The energy crisis is slowly heating up in Poland. For now, due to high temperatures and the summer holiday season not everyone feels it, but when the cold and shorter days arrive in the fall, the problem may become a burning one in many households due to access to coal, which is arriving at our ports, but still needs to be distributed across the country – writes Mariusz Marszałkowski, editor at BiznesAlert.pl.
Comfort at home
Today natural gas, oil and coal are the main energy resources behind the comfort and well-being of our lives. The shortage of any of them to a lesser or greater extent spells problems not only for the economy, but also for the society as a whole.
In western Europe, the main problem is the availability and prices of natural gas, which, due to the policy of the Kremlin, flows to the Old Continent in limited volumes that are too low to cover the demand. In Poland, we are experiencing a natural gas problem, mainly due to the fact that the contract prices are based on European exchanges, where the prices keep breaking new records. However, at this point there are no obvious indications that we may run out of gas. Thanks to diversification, i.e. infrastructure investments and a diversified portfolio of gas contracts, the risk of gas shortages is low, although in the event of a serious disruption in the LNG market, not excluded. However, the situation with coal looks worse. This pertains especially to the coal used at homes, public institutions, schools, hospitals and greenhouses, as well as heating plants, in other words everywhere where it is used as a heating source.
According to the data of the Industrial Development Agency (ARP), in 2021 about 58 million tons of thermal and coking coal were sold in Poland – 45 million tons of thermal coal and 13 million tons of coking coal. The production of thermal coal in 2021 amounted to just over 40 million tons. The gap in sales and production last year was mainly covered by imports (mostly from Russia) which amounted to about 8 million tons, and coal reserves in mounds near power plants and mines, which reached about 6 million tons. ARP reported that in July 2021, more than 4.5 million tons of coal remained on the mounds. According to the same source, in July 2022 it was only 1.4 million tons, which means a decrease of 3 million tons.
This difference from last year will have to be covered by imports. The bigger problem, however, is with coal used for heating purposes. The professional power industry and large-scale power plants use ultra fine coal as the main fuel. This type of raw material is mined mainly in Poland. Some plants, especially those located in the north of Poland, have to fall back on imports. Household central heating stoves and furnaces in small local heating plants use mainly medium and coarse coal. The import from Russia contained mainly the latter types of coal, but due to sanctions it is no longer possible to buy that.
The logistics of import
Apart from the availability of coal on the markets, the other challenge the Polish market is facing is the logistics of imports. Before the introduction of sanctions against Russia, the majority of coal arrived to Poland through rail connections. Coal was unloaded at depots near the Polish-Belarusian border (e.g. at the Malaszewicze node), and then distributed throughout the country. The situation was similar on the Polish-Russian border with the Kaliningrad Oblast. Part of the coal that went to, among others, Polish steelworks and metallurgical plants, as well as other plants, including, the CHP Plant in Gdańsk and the Dolna Odra Power Plant, arrived to Poland via the ports in Świnoujście and Gdańsk.
Today it is through the ports of Gdańsk, Gdynia and Świnoujście that all coal imports are to reach Poland. And here lie the problems. The first one is that the coal contracted in various parts of the world needs to be purchased and shipped to Poland. We are talking about African countries, Colombia or the distant Australia. The coal bought there today will reach the Baltic Sea in 1.5-2 months at the earliest, depending on its availability in a given place, the availability of ships, loading capacity, etc. Add to that the journey that will take at least a few weeks. The second issue is the efficient reception of cargo, its unloading, storage and further distribution by rail or trucks.
The Port of Gdańsk told BiznesAlert.pl that between the beginning of the year and mid June it unloaded 3.8 million tons of coal, which is a 46 percent increase in comparison to the same period last year. “The transhipment capacity of coal and ore in the Port of Gdańsk, based on the currently existing transhipment facilities, is estimated at 12.5 million tons per year. When we launch additional quays in the inner port, and these are universal quays where it is possible to unload self-unloading vessels, we can increase the volume by an additional 4 million tons per year,” the spokeswoman of the Port of Gdańsk explained.
The Port of Gdańsk also revealed the investments that will improve transport logistics, including of coal.
“Since April 2022, ZMPG SA has been carrying out intensive investment and renovation works for its own infrastructure in several areas of the Port of Gdańsk. The works are a priority and focus on preparing new areas for storing coal and on ensuring they are fully available to railway infrastructure. To date, the following works have been completed:
– hard-paving of an 100 thousand square meters area,
– thorough overhaul of tracks with a total length of 1367 running meters.
Currently work is underway to prepare paved depots for storing and trashipping coal by October 2022. The area is 81 thousand square meters big and is linked with 2072 running meters long tracks,” the company informed.
We sent identical questions to the Port of Gdynia and the Port of Świnoujście, but have not received answers before publishing this piece.
