world market for hard coal edition rwe power dr wolfgang

RWE Power

World Market for Hard Coal

2007 Edition

RWE Power

Essen • Cologne

www.rwe.com

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worldmarkethardcoal_ms1_u1-4.indd 20-1 19.11.2007 14:48:04 Uhr


2007 Edition

Dr. Wolfgang RitschelDr. Hans-Wilhelm Schiffer

rwe broschure weltmarktsteinkohle uk fin.indd 3 29.11.2007 12:28:39 Uhr

5

Content

Coal-exporting countries

Australia

Indonesia

Russia

South Africa

China

Colombia

USA

Canada

Vietnam

Poland

Venezuela

Coal geology and mining techniques

Deposits

Mining techniques

Preparation

Transportation and handling of hard coal

Literature

World Market for Hard CoalOctober 2007

Dr. Wolfgang RitschelDr. Hans-Wilhelm Schiffer

Summary

Markets for hard coal in the

world energy mix

Definition

Reserves/output

Quality requirements

Consumption, by use

Consumption, by region

Perspectives in consumption developments

Environmental aspects – Clean coal

technology

Liquefaction of coal

World trade

Demand

Supply

Developments in sea freights

Demand and supply cycles

Re-formation of markets

Representative costs in the coal chain

Price formation

Contract forms

Influence of electricity markets

Risk management

Perspectives

Upshot

50

50

55

61

65

70

75

79

84

88

91

95

99

99

100

101

102

106

6

9

9

9

11

12

13

15

17

21

24

24

27

30

31

32

34

37

40

43

43

47

49

Content



6

use in power plants will increase, whereas volume

sales in the heat market will continue to decline.

Coking coal consumption will grow in step with

pig-iron production, and world trade in coking coal

should move forward again after years of stagna-

tion, because the centres of supply and demand are

shifting, whilst demand for high-quality coking coal

is rising.

The Asian region continues to show dynamic

growth in consumption and production, whereas

Europe will in future report falling trends in

consumption and production. The cutbacks in

uneconomic domestic production are being partly

replaced by coal imports. Gas and renewable ener-

gy will gain further market shares.

North, Central and South America are growth mar-

kets in both consumption and production terms.

In the USA, in particular, hard coal is growing in

significance for power generation in view of the

greater scarcity and declining availability of domes-

tic oil and gas reserves.

Thanks to the strong public focus on lowering CO2

emissions from the use of coal, power plant con-

structors and utilities have launched a technology

This study describes the still growing impor-

tance of hard coal in meeting the world’s ener-

gy needs. It deals in particular with the contri-

bution to the energy supply made by

international coal trading, which has been ris-

ing for some years now, and at an especially

strong rate in the last few years. It discusses the

structure and functioning of world trade in

hard coal and examines the chief hard coal

exporting countries with their export potential

in terms of output and infrastructure as well as

the major players.

At present, hard coal accounts for 4.3 billion

tonnes of coal equivalent (Btce) or 26 % of global

energy consumption. In the last few years, hard

coal has been able to steadily increase its share in

the world energy mix, this being due primarily to

the rapid expansion of coal production in China.

More than 70 % of worldwide hard coal output

goes into power generation, covering 36 % of the

world’s electricity requirements.

All key forecasts assume ongoing growth in coal

production and world trade, though with vary-

ing levels of consumption between sectors and

between world regions. In the case of steam coal,

Summary

World energy mix, 2006

Source: BP Statistical Review of World Energy, June 2007 (Primary energy consumption); estimate based on the figures presented by the International

Energy Agency in Electricity Information (2007 Edition)

Primary energy consumption 16 billion tce Power generation 19 trillion kWh

Nuclear energy 15 %

Hydro + other 19 %6 % Oil

20 % Gas

4 % Lignite

Hard coal 36 %

Nuclear energy 6 %

Hydro + other 6 %

36 % Oil

24 % Gas

Lignite 2 %

Hard coal 26 %


7

The strong growth in world coal markets during

recent years and, parallel to this, in the iron ore

market has led for the first time to strains in the

international transport chain, with substantial fluc-

tuations in freight rates. Harbour capacities, too,

have revealed bottlenecks in the shipping of coal

and ores. The bulk carrier fleet has been massively

enlarged, with the expansion of shipping capaci-

ties, and the planning of ship loading optimized in

order to avoid queuing at exporting ports. In this

respect, logistics are adapting flexibly to the new

market situation, and a return to an efficient, low-

cost and effective coal transportation chain can be

expected in the future.

Still, it cannot be denied that the present expan-

sion measures for pits and, above all, for the infra-

structure are lagging behind growing demand.

The restrained investment activity in the low-price

period through to 2003 is now making itself felt in

Australia and elsewhere in the guise of bottlenecks,

although these will be overcome in the foreseeable

future.

Besides the traditional Asian and European custom-

ers for imported coal, a growing need for imported

coal by coastal regions can be detected in the

world’s two biggest coal producers, China and the

US. These requirements reached a volume of over

60 Mt in 2006 and are expected to go on rising. In

offensive. CO2 emission levels are to be reduced

by retrofitting existing power plants, building new

coal-fired power stations in the short- and medium-

term with higher efficiency, and by developing a

zero-CO2 power plant. So far, however, it is mainly

the EU-27 countries and Japan that have set them-

selves CO2 reduction targets; it is now urgent for

the USA, emerging countries like China, India and

developing countries to be involved in the process

of restricting CO2 emissions.

In meeting the world’s growing demand, interna-

tional hard coal trading has been playing an ever

greater role in recent years. Since 1999, the traded

volume has been expanding by a healthy 7 % per

annum or 357 Mt in all. In 2006, cross-border trade

in hard coal totalled 867 Mt. Of this, 782 Mt was

maritime trade, split between 595 Mt of steam coal

and 187 Mt of coking coal. 85 Mt was traded over-

land – mainly between neighbouring countries.

