Climate Policy 28 September, 2017 10:00 am   

Smog to blame for coal shortages? Mining’s blind man’s buff continues 

In this children’s game only one person has a blindfold on while trying to tag the other players. I am not sure whether only one person has their eyes covered in the hard-core version of the game that is played by Poland’s hard coal mining industry – writes Karolina Baca-Pogorzelska from Dziennik Gazeta Prawna daily.

Courtesy of my colleagues from the TOK FM radio I listened to the Deputy Minister for Energy Grzegorz Tobiszowski and the CEO of the Polish Mining Group (PGG) Tomasz Rogala giving a presentation to journalists in Silesia. I found out that the data on coal over- or under-supply are in essence false (actually those are just rumors), because “who said that” and anyway the people to blame for the shortages are the marshals of the Silesia and Lesser Poland voivodeships because introduced anti-smog resolutions and thus “created a gap on the coal market for the individual customer, for gardening,” (an exact quotation from Minister Tobiszowski).

The gap, my dear readers, was indeed created, but in coal production and created it was by the PGG, which considering its dominant position on the steam coal market, is the responsible culprit here. Because neither Tauron Wydobycie, nor the Bogdanka mine, or the private PG Silesia will not step out of line. This pertains at least to the increases in coal prices. After all, if hard coal prices in the ARA ports are today at about USD 92, which is almost twice as much as roughly a year ago, then why PGG would not increase them? And this is where I completely agree with Minister Tobiszowski and CEO Rogala – sorry, if we want our mining industry to be competitive we should not lament when PGG, a huge market player, wants to use the situation and increase the price of its product. And since there isn’t enough coal anyway – who cares. Rogala told the reporters that the current situation of the “black gold” shows how necessary PGG is, as its prices are lower than those in the ARA ports. Today we have excess demand, but we used to have oversupply. The question is to what extent this is about the price. The lack of coal forces consumers to accept a higher price. Whereas anti-smog bills promote imported coal, eco-pea coal, which is even 100 percent more expensive.

“Our overarching objective is to protect air quality, but in Poland we also have energy poverty, some households will pay twice as much for the fuel,” the CEO said. He also reminded that last year at this time the message was this: shut down half of your capacity, lay off half of your people. “We are able to use only the potential we have. We cannot reconstruct it in a day. Increasing the production of the eco-pea coal takes two years, I have to replace the exploitation fronts to extract large coal and modernize processing plants, it is simply impossible to do it quicker,” he explained. It would have been certainly possible if last year PGG had not cut down its investments for 2016 by 36 percent (so far the management blames its predecessors for underinvestment). You didn’t have the money? Well, sure you didn’t, since in 2017 under the pretext of taking over four coal mines of the Katowice Coal Holding (KHW) you said you needed another billion Zlotys, even though earlier you had already received two (apropos the planned investments in KHW were not realized at all – I suggest asking how is the daily extraction at the ex-KHW doing and how is it doing when compared to the one before the takeover; unfortunately, I only have unofficial data, so I will not spread rumors and PGG has recently become reluctant to officially answer to my questions).

I guess this means we should not be surprised that the miners, hearing that everything is awesome, are demanding a one-time bonus (after all in 1H PGG, whose turnover is PLN 8-9 bn, earned as much as PLN 8 m net), a reinstatement of the fourteenth pay, which was suspended in 2016 for two years, and talks on pay increases in 2018. After all this is a mining’s blind man’s buff. And I am under the impression that almost everybody is wearing a blindfold here…