Last week we’ve delivered you with last month Richards Bay and Amsterdam-Rotterdam-Antwerp prices. Today, on a point of order – update on weekly international prices (DES ARA, FOB RB, FOB Newcastle) in June – a prelude to July’s upwards trend.
Natural for this time of year, coal prices for industrial consumers such as heat plants started falling (PSCMI2/T by 2%, PSCMI2/Q by 1.1% MOM). On the other hand, prices of coal sold to power plants increased (PSCMI1/T by 0.6%, PSCMI1/Q by 0.8% MOM). Since the sudden leap in prices in December, Polish coal prices fell by average by 18%.
Warmer and warmer weather on the Northern Hem. and global oversupply were the main factors of further decrease of international coal price levels. Being the border-bottom of three main markers with all its green- and efficiency-oriented energy policies in Europe, ARA index still did not went as low as it could, mainly because of redirection of some Colombian deliveries to Asia (Thailand, India).
Following international trends, in March we have noted small increase in Polish steam coal prices. PSCMI1 (USD) increased by 3%, while PSCMI2 (USD) increased by 2%. Check all the indices in Polishcoaldaily PRICE INDICES section.
Further decrease of coal prices in Poland , but not as strong as it was at the turn of year. PSCMI1/T down by 4.07%, PSCMI2/T unnoticeably by 0.21% (much colder winter, heat plants had to buy more). Since January both PSCMI1/Q and PSCMI2/Q still bellow 9 PLN.
Few shadows lies on the whole story. Isn’t it puzzling that Australians knew exactly where to look for the LZW golden-coal-vein? Did the former CEO of Bogdanka Miroslaw Taras had anything to do with it, as he was surely aware of LWB’s plans before he left the company conflicted with Supervisory Board and joined PD Co as an advisor? Another question that could be raised: is the whole Jan Karski mine a real deal? Or is it just a tool to bully Bogdanka and force them to buy entire Lublin Coal Project and unblock their expansion?
First, a body blow was stroke by Kompania Weglowa and its 2015 spring sale, which completely ruined the business. Next one was even worst: Enea decided to hit bellow the belt and went after their market value. Strike three came on Friday, from a company tied to a country with a long boxing tradition, at least among their national animals.
While still waiting for the results of audit in Kompania Weglowa, Katowicki Holding Weglowy and Jastrzebska Spolka Weglowa, lets check the 2015 performance of Polish hard coal producers no. 4 and 5 – LW Bogdanka and Tauron Wydobycie. Both companies are owned by energy groups and therefore are not a concern of Ministry of Energy at the moment.
PiS MP Grzegorz Janik asked Ministry of Energy if it would be possible for Kompania Weglowa to cover its liabilities in coal. With almost 6m Mt of unsold coal stocked on open piles and facing loss of cash flow in the following 6-7 weeks Janik’s plan sounds reasonable. For KW.
A short comment on the general situation in domestic hard coal mining industry by Polishcoaldaily Editor, published by The Centre of Analysis of the Jagiellonian Club. [POLISH READERS ONLY]
Not getting deep into the issue of reasons behind it, Weglokoks was and will be an entity that supports restructure of Kompania Weglowa. The ongoing project of establishing Polska Grupa Gornicza posits moving KW’s mines (not the whole company) to Weglokoks Group, which is a middle way between building a national coal mining holding and bursting the sector to small, independent pieces.
Polish coal indices drags on after ARA prices, all the time one step (month) behind: major drop of DES ARA index in December rebounded on PSCMI markers in January. PSCMI1/T (power producers) fell by 11% MOM, and PSCMI2/T (heat plants and other industrial consumers) by 18%.
Hard coal sales increased in 2015 by 4.2% YOY (73.6m Mt), in which steam coal took 82% shares (60.6m Mt) and coking coal 18% (13m Mt). Sales increase balanced decreased average coal prices (258.58 PLN/Mt in 2015, 275.73 PLN/Mt in 2014), as the industry recorded 19.04bn PLN of revenues from coal sales (19.02 in 2014).
“It could have been worse” – that is the proper comment for domestic hard coal mining results for 2015. Industry recorded almost 1.9bn PLN loss (154m PLN less than a year ago), and while being in a deep crisis and receiving 716.1m PLN of governmental subsidies, it still paid 6.5bn PLN of various impositions.
As promised last week – we present you a short interview by Coaltrans, where our Founder and Editor shares his views on the challenges that the Polish coal industry is facing, the opportunities for investors in Polish coal assets and on the role the government has played so far in restructuring Poland’s coal sector.
Do you think there are many outstanding viable opportunities for investors in Polish coal assets? How successful do you think the government has been so far in restructuring Poland’s coal sector and what more should be done to make the industry sustainable long term? – check out our views on these subjects in an interview with Polishcoaldaily Founder and Editor…
Due to the financial audit in Polish steam coal sector Industrial Development Agency updated certain values of last year’s monthly Polish Steam Coal Market Indices for the period from April to November and quarterly markers for Q2 and Q3.
Since we’re not focused much on the retail coal market, we only briefly commented the buzz connected with Anti-Smog Act, signed in October by Polish president Andrzej Duda. Hard coal sector took it as a punch in the face and shouted, that this will surely immerse the crisis in the industry. Would it really?
Apart from constantly falling employment (1000 people less MOM), all the other stats of Polish hard coal mining industry for last month of 2015 looks good on paper: stable level of production (decrease by 3% MOM), increase of sales (by 11% MOM) and slightly decreased coal piles (by 1.7% MOM).