Former President of PKP Cargo Czesław Warsewicz said in an interview with BiznesAlert.pl that one of the main challenges for coal transport is the issue of coordinating the entire logistics chain from the supplier to the final recipient. “In order for everything to function smoothly, we need efficient organization and logistics of the cargo delivery management. The number of open wagons is not a problem, because we should have enough to manage all the cargo. The problem is precisely the lack of coordination and cooperation between the various actors – from the purchase, transportation of raw materials, through its reception and unloading in the port, to its further transport by rail or road,” he added. According to Warsewicz, scarce communication is also a problem, which is why the crews need to wait up to several hours for entering the port, which means they cannot do their jobs due to labor laws. “This means new crews need to be brought it, which extends the transport of the cargo,” Warasewicz told BiznesAlert.pl in an interview.
Leszek Miętek, the President of the Locomotive Engine Drivers Trade Union in Poland pointed to similar problems. “Indeed, we are receiving signals that there is no coordination and information flow between those who place the orders, the ports and railways. We are not short on locomotive drivers or operators, but they are used inefficiently. The actual running time of the train is negligible in relation to the actual work performed. The driver just stands by and waits instead of transporting the cargo. The key thing is to solve the problem of communication and eliminate these bottlenecks, because one bottleneck immediately causes another,” Miętek explained during a conversation with us.
The trade union president also stated that the problem mainly lies on the side of the ports, which in recent years have lost a large part of their ability to transship coal. “After all, Poland was a major exporter of coal. These capabilities we had were abandoned. Some railway investments that lead to the ports are also problematic. It is necessary to consider whether some of these investment projects should not be postponed,” suggested the trade union president.
What about the distribution of coal?
According to Michał Grobelny, the Head of Railway Projects at the TOR Consultants Group, the railway may find it hard to efficiently distribute the coal that will arrive at the ports. “The railway may find it hard to immediately increase its capacity when it comes to coal, which will have to be transported from the ports as part of the increased intervention purchases. It should be borne in mind that last year the import of this raw material by rail amounted to approx. 6.8 million tons. Now we are talking about the need to transport 4.5 million tons of coal (for Węglokoks and PGE Paliwa) more than the amount that PKP Cargo had already committed to transport on behalf of its existing customers,” Grobelny said. He also pointed out that the problem is the lack of an adequate number of units for the transport of coal.
“For some time now, Poland’s largest rail operator PKP Cargo has been reporting problems primarily with the number of open wagons in operation. Theoretically, it has as many as 24 thousand units, but in reality the number of wagons that are actually used is lower. As early as last year, before the Russian aggression on Ukraine, the Office of Rail Transport reported that the availability of coal rolling stock was insufficient. ( … ) the fact is that in previous years it was believed that since the economy was being decarbonized, the railway should reduce its share in the transportation of bulk goods, so it was decided to either not renovate the open wagons or to strap them. PKP Cargo also failed to start cooperation in the production of freight wagons with the American company Greenbrier at the former Gniewczyna Railway Carriage Factory, despite the previously signed letter of intent on this matter,” Grobelny pointed out.
The TOR expert also stated that it may be necessary to ask other carriers to transport coal. “When it comes to transporting coal, it will definitely be necessary to cooperate with other cargo carriers, and we do have over a dozen companies in Poland that are able to facilitate large transports. They have already declared their willingness to take joint action, but have doubts about the fact that the only contractor the government is considering is the state owned PKG Cargo,” he revealed.
The former President of PKP Cargo emphasized that today we were focusing on coal, but it is not a key cargo that is reloaded in ports and transported by rail.
“Today we are mainly talking about coal, which is only a fraction of transshipments in Polish ports. The ports import and export bulk container cargo such as copper ore, steel and grains, as well as many other products. All this must be delivered or transported as well, often based on transport contracts. Today the priority is coal, but this does not mean that other goods can wait for their turn in transport,” Warsewicz emphasized.
The head of the trade union agrees. “Coal is the key word today. But we must remember that our economy is not just about coal. There are also other goods, which are important for our economy. Let’s not turn everything upside down in the heat of the moment,” Miętek pleaded.
In addition to the lack of coordination between the companies, the available railway infrastructure and its repairs are also a challenge, as Michał Grobelny from TOR stressed. “The main routes currently relevant in the context of coal transport are, of course, line no. 131 (connecting the ports of Tricity with Silesia), line no. 9 (from Tricity to Warsaw) and no. 273 and no. 401 (from the ports of Szczecin and Świnoujście to Wrocław). In the event of a sudden increase in traffic, there may be problems with the capacity of this infrastructure,” he elaborated.
The expert from TOR also mentioned that the summer holiday season was not helping the case for coal. “Let us remember that we are in the peak period when it comes to the transport of aggregates necessary for the construction of roads, and railways are used to a large extent for this. It is also difficult to envisage freight trains carrying coal will receive an absolute priority at the expense of, for example, passenger trains. After all, passenger rail is currently under a huge strain, due to the increased number of passengers, which is caused by the horrendous fuel prices. Increased freight traffic may worsen the already low punctuality of the state-owned carrier,” the expert clarified.
Coal will become a burning problem in the coming fall and winter, and some are already losing sleep over this issue. This is evidenced by the fact that our editorial room sent questions to many entities that handle the logistics and transhipment of the imported coal, but we only received a partial answer from the Port of Gdańsk. The other companies we asked either did not answer or assured us they would do it, but failed to get back to us by the time we published this article.