Germany Returns to Coal: Opportunity for the Polish Industry

    The past few years have seen a rollercoaster ride for the supply and wholesale prices of coal, influenced by factors such as the pandemic, environmental issues, the war in Ukraine, disrupted supply chains, economic sanctions, and the global crisis. Currently, market sentiments are primarily shaped by the tense geopolitical situation on the eastern border of the European Union and in the Middle East. This situation also extends to Poland and is likely to have an impact in 2024.

    Coal prices in the wholesale market need to be examined over several years. In recent times, it has been a true rollercoaster. The pandemic caused an economic slowdown and a decrease in demand for electricity. Subsequently, with the announcement of the war in Ukraine in the second half of 2021, coal commodity indexes (ARA, API2) reacted dramatically, pushing prices from a few dozen USD per ton to around $280/t. After a sudden correction, the situation stabilized for several months between 2021 and 2022 at levels of $120-$140/t. However, those who thought the turbulence had ended were surprised when, just a few weeks later in March 2022, coal prices on exchanges soared to historic levels of around $460/t. By the end of December 2023, the ARA coal index (Amsterdam, Rotterdam, Antwerp) for the heating value NCV AR 25GJ reached approximately $117/t. It can be said that the situation stabilized at a moderate level, considering that in mid-2020, prices fluctuated for months within the range of $50-$60/t, explains Sławomir Wołyniec, CEO of V-PROJECT S.A.

    Currently, political decisions play a significant role in shaping coal prices. This is particularly evident when comparing coal prices for individual consumers with prices for the energy sector. Government-regulated coal prices for consumers have significantly decreased over the past year, as have coal prices for the energy sector on the free market. Coal prices imported for energy and industry purposes have been consistently declining since the beginning of 2023, while prices for coal offered by Polish mining, which were maintained at twice, and sometimes even three times lower levels than imported coal prices in 2022, were rising – says Sławomir Wołyniec.

    Undoubtedly, the sanctions imposed on Russia in connection with the invasion of Ukraine have a huge impact on the energy raw materials market in Europe. The abandonment of Russian gas has led to increased demand for coal in European countries. This is particularly evident in our western neighbors, who, aiming to stabilize their energy system, have announced the resumption of work at brown coal power plants. According to experts, this is an opportunity for the Polish mining sector and industrial raw material distributors. However, this opportunity must be skillfully utilized.

    High Quality from Overseas

    It has long been known that coal mined in Poland will not ensure a stable market situation. Shortages were usually supplemented by raw materials from Russia, from which we were cut off by wartime sanctions. However, the world does not lack sources of coal.

    “As is widely known, logistics costs (rail and sea transport, as well as handling costs in ports or transshipment terminals) for coal from distant countries such as Colombia, the USA, Australia, but also Kazakhstan or South Africa often account for 60-80 percent of the price of this raw material in Poland,” emphasizes Sławomir Wołyniec.

    Experienced suppliers of energy raw materials have found an optimal solution to this problem. In settlements between importers and power plants, combined heat and power plants, and heating plants, the actual calorific value expressed in GJ is always taken into account. Therefore, recipients pay for GJ, while transportation costs are converted into tons of raw material.

    “For the transport and handling of low-calorific coal, we will pay the same as for the transport of high-calorific coal. Coal can have a calorific value of 18GJ, but it can also have 30GJ. The most sought-after calorific values of energy coal for the needs of the energy sector range from 20 to 23 GJ. It is more cost-effective to import high-calorific coal and then optimize the quality to the desired parameters,” elaborates Sławomir Wołyniec.

    Deliberate Actions Ensure Peace

    In the face of the dynamic situation in the energy raw materials market, this industry must continually adapt to changing conditions. Pandemics, geopolitical crises, variable economic trends – all of these pose challenges to mining facilities, distributors, and energy consumers. However, the experiences of recent months show that even a difficult situation can be well-utilized. Deliberate actions by distributors of energy raw materials for heating and professional energy needs, particularly the opening of new markets for obtaining coal, make the situation in Europe seem stable, and the market well-prepared for the challenges that 2024 will bring.

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