Perfunctory announcements by Grzegorz Tobiszowski and others involved in establishing Polska Grupa Górnicza about potential investors may suggest, that there are not so many entities interested in helping KW’s mines. As far as State-owned companies may be impelled to come to the rescue, domestic private firms would not be so willing. Is there a field for foreign companies in this game?
Scissors effect on Polish and international coal indices. While DES ARA, RB and NEWC markers are falling, in the last month of 2015 prices of coal for power producers in Poland increased by 5% MOM. Twice as much increased MOM the index for mid-size industrial consumers.
For KHW 2013 was a year of relative stability. The company produced 12m Mt of coal (18% of total domestic steam coal production) and had almost 45m PLN of net profit. Just like Kompania Węglowa at the time, Katowicki Holding Węglowy planned investing in its own power plants. Also, KHW was running its underground coal gasification project (which is today under investigation by Supreme Audit Office, but on the aspect of insufficient support from the former Minister of Economy).
“There are three patients, lying on their beds in emergency room: the European, the South African and the Australian” – starts like a common joke, but there won’t be much laugh. Further decrease of coal prices on the international markets in December, with a glimmer of hope for winter and summer 2016.
Three years ago no one suspected such fall: whole industry just had three good years and as the EU Commissioner Elżbieta Bieńkowska said “everyone was eating, drinking and smoking pipes” (a reference to the ballad by A. Mickiewicz). And then it all collapsed, starting with the European giant in gigantic troubles – Kompania Węglowa.
We’ve received a couple of emails with requests for translation of the latest interview with our Editor by TV Republika, so you can expect it in a few days. Yet, today we give you the link to yesterday’s audition in Polish Radio Three with a comment on the current coal mining situation in Poland (available for Polish-speaking followers only).
With constantly decreasing employment (93,100 people) domestic coal mining sector managed not to increase coal stocked on piles (5.9m Mt) thanks to the sales results balanced with production (both 6.7m Mt). In a few weeks now we should be provided with data for all 2015.
For our Polish readers only – an interview with our Editor on current political and economic situation in the domestic coal market. If we will receive enough requests, you will be provided with an English translation, so please write to us if you would like to read it (go to CONTACT section).
After the first part, our Editor received a few emails with concerns around the word endsieg, which apparently is banned in the German Internet. We hope we won’t lose our German readers (9th position on Polishcoaldaily viewers origin stats). But now lets go back and check the other battles that happened the last year.
Warm November and saturated consumers led to fall of prices in the second to last month of 2015. For the first time since July, PSCMI1 marker again met with coal indices from western Europe and South Africa.
Hitler’s endsieg in its origin meant “ultimate victory at any cost”. Soon after the II World War, critics gave it a new meaning: “costly and empty victory”. Similar term could be used to describe what actually happened in the Polish coal market in 2015, where all the spectacular successes that were celebrated with great fanfare were actually of rather minor value.
Winter is coming, but in case of global coal market it won’t bring any white walkers from George R.R. Martin’s book series, but instead – increased demand for coal. In Europe low water level on Rhine (one of the key routes for European cargo shipping) and on the other hand warm temperature caused in stable prices, with a significant drop in the last week of November.
Like in the tales shared in the Ancient Greece, in the beginning there was chaos: various powers were split by different offices. Then out of void appeared Piotr Naimski, who wanted to put a stop to this disorder and to gather all the competences related to the power industry into one hand of Superminister of Energy. But just like with the Cronus in Greek Mythology, Naimski was defeated and sentenced to Tartarus, and so his plan was forgotten with him.
Tauron’s new CEO Remigiusz Nowakowski decided, that despite the fact that Tauron Wydobycie is one of the least profitable elements of the Group (108m PLN loss after first 3 quarters 2015), employees from Janina and Sobieski mines will get raises in 2016.
Following the natural trend of bigger demand for steam coal in the third quarter of each year, Polish coal producers and traders managed to increase the volume of sales by 300,000 Mt. Still, taking into consideration the forecasts of cold winter and falling prices it surely is not as much as they would wish.
When you’re running a convenience store or any other type of small-time operation and you just had a bad year, you surely can start thinking of some ground improvements or selling of the business. If you skip the mending process and decide to just see if the next year might bring some bounce up, you may find yourself in the situation when bankruptcy is the only way out. What happens, when you are having the same troubles, but your operation is a multimillion coal production business, and you’re about to close in red the third year in a row?
In primary school, every Polish kid learns about symbiosis – a close and long-term interaction between two different species, that can be observed e.g. when clownfish feeds the anemone with its fecal matter, and in exchange anemone protects the clownfish from predators using its stinging cells, to which the clownfish is immune. Their cooperation should be an example for healthy relations between the government and its strategic sectors. Unfortunately, the relation between the State and mining industry seems more like a parasitic arrangement, where on one hand the government sucks the body fluids of its host, and on the other stabs him in the back, imposing Draconian EU climate laws.
During the recent COP in Paris many panelists, including Faith Birol from IEA highlighted the problem of governmental subsidies for fossil fuels, calling it a “major hurdle for the development [of renewable energy]” and “public enemy #1 in the terms of sustainable energy development”. Are they such a big deal and how does it look on the Polish back yard?
In the period of first three quarters of 2015 the governmental money train brought to Polish coal mining sector 530.2m PLN. Majority of this amount (304.4m PLN) was used for tasks connected with liquidation of mines and other facilities (the ongoing process since 1998). For real restructure the Mines Restructuring Company (SRK) received 207.4m PLN.
Two weeks ago Bartłomiej Derski presented an interesting graph, showing incongruity of coal produced in domestic mines, more specifically: shortage of coal of a certain size. While Polish producers keep mining coal of size 0-31.5mm, there is a significant insufficiency of commodity of larger sizes.