In 2006, cross-border trade amounted to 16 % of

the 5.4 Bt worldwide hard coal output.

The background of this growth remains the price

advantage that world market coal has as against

domestic hard coal (e.g., in Europe) and alternative

energy sources, such as oil and gas, as well as the

growing energy requirements for power generation,

above all in Asian economies.

Summary

World hard coal output and maritime trade, 2006

World trade (maritime) 782 Mt = 15 %of which:595 Mt steam coal187 Mt coking coal

5.4 Bt hard coal output

Source: German Coal Importers Federation (VDKI), Hamburg 2007


8


ing contribution toward meeting the world’s energy

and raw material requirements.

In the long term, i.e. by 2030, a rise in coal output

of just under 1 - 2 % p.a. or more is expected. The

world trade in coal is set to grow by 1.5 – 3.0 % p.a.

Central and South America, too, coal is increasingly

being used in power plants.

On the supply side for steam coal, the greatest

gains are being made in the Pacific area by Austra-

lia and Indonesia, and in the Atlantic area by Rus-

sia and Colombia. South Africa’s exports are cur-

rently stagnating. Indonesia in 2006 made a 30-Mt

contribution toward supplying the Atlantic market.

In the case of coking coal, Australia has extended

its position with a 66 % market share. The US and

Canada – prompted by the high price level – are

stepping up their exports. A number of new coun-

tries could help broaden the coking coal supply

somewhat in future.

In the international steam coal trade, the ongoing

trend is toward commoditization, and many con-

tracts are concluded on the basis of price indices.

Current procurements, by contrast, are largely a

function of electricity sales and are based on short-

term supply agreements. Increasingly, physical

purchasing is being secured by financial instru-

ments. The paper trade has expanded strongly and

exceeds the physical trading volume 2.5-fold.

Following the growth seen in recent years (1999

– 2006), a continued increase in world coal trade

volumes is expected over the next few years. With

the substantial price rises for oil, natural gas, coal

and coke, energy prices have increased with little

impact on their relative competitiveness. It remains

to be seen how CO2 trading in Europe will impact

the competitive situation for coal. In the first trad-

ing period, 2005 – 2007, the market was over-sup-

plied, which led to a price of zero at the end of the

trading period. For 2008 – 2012, CO2 prices are cur-

rently moving within a € 15 - 25/t CO2 price band.

However, further expansion in world steam coal

trading, following decades of falling real coal

prices, now requires a price level that induces

companies to invest in replacement and additional

capacities. The future potential for new mines is

widely dispersed in geopolitical terms and the min-

ing industry is in a good position to make a grow-


9

Markets for hard coal in the world energy mix


Definition

Coal, a product of plant substances, is a fuel and

raw material available in abundant quantities

throughout the world. Its various evolutionary

stages date back up to 400 million years in places.

In earth's history, a wide range of coal types with

differing properties has emerged. Depending on

the degree of carbonization and, hence, on its

energy intensity, this energy source is classified as

anthracite, bituminous coal, sub-bituminous coal,

and lignite. Anthracite coal is marked by a high

carbon content coupled with very low moisture

and volatile components. In the case of lignite –

young in earth's history – the converse is the case.

Bituminous and sub-bituminous coals are located

between the two, with blurred boundaries between

the classifications. In line with international prac-

tice, this study classifies anthracite, bituminous and

the majority of sub-bituminous coals as hard coal.

Depending on the use and quality of hard coal, ref-

erence is made to metallurgical or coking coal and

steam coal.

Reserves/output

The appraisal of coal deposits is subject to continu-

ous, though uneven and unsystematic updating.

Whereas oil and gas are systematically updated

year after year, this has not been true of coal hith-

erto. The reason may be that, in the past, a foresee-

able end of the deposits of oil and gas was repeat-

edly forecast and then disproved by updated sector

estimates.

Reserves

Worldwide distribution of hard coal reserves (Bt)

20

119

219

41

11

95

111

167

Total: 736 Bt

Source: Federal Institute for Geosciences and Natural Resources (BGR) (2007), 31 December 2006

52

South America

North America

Africa

Europe

Middle East

CIS

India

PR China

Other Asia

Australia


10

has improved considerably, compared with the pre-

vious estimate made in 2005 (5:1).

According to the Energy Information Administra-

tion (EIA) of the US Department of Energy (DOE),

the global coal reserves consist of 53 % anthracite

and bituminous coals, 30 % sub-bituminous coals

and 17 % lignite.

Unlike oil and natural gas deposits, hard coal

reserves are widely scattered geographically, with a

focus on the USA, Russia and China. Of the rest,

India, Australia, South Africa, Ukraine and Ka zakh-

stan, in particular, have significant coal reserves.

Even the economically mineable hard coal reserves

referred to earlier, i.e. without proven resources of

some 8,817 Bt will last, at current consumption lev-

els, for approximately 140–150 years.

Reserves and mining levels do not always match.

This is particularly true of the former Soviet Union,

where only limited use is made of mining oppor-

tunities owing to the great distances involved

between the deposits and the consumer centres

and to the ample availability of oil and gas. In Chi-

na, by contrast, coal dominates the energy market

owing to the still slow mobilization of competing

energy sources. The same is true of the "Far East"

region, where India – likewise with high coal inten-

So far, coal has been largely left out of any discus-

sion on the remaining life of energy resources. To

that extent, there has been no need for regular,

annual updating. If such updates were made, how-

ever, it must be assumed that both resources and

reserves would go on rising, since far less effort has

so far gone into exploration for coal than for oil and

gas.

In raw material deposits, including coal, a dis-

tinction must be made between "resources" and

"reserves". Resources refer to the entire quantity

of coal in a deposit. Reserves are that part of the

resources that can be mined according to today's

technical and economic standards. As coal prices

rise, some deposits are reassigned from resources

to reserves, since higher extraction costs can now

be shouldered, and mining may become economic.

