Coal-hungry Poland starts US imports

The Navios Helios, a vessel carrying a 73,616-ton coal shipment for state-owned Weglokoks from Baltimore, is expected to enter the northern port of Gdansk later on Friday. Weglokoks, which is Poland's largest coal trader, said it didn't rule out more imports, perhaps from Kazakhstan and Colombia.

Most imported coal has come to date from Russia, but mainly supplying households as the government does not permit state-run power generators to burn it, due to its low quality. Industry sources expect state or private buyers to take at least three more cargoes over the next seven months.

"The deal seems to make sense for Weglokoks," Aleksander Sniegocki, an analyst at Wise Europa, a Warsaw-based think tank, told DW. Contrary to popular intuition, Sniegocki believes this is mainly an economic, not a political decision.

"It is necessary because of the fall in domestic coal production — the amount of imported coal is limited [to 75 kilotons], and there are other countries [e.g. Kazakhstan] considered," he told DW.

Sniegocki also said the decision is not just about cost-efficiency, but primarily about availability of domestic fuel.

"The Polish mining sector has failed to meet its production target and Weglokoks saw a shortfall of the fuel available for export, both in terms of quantity and quality," he went on.

This is mainly because mining giant PGG has failed to achieve production targets. PGG, which was saved from bankruptcy in 2016, is struggling to meet demand from its major clients — mostly state-run listed utilities, after cost-cutting led to lower investment. 

Most Polish mines suffer from years of underinvestment, while Warsaw is planning three new coal-fired power stations.

Pawel Mikusek from the Warsaw-based think tank Forum Energii told DW that domestic Polish hard coal supply will be gradually decreasing.

"This is partly for geological reasons, in particular the increasingly difficult availability of hard coal deposits, but also due to the need for modernization of existing coal mines in order to improve their competitiveness and rising public opposition to the construction of new mines," he said. Coal, both hard and lignite, represents 84 percent of Poland’s energy mix, he added.

Meanwhile, US coal mines need export growth as power utilities at home switch to cheaper, cleaner alternatives.

Importing to keep exporting

Weglokoks said this week it needed to honor contracts with overseas buyers and would resell the imported US coal abroad to the Czech Republic, Slovakia, Hungary, Germany and Austria, and would also consider sales to customers in Poland.

"So, the solution was to import high-quality US fuel and mix it with Polish coal, and then to re-export it in line with existing contracts. This has attracted interest from Polish companies, and now Weglokoks may also import US coal for domestic consumers," Sniegocki said.

Mirosław Kowalik, chief executive (CEO) of Warsaw stock exchange-listed and partially state-owned energy utility Enea, meanwhile, has confirmed that he was in talks with Weglokoks to buy some of the imported coal. "At present, we don't see a need to import coal, but Weglokoks came to us with an offer, so we're talking," Kowalik said.

Poland's energy ministry, however, wants domestic utilities to buy and burn coal only from domestic mines. "We want the energy security in Poland to be guaranteed by Polish coal production," Energy Minister Krzysztof Tchorzewski told news agency Reuters.

Exports down, imports up

According to Weglokoks figures, Polish thermal and coking coal exports on both land and sea totaled 1.5 million tons in the first half of 2017, down 28 percent year on year. The company is expecting coal exports at about 2.5 million tons this year, down from 4 million tons in 2016.

Analysts at the state-run ARP agency, which monitors the Polish coal market, expect coal imports this year to exceed the 8 million tons in 2016. Some private analysts reportedly believe the figure could be as high as 10 million.

European coal prices are around $85 (€75) per ton, just below their highest level since June 2013. This is mainly due to high demand from China.

The price of US coal is about $110 per ton, mainly due to transport costs from North Sea ports to Poland.

Private Polish importers pay about $95 per ton for Russian coal including delivery costs, a Russian market source told the news agency Reuters.

The planet can wait

Poland, the EU's biggest coal burning nation, is at odds with Brussels over the coal-related targets laid down in the 2015 Paris Accord on climate change. But while US president Donald Trump has decided to pull of the agreement, Warsaw is staying in.

Polish Prime Minister Beata Szydlo has warned MEPs she will "throw it back at them" if they criticize Poland's carbon consumption at the EU summit in December and in 2018 when Poland hosts the next round of UN climate talks.

EU ministers meeting on the sidelines of the climate summit in Bonn this week told Poland to "do more" on climate change — particularly by ratifying the Doha amendment, the second stage of the Kyoto Protocol and predecessor of the Paris agreement.

Also in Bonn this week, an alliance of 19 nations committed itself to phasing out coal. New pledges were made on Thursday by Mexico, New Zealand, Denmark and Angola for the Powering Past Coal Alliance, led by the UK and Canada.

Germany is not part of the alliance and the pressure for it to announce a phase-out of its large fleet of heavily polluting coal power stations has intensified ahead of a decision on the format of the country's new ruling coalition, one element of which — the Greens — has said Berlin signing up to the alliance is a precondition of its membership of the government.

Next year's climate conference will be held in the southern city of Katowice, the center of the coal-producing Silesia region and PGG's home.