaining for quite some time now on low coal prices and literally praying for some bounce off, which with the high production costs would allow them to record better results of unit sales. There it came, since April the prices are rising, but in the long term – will this trend be a salvation or doom for the coal producers?

Skipping the elementary knowledge of price/demand/supply correlation, it is obvious, that increasing price in the long term might lead to a massive oversupply, just like 3-4 years ago. With global demand decreasing, it is likely to affect Polish market as well. Taking into consideration domestic energy mix, in recent few months steam coal managed to achieve a strong position among the other fuels, being much cheaper than lignite, gas and renewables. Now though, with price increasing and reconditioned lignite-powered energy blocks in Belchatow power plant, it might lose its domination.

Another thing that should worry miners in increasing trend of industrial energy self-efficiency by investments in industrial power generation. To minimize the risk of blackout after last year’s problems, many industrial facilities decided to build their own energy blocks, which are by large powered by gas and renewables due to the European environmental laws. With increasing price of coal, they will be more keen to stay on that track.

Coal piles, that were a symbol of inefficient and unorganized coal mining sector in Poland managed to decrease almost by half in last few months, with majority of what is left stocked there being already bought and paid by power industry. With prices rising and demand falling, are we about to see them growing again?

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