Current estimates on the basis of our present

knowledge of economically mineable reserves (see

Table) are 736 Bt, equivalent to approx. 640 Btce.

These most recent estimates have been made by

the Federal Institute for Geosciences and Natural

Resources (Bundesanstalt für Geowissenschaft und

Rohstoffe, BGR).

The BGR puts hard coal resources at 8,817 Bt in

2007. The ratio of resources to reserves is 12:1 and

Hard coal reserves and output by region (status: 2007)

Europe

CIS

Africa

North America

South America

PR China

Other Asia

Australia/New Zealand

Other

Total

1) Source: Reserves: Federal Institute for Geosciences and Natural Resources (BGR), Hanover, 20072) Source: Output: VDKI/BP Statistical Review of World Energy 2007

Reserves1)

Position: 2006 Output2), 2006 Range in years

19

111

53

219

20

167

106

41

0

736

2.6

15.1

7.2

29.8

2.7

22.7

14.4

5.5

0.0

100.0

162

483

247

1,087

72

2,326

595

302

77

5,351

3.0

9.0

4.6

20.3

1.3

43.5

11.1

5.6

1.6

100.0

117

230

215

201

278

72

178

136

0

138

Bt % Mt %Region



11


for these of max. 8 % and 1 % respectively. Other

coking properties, too, are called for in the coal,

including both the content of volatile components

(27+ 7 %) and, in particular, its coking behaviour

as measured by the free swelling index of 4 - 7, as

well as the coke strength (CSR value), which has

continued to gain in importance owing to the fall in

specific coke consumption. As a general rule, blast

furnace coke is not made from one single type of

coking coal, but from a mixture of different origins

with an average volatile component content of

approximately 27 %.

But coking coal with a lower swelling index, i.e. 1 -

3, is also used in making coke, so-called soft coking

coal. By itself, this produces coke of low, i.e. inad-

equate, strength. However, steam pre-treatment or

mechanical compaction when the coal is fed into

the coke oven – along with hard coking coal – ena-

bles this coal type, which is also less expensive on

the market, to be used on a considerable scale,

above all in Japan, to make high-quality blast fur-

nace coke.

Growing use is now also being made in the met-

allurgical sector of hard coal for pulverized coal

injection (PCI). Intended as substitute fuel in the

1980s for the by-then costly heavy oil, pulverized

coal or fine-grain coal, injected into the furnace as

PCI coal, is now largely ousting blast furnace coke,

which has become relatively expensive. Here, all

hard coals with a low sulphur and ash content are

suitable, with the quality spectrum ranging from

the increasingly preferred anthracite coal all the

way to highly volatile steam and semi-soft coking

coal. It is the latter in particular that is used in

Japan as PCI coal. PCI coal’s share of just under

50 Mt/a in global energy consumption is modest.

Consumption, by use

Hard coal consumption worldwide grew by some

1.4 Btce (+ 48 %) from 2.9 Btce in 2001 to 4.3 Btce

in 2006. This makes hard coal no. 2 in the list of

important energy sources – after oil, but ahead of

natural gas. Hard coal’s share in worldwide primary

energy consumption in 2006 was some 26 %. The

recorded increase is mainly accounted for by China,

sity – is the major hard coal producer, followed by

Indonesia.

Quality requirements

Coal is a heterogeneous energy source. The quality

parameters, like calorific value as well as sulphur

and ash content, vary considerably between the

various deposits and even within single coal seams.

The various uses for hard coal require different

qualities and properties. On economic efficiency

grounds, for example, the key quality parameter of

imported steam coal for power plants is the highest

possible net calorific value (NCV > 6,000 kcal/kg),

which is ensured by having low moisture and ash

content (total < 25 %). On top of this come a low

sulphur content (< 1 %) and specific requirements

for the chemical composition of the resulting ash

and its melting behaviour. A low share of volatile

components (< 20 %) is a drawback for combustion

in modern power plants. The imported coal used in

power generation is supplied as fine coal, i.e. with

a grain size of 0 - 50 mm.

Different quality requirements must be met by the

steam coal that goes into the industrial area mainly

to produce steam and process heat. The combus-

tion technology deployed there usually calls for

specific grain sizes (range: 6 - 80 mm) in graded,

i.e. sized, lump coal. Here, too, low moisture (3 - 6

%) and ash (3 - 5 %) contents are expected, along-

side low sulphur.

Private consumers and households, too, are sup-

plied with graded coal (smalls, cobbles) of varying

grain sizes between 8 - 80 mm and with low mois-

ture, ash and sulphur contents. A significant share

here is accounted for by anthracite coal with vola-

tile matter of < 14 %.

Tighter quality parameters apply to the hard coking

coal used in coking plants. The resulting product,

coke, is mainly used in the steel industry, but also

in nonferrous metal working. Deployment as blast

furnace coke requires, first of all, a raw material

that is low in both ash and sulphur, i.e. the coal

mixture used in coking plants is subject to limits set


12

in Russia and was largely satisfied from domestic

output in each case. The blast furnace process for

the production of pig iron is the method chiefly

employed in China, since alternative processes are

not feasible owing to a scarcity of scrap. In view of

the present high prices for coking coal and coke,

work is proceeding on optimizing the blast furnace

process, and the technology for injecting pulver-

ized coal has received a new boost in a bid to save

coke.

Consumption, by region

Most hard coal is used near the extraction site,

i.e. near the deposits. The reason is its low energy

content compared with oil and gas. Long and often

costly transportation by land can place an extra

burden on the cost-effectiveness of any remote

use. In recent years, ocean freight capacity, despite

although other mining regions, too, have pressed

ahead. However, the dynamic global trend of recent

years does not apply equally to all coal-using sec-

tors and world regions.

World hard coal output was some 5.4 Bt (equiva-

lent to 4.3 Btce) in 2006. This can be subdivided

between approx. 4.7 Bt (87 %) steam coal and 0.7

Bt (13 %) coking coal. Most of the steam coal goes

into power generation. The share is about 4.0 Bt or

74 % of world hard coal consumption. Some 36 %

of total power generation worldwide is based on

hard coal.

The heat market – i.e. customers outside the elec-

tricity sector and the steel industry – comprises,

e.g., cement works, paper mills and other industrial

consumers. Also, there is a domestic fuel segment,

which is still significant in Eastern Europe and Tur-

key, and in China and North Korea. This market is

put at 700 Mt worldwide, although its share con-

tracted from 43 % in 1980 to about 13 % of world

hard coal consumption in 2006, and further decline

is expected. In view of high oil and gas prices,

however, the pace of decline could slow down.

The metallurgical sector, with a share of 13 %

(some 700 Mt), has grown by some 120 - 130 Mt

since 2001. The increase in the consumption of cok-

ing coal was noted, above all, in China and, partly,

Lignite

Hard coal

Hard coal‘s contribution to power generation, 2005

Source: IEA, Electricity Information 2007, Tables 1.2 and 1.3

0%

25%

50%

75%

100%

Sout

h A

fric

a

Pola

nd

Aus

tral

ia

Chi

na

Isra

el

Kaza

khst

an

Ind

ia

Serb

ia a

ndM

ont

eneg

ro

Cze

ch R

ep.

Gre

ece

Taiw

an

USA

Ger

man

y

Wo

rld

93 92

79 78 7170 66 64

60 5953 50 48 39

93

54

7978 71 70 66

7

5348

21

3538

212 2

53 59

274

World hard coal consumption, by sector,1980 and 2006

1980 Bt %

Total

of which

Power plants

Steel industry

Heat market

Source: German Coal Importers Federation (VDKI), Hamburg

5.40

4.00

0.70

0.70

2.80

1.00

0.60

1.20

74

13

13

36

21

43

2006Bt %



13


The most important hard coal consumer after

China is India, where over two thirds of the coal

consumed is for power generation. Coal needs

are mostly covered by domestic output, though

increasingly by imports as well.

The situation in "mature" Asia-Pacific markets,

especially in Australia, Japan, South Korea and

Taiwan differs fundamentally from conditions in

China and India. Australian coal is mainly exported,

although some 25 % of domestic coal production

is used in Australia itself. More than three quarters

of power generation in the country is based on

domestic coal.

Along with China, the USA, India, Russia and South

Africa, Japan is one of the biggest hard coal con-

suming countries, covering practically its entire

coal needs with imports, mostly from Australia.

Some 44 % of the coal consumed in Japan is used

in the steel industry; Japan is the world’s second

largest steel producer (after China). Also, coal in

Japan makes a considerable contribution to power

generation, with more than one quarter of the

country’s power supply being based on imported

hard coal.

high growth rates, has become scarcer owing to the

strong growth in the maritime trade in iron ore and

coal, longer travel routes and bottlenecks at export-

ing and importing ports. In the last few years

(2003 – 2007), this has repeatedly led to hefty price

hikes. With ongoing high fleet expansion rates,

however, normalization of freight rates can be

expected, so that, in future, hard coals from mines

with low extraction costs and logistically favourable

locations relative to seaports will definitely remain

competitive for overseas consumers.

In recent years, world maritime trade has grown

to 782 Mt and, in spite of high sea freight rates

at times in 2006, has increased by 56 Mt. This is

equivalent to a 15 % share for maritime exports in

world hard coal output; adding overland trade of

80 Mt, we obtain a traded share of some 16 %.

The most important market for hard coals is the

Asia-Pacific economic area. Hard coal consump-

tion in this region in 2006 was some 2.7 Bt. This is

equivalent to more than 60 % of worldwide hard

coal consumption. Especially strong consumption

growth was noted in China, where the main driver

behind the growing demand for coal, as in other

Asian countries, is the striking rise in electricity

needs.

Developments in world energy consumption, by energy source [Btce]

Mineral oil

Natural gas

Nuclear energy

Hydro

Hard coal

Lignite

Totals

Share of hard coal (%)

Share of lignite (%)

Share of coal, total (%)

Share of mineral oil (%)

Share of natural gas (%)

Share of nuclear energy (%)

Share of hydro (%)

Totals (%)

4.35

1.86

0.24

0.64

2.50

0.42

10.01

25.0

4.2

29.2

43.5

18.6

2.4

6.3

100.0

4.05

2.15

0.50

0.67

2.85

0.42

10.64

26.8

3.9

30.7

38.1

20.2

4.7

6.3

100.0

4.48

2.52

0.74

0.73

2.82

0.38

11.67

24.2

3.3

27.4

38.4

21.6

6.3

6.3

100.0

4.71

2.81

0.76

0.82

2.90

0.34

12.34

23.5

2.8

26.2

38.2

22.8

6.2

6.6

100.0

5.13

3.18

0.85

0.39

2.79

0.33

13.17

21.2

2.5

23.7

39.0

24.1

6.5

6.7

100.0

5.79

3.77

0.94

1.00

4.11

0.33

15.94

25.8

2.1

27.9

36.3

23.7

5.9

6.2

100.0

5.83

3.86

0.95

1.03

4.31

0.33

16.31

26.4

2.0

28.4

35.7

23.7

5.8

6.4

100.0

1980 1985 1990 1995 2000 2005 2006

Source: BP Statistical Review of World Energy


14

market conditions. Some of the fall in output is

offset by imports. The chief consumer countries in

this region are Germany, Poland, UK, Spain, Turkey,

Italy and France.

Perspectives in consumption developments

According to the International Energy Outlook

2007, which the Energy Information Administration

(EIA) of the US Department of Energy (DOE) pub-

lished in May 2007, the following perspectives are

indicated until 2030.

World coal consumption will grow until 2030 at an

average annual rate of 2.2 % compared with 2004.

This would be equivalent to an absolute increase

of more than 70 % in that period. Even relative to

the significantly higher level of 2006, there would

still be an arithmetic rise of nearly 50 %. In this

forecast, coal's share in world energy consumption

would remain largely unchanged.

For the strongly growing Asian economies, the

DOE/EIA reference case suggests a doubling of

coal consumption by 2030, with more than three

quarters of the expected increase in the world con-

sumption of hard coals being accounted for by new-

ly industrialized countries in Asia. The main driver

behind this development is to be found in the elec-

tricity markets of China and India, for which future

growth of 3.3 % p.a. (China) and 2.4 % p.a. (India)

is expected. Behind this is the assumption of aver-

age annual economic growth (real) of 6.5 % (China)

and 5.7 % (India).

China's required net growth in coal-fired power

plant capacities (balance of new-builds and age-

related decommissioning of plants) is put at 497

GW in the period 2004 to 2030. This enormous rise

is regarded as being necessary to cover the demand

for electricity. By way of comparison: at year-end

2004, China's coal-based power plant capacity

stood at 307 GW, and of 2006 at 484 GW. Some

of the expected increase in China's demand is also

due to the development of a large-scale coal-to-

liquid (CTL) industry.

Other important hard coal consumers in the Asia-

Pacific economic area are South Korea, Taiwan,

Indonesia and Thailand. Whereas Indonesia is in

a situation comparable with that of Australia (net

exporter in the case of hard coal), the other coun-

tries named mainly depend on supplies from the

world market.

The second largest hard coal consumer region

– after the Asia-Pacific economic area – is North

America. Over 90 % of hard coal consumption in

North America totalling some 1 Bt is accounted for

by the USA.

In Central and South America, coal in the past

was not counted among the central pillars of the

energy supply, and coal’s share in the region’s total

energy consumption is a mere 4 %. More than 60 %

of coal consumption in Central and South America

is accounted for by Brazil, the country with the

world’s tenth largest steel industry. The other main

coal consumers, accounting for small amounts, are

Colombia, Chile, Argentina, Peru and Venezuela.

Africa has a 3 % share in coal consumption world-

wide. The major market there is South Africa, which

accounts for over 90 % of coal consumed by the

entire continent. Demand is covered by domestic

output. South Africa is also one of the world’s key

exporters of hard coal.

Consumption and mining in the former Soviet

Union are concentrated on Russia, Ukraine and

Kazakhstan. Coal needs in each case are covered

by domestic output. In all of these countries, coal

makes a significant contribution toward power

generation. Rising consumption over the last ten

years – after falls in consumption owing to eco-

nomic restructuring – are accompanied by industry

consolidation.

In Western and Central Europe, the requirements of

environmental and, specifically, climate protection

are increasingly acting as a damper on the use of

coal in its chief deployment area, power genera-

tion. Also, wide sections of Europe’s hard coal

mining industry are unable to compete with world



15


In India, nearly 70 % of the estimated rise in coal

consumption is accounted for by its electricity sec-

tor. According to the DOE/EIA forecast, coal-based

power plant capacity in India will grow by 104 GW

from 82 GW in 2004 to 186 GW in 2030.

Future developments in energy consumption and

its coverage in China and India is the focus of

the 2007 World Energy Outlook drawn up by the

International Energy Agency. This analysis, which

likewise extends to 2030, will be published in

November 2007.

Significant growth in coal input for power genera-

tion is also expected for Taiwan, Vietnam, Indo-

nesia and Malaysia. This is where new coal power

plant capacity is now being built or planned on a

major scale.

The world's biggest coal consumer after China

is the USA. In its reference case, the DOE/EIA

expects US coal consumption to grow by 50 % in

the period 2004 - 2030. In the USA, 50 % of power

generation is based on coal. While an expansion

of gas-based power generation is expected over

the period until 2015, the DOE/EIA are assuming

that in the period after 2015, with gas prices then

rising, the focus will again be on coal in electricity

generation. The estimate for the new-build of coal

power plant capacity in the period 2015 to 2030 is

140 GW. However, this assumption comes with the

qualification that a change in the present legal situ-

ation and in underlying political conditions would

have serious implications for the projections.

In Western and Central Europe, a decline in coal

consumption by 0.5 % p.a. is forecast for the

period 2004 to 2030. All the same, OECD-Europe

remains an important coal market in the DOE/EIA's

view. The chief coal-consuming countries in this

region are Germany, Poland, the UK, Spain, Turkey

and the Czech Republic. The most important fac-

tors dampening coal consumption in Europe are

said to be the relatively slow increase in electricity

demand, growing use of natural gas in the power

plant sector and in industry, as well as promotion

of renewable energies coupled with a dismantling

of remaining subsidies for hard coal.

Btce

World coal consumption, by region

Source: DOE/EIA, International Energy Outlook 2007, Washington 2007, Reference Scenario

0

2.5

5

7.5

2004 2010 2015 2020 2025 2030

North America

China

Other countries

OECD Europe

Russia

IndiaAfrica

OECD Asia/Australia


16

Russia is the world's fourth-largest coal consumer

after China, the USA and India, with 20 % of the

country's power generation being coal-based. Rus-

sia's long-term energy strategy is geared to the

construction of new, and the replacement of old

power plant capacities, based specifically on nucle-

ar energy, gas and coal. The focus of new coal-fired

power plant capacity with advanced technology is

to be on the coal-rich Siberian region (central Rus-

sia). Efficient commercial-scale power plants are

to be built in the west and in the far east of the

country.

More than ninety per cent of coal consumption on

the African continent is accounted for by South

Africa. There, the strong rise in electricity demand

has led to a decision at Eskom, the state-run

power-supply company, to recommission three

large – previously closed – coal-fired power plants

(Camden, Grootvlei and Komati). The plants, with a

total capacity of 3.8 GW, are to go back on stream

as early as 2007. Moreover, the construction of new

coal power stations is planned, not only in South

Africa, but also in Mozambique, Zimbabwe, Tanza-

nia and Botswana.

In South America, future developments will be

marked in particular by the situation in Brazil. Chile,

Colombia, Puerto Rico, Peru and Argentina are the

next most important coal consumers. In view of the

expected capacity expansion in the steel sector and

the planned construction of new coal-fired power

plants, a disproportionately strong increase in coal

consumption is expected there. Hence, the DOE/

EIA puts the average annual increase for Brazil in

the period 2004 to 2030 at 3.3 % compared with a

forecast mean value for Central and South America

of 2.8 %.

For Asia's OECD countries (Japan and South Korea)

and for Australia and New Zealand, average growth

in coal consumption in the period 2004 - 2030 is

quantified at 0.9 % p.a., although the estimates

vary quite significantly from country to country. For

Australia/New Zealand and, specifically, for South

Korea, growth in demand by more than 1 % p.a. is

still expected. By contrast, a slight fall in coal con-

sumption is expected in Japan (-0.1 % per year in

the period 2004 - 2030).

The results presented for the reference case of the

2007 International Energy Outlook of the DOE/EIA

apply to a scenario in which current laws and poli-

cies remain unchanged in the forecast horizon. To

that extent, they cannot be regarded as a forecast

proper. A more realistic forecast would assume

changes in the energy policy framework over the

next 25 years – with corresponding implications for

the level and structure of energy consumption.

The World Energy Outlook of the International

Energy Agency (IEA), too, is assuming unchanged

government policies in its reference scenario. So,

the IEA in this scenario, which is comparable with

the reference case at DOE/EIA, arrives at virtually

identical worldwide developments in coal consump-

tion – marked by an average annual increase of

2 % or so until 2030. There are marked differences,

between DOE and IEA analyses, however, in the

assessment of trends in coal demand by continent

and by individual country.

In addition to the reference scenario, the IEA,

within the scope of an alternative policy scenario,

is investigating the implications of a bundle of

political measures by governments that are being

considered worldwide to improve security of supply

and, specifically, measures for stepping up the pre-

vention of climate change. In this alternative-policy

scenario, the increase in global energy consump-

tion is lower than in the reference scenario. This is

true above all of coal consumption. So this scenario

puts the growth rate for global coal consumption

at less than half the figure in the IEA's reference

scenario.

Environmental aspects – Clean coal technology

For years now, the environmental debate has cen-

tred on worldwide preventive climate protection.

It is assumed that emissions of greenhouse gases

(GHGs) are increasing the temperature of the

Earth’s atmosphere and, in this way, could give rise

to climate change. At the World Climate Summit

in Kyoto (the third conference of the treaty states



17


on this subject) specific obligations for reducing

GHG emissions were defined for the first time. For

the initial commitment period from 2008 to 2012,

38 industrialized countries agreed to reduce such

emissions by 5.2 % compared with 1990 (EU: -8 %;

US: -7 %; Japan: -6 %). Developing countries have

not yet given any specific undertakings to reduce

emissions, but are integrated by way of the clean

development mechanism (CDM). The Kyoto Protocol

targets the following gases: carbon dioxide (CO2),

methane (CH4), nitrous oxide (N2O), hydrofluorocar-

bons (HFCs), perfluorocarbons (PFCs) and sulphur

hexafluoride (SF6).

The meeting in Japan was followed by further talks

on the practical implementation of the various

commitments and measures resolved in Kyoto. With

the compromises obtained, the way was paved for

ratification of the Agreement by the treaty states.

Although the USA and Australia had declared that

they would not ratify the Kyoto Protocol, Russia’s

ratification has helped meet the requirements for

the Protocol to come into force, as it did on 16 Feb-

ruary 2005, when the Protocol became binding in

international law.

The coal industry advocates measures designed to

reduce environmental impact as part of preventive

climate protection, while heeding the principles

of proportionality and sustainability. It has been

actively pursuing such measures itself.

In coal mining, environmental aspects are increas-

ingly being heeded in developing countries as well;

this includes measures for recultivating depleted

mines. According to the definition of the Interna-

tional Maritime Organization, coal – unlike oil and

gas – is not among the environmentally hazardous

goods transported by sea. A further contribution

toward preventive climate protection is the use of

coal mine methane, which is drawn off continuously

from mines on safety grounds. This drainage gas,

which in the past was discharged unused into the

atmosphere or flared, is increasingly being used

today for power generation at small, mine-mouth

power plants.

On the coal-use side, the strategy for CO2 reduction

has three horizons. Horizon 1 concerns the world-

wide use of state-of-the-art technologies in replac-

ing old or building additional new power plants. In

horizon 2 the very latest in power plant technolo-

gies is further developed. Both horizons back CO2

reduction by enhancing efficiency. This primary

measure combines efficient use of resources and

preventive climate protection.

Strategy to limit CO2 emissions from coal-based power generation

Horizon 1 Horizon 2

2015 < 20202010

Horizon 3

Use of state-of-the-art technologies

Further development of latest power plant technologies

Efficiency increase(primary measure for CO

2

reduction)

Implementation of zero-CO2 power plant

CO² capture andstorge(secondary measure)

Source: RWE Power AG


18

Virtually zero-CO2 power generation on the basis

of fossil energy sources, which is not obtainable

by increases in efficiency alone, is only possible

using the secondary measure of CO2 capture and

climate-neutral CO2 storage. The appeal lies, above

all, in the fact that, for coal, which has the largest

reserves by far and is of the greatest importance

for world power generation, horizon 3 paves the

way for virtual zero-CO2 power generation. The

technologies required for this largely build on exist-

ing developments. Long-term safe CO2 storage with

public acceptance will be the basic precondition for

use of this technology.

The successive renewal of the oldest coal-fired pow-

er plants, with average efficiencies of 29 % using

state-of-the-art technology with an efficiency of 44

to 45 % (horizon 1) yields a specific CO2 reduction

of more than one third.

The focus in the further development of steam

power plant technology on the basis of hard coal is

to further increase process parameters (i.e. temper-

atures and pressures). The developments under way

in this area suggest that, in commercial use, the

50 % efficiency limit for coal-fired power plants can

be exceeded (horizon 2) by 2020.

Although the integrated gasification combined

cycle (IGCC) power plant technology will not, in

the medium term, offer a commercial alternative to

steam power plants, this technology will be of inter-

est in the longer term, not only because of its effi-

ciency potential of 52 to 55 %, but also on account

of its suitability for CO2 capture, above all for power

plant concepts featuring CO2 capture using tech-

nologies that have been proven at scale (horizon 3).

In principle, there are three technical options for

CO2 capture:

■ Flue-gas scrubbing in conventional power

plants:

For conventional steam power plants, only CO2

capture downstream of combustion is feasible.

In this process, the dedusted and desulphurized

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

5550454035302520

Source: Central Association of German Hard Coal Producers

Efficiency in %

CO² emissions in t per MWhelCoal input in tce per MWhel

CO² emission reduction thanks to efficiency increases in hard coal-based power generation



19


flue gas has its CO2 separated in an additional

scrubbing stage at atmospheric pressure.

Although old plants can be refitted in principle

using this technology, the space requirements

set narrow limits to the implementation of this

concept at existing power plants. Also, the

enormous flue gas volumes and the low CO2

content make this process very costly. Finally,

the considerable energy needs translate into a

drastic lowering of power plant efficiency. In

order to limit the costs of any later retrofitting,

some power plant operators today already pro-

vide sufficient space for flue gas scrubbing in

new-builds.

■ Oxyfuel process:

In the concept for the oxyfuel process, combus-

tion is with a mix of oxygen and recirculated

CO2. The flue gas, consisting mainly of CO2 and

steam, is cooled after scrubbing to remove SO2,

so that, following condensation of the steam

portion, CO2 is obtained without an additional

CO2 scrubbing stage.

■ Integrated gasification combined cycle

(IGCC) process:

Here, CO2 capture is possible upstream of com-

bustion. The fuel gas, which is as a rule under

pressure, has a 100-fold lower volume, and suit-

able capture technologies are widely employed

in the chemical industry. One new development

is the gas turbine with a combustion chamber

for H2-rich fuel gas. The "zero"-CO2 combined

cycle power plant technology can be imple-

mented both for coal (IGCC) and for natural gas

(IRCC, with a natural gas reformer).

One disadvantage of all the technologies described

is lower efficiency and, hence, higher fuel consump-

tion than in the case of technologies without CO2

capture. The technologies differ in this respect:

whereas conventional power plants with CO2 cap-

ture in the flue gas scrubbing system reach only

28 % efficiency, the figure is 37 % in the case of

oxyfuel and as much as 40 % in the case of the

IGCC process with CO2 capture, putting it close to

the efficiency level of today’s power plants. CO2

capture using the IGCC process is also, relatively,

Most important technology options for CO2 capture at power plants

1 Post-combustion CO² capture (steam power plant)

Conventional power plant incl. CO2 scrubbing

CoalAir

3 Pre-combustion CO² capture (IGCC power plant)

IGCC process

CoalO²

CO² capture

1,000 m³/s, 13 vol - % CO²

CO²

2 Oxyfuel process

CoalO²

Flue gas de-sulphurization

Conv. steam power plant

CO²CondensationFlue gas

cleaningBoiler

CO² / H²O

CO²

Gas proces-sing – CO shift

CO²capture

Gasification CCGT

incl. H² turbine

10 m³/s, 45 vol - % CO²

Three technologies seem to be capable of meeting the target by 2020

All are based mainly on known technolo-gies and components

All require optimiza-tion, extension and process integration

Enhancing generation process efficiency is always a supporting activity

■

■

■



20

the lowest-cost method, even if specific investment

costs are still 80 % above those for a conventional

power plant. Hence, this process has the greatest

potential among the options for CO2 capture. Also,

it has already been widely explored in both techni-

cal and operational terms.

Industrial-scale CO2 storage today is found mainly

in the USA as a result of its use in enhanced oil

recovery. In Europe, in-depth work is underway to

implement CO2 capture and storage (CCS) on the

energy market.

With a time horizon from 2020 onwards, CO2 cap-

ture and storage can make substantial contribu-

tions toward obtaining a zero-CO2 energy supply.

The CO2 avoidance costs in such a concept are

some €35/t CO2, based on current assessments.

Further technical developments offer cost-cutting

potential, making ambitious climate-protection

goals economically achievable.

Liquefaction of coal

The liquefaction of coal is one option for improving

the security of energy supply and for dampening

the rise and volatility of crude oil prices.

Decades ago, two CTL processes were being devel-

oped and deployed in Germany. These were the

direct hydration of coal (patented by Fritz Bergius

in 1913) and indirect liquefaction by gasifying the

coal with subsequent (indirect) hydration of the

synthetic gas (filed for patenting by Fischer and

Tropsch in 1925).

Drastic price hikes, coupled with concerns about

security of supply in the case of oil and natural gas,

have revived the interest in CTL worldwide. In a

number of countries, projects are being planned

to implement CTL. This is particularly true of coun-

tries that have large – economically mineable – coal

deposits and are increasingly dependent on oil

imports. These include – in addition to Germany –

Depleted oil and gas fields

Deep saline aquifers

Oil platform

Power plant

ElectricityUnderground mine

Schematic diagram of a climate-friendly coal-fired power plant with CCS

Opencast mine


CO2

Coal

CO2 storage site



21


the USA and Australia, as well as, specifically, China

and South Africa.

On the basis of the Fischer-Tropsch process, an

industrial CTL plant has been in operation at Sasol-

burg in South Africa ever since 1955. In addition,

Sasol has been operating two more CTL plants in

Secunda since the early 1980s. In all, the company

produces about 7.5 Mt of fuel at these locations

from 28 Mt of coal. In terms of process efficiency, it

is reported that 1 t of hard coal can yield – depend-

ing on the coal quality – some 2 barrels of oil prod-

ucts (1 barrel is equivalent to 159 litres), divided

into 70 % diesel and 30 % naphtha.

China has been a net oil importer since 1993. Since

then, oil imports have risen strongly. The country

also has large coal reserves. Against this back-

ground, CTL is accorded high importance. The Chi-

nese energy group Shenhua is building an indus-

trial plant for direct coal hydration at Erdos to the

south of Inner Mongolia. Operations are scheduled

to commence in 2007 with an annual output of

1 Mt of oil products. After completion of a second

project phase, an annual 5 Mt of oil are due to be

produced from coal. Shenhua is planning to build

further systems, some of them as joint ventures

together with Sasol and Shell. The goal of the ener-

gy group Shenhua is to produce 10 Mt of oil from

coal by 2010 and 30 Mt by 2020. In this respect,

it can rely on coal that can be mined at costs of

between USD 8 to 10/t. Coupled with relatively low

labour costs (about USD 10,000 p.a. for an engi-

neer), CTL in China would still be an economically

efficient proposition even if the world market price

of oil were to fall below USD 40 per barrel. Besides

reducing the dependence on oil imports, CTL close

to the deposits offers the option of replacing trans-

portation by rail to demand centres with pipeline

transportation. At the same time, China views CTL

as an important path toward implementing a clean

coal strategy. Although China still does not regard

the limitation of CO2 emissions as a priority envi-

ronmental-policy concern, this, in the assessment of

a representative of the Chinese Shenhua group, will

be the case in six to seven years' time.

In Australia, Monash Energy has launched a

project with the aim of producing some 3 Mt diesel

and other liquid products from coal. A demonstra-

tion plant is to be commissioned by 2010. The plant

is to be built in the south-east of Australia based

on lignite from the Latrobe Valley. Participation by

Shell and support from the Australian government

are viewed as important factors for implementing

the project.

The USA, the world's biggest oil consumer and

importer, is currently producing feasibility studies

on a range of projects for coal liquefaction. These

include the Medicine Bow project in Wyoming, the

Waste Management and Processors Inc (WMPI)

project in Pennsylvania and the Rentech project

in Illinois. Also proposed are projects in Arizona,

Montana and North Dakota. The DKRW Energy

project in Medicine Bow is initially set to produce

an annual 0.75 Mt (15,000 barrels per day, bpd) of

various fuels, specifically diesel. In the long term,

capacity is to be expanded to some 2 Mt annu-

ally. This project includes the erection of an IGCC

plant which uses the synthetic gas and the steam

produced in the CTL system to generate electric-

ity. The capacity of the power-generation plant is

put at 45 MW in the first phase. Plans call for CO2

capture and its sub-surface injection to boost oil

extraction. The legal measures and financial incen-

tive mechanisms required for implementing the CTL

project are being considered. This is true of both

the local states and the national administration

in Washington. The chief considerations behind

promotion of the technology are a lowering of the

dependence on oil imports and the creation of

additional jobs at home associated with the con-

struction of the CTL plants concerned. Besides this,

the US defence department is very interested in

these developments for military purposes. Accord-

ing to an estimate of the US Department of Energy,

America could expand the extraction of oil prod-

ucts from coal to 3 - 5 mill. barrels per day by 2030

(equivalent to 150 - 250 Mt/a).

In Germany, the most important project is the

commercial-scale IGCC system planned by RWE

Power with integrated CO2 capture and storage.


22

The plant, including the envisaged CO2 transporta-

tion and storage, has an investment requirement

of significantly more than € 1 bn and is to go on

stream with a gross capacity of 450 MW in 2014.

As an alternative or supplement to power genera-

tion, the IGCC technology deployed here offers the

flexibility of making the following products per ton

of lignite: 580 cbm hydrogen, 180 cbm synthetic

gas, 270 kg methanol or 140 l engine fuels. The full

costs of producing one ton of diesel on the basis of

Rhenish lignite are put at € 430. This is equivalent

to a crude-oil price of about USD 65/barrel.

In Japan, comparative analyses are being made of

the development of two direct CTL technologies by

the New Energy and Industrial Technology Devel-

opment Organization (NEDO). In a pilot plant with

a daily capacity of 150 t, eight tests with different

coal types have been run to date. NEDO has also

developed a plant in Funakawa to adapt the liquid

product made from coal to specifications under

Japanese standards. In further developments,

collaboration with other countries, like China and

Indonesia, are envisaged.

The outlined facts on coal-to-liquids were presented

within the scope of a workshop organized by the

Coal Industry Advisory Board of the International

Energy Agency in Paris on 2 November 2006 (www.

iea.org/ciab).

Coal can play a comprehensive role in the solution

of future energy problems through a combination

of technologies for upgrading coal (like liquefaction

and gasification) with CO2 capture and storage. For

this, the underlying regulatory conditions must be

created and market incentives created.

A workshop of the IEA Coal Industry Advisory

Board on all aspects of relevance for the subject of

CCS will be held in Paris on 7 November 2007.

Gas recovery treatment

Coal conversion

Hydrotreating unit

Refining

Fractionation

Solvent deashing

Gasifier

Coal+Catalyst

Make-upH

2

Recycled H2

H-donor

Slurry

Slurry

Deashed oil

Unconverted coal

H2S, NH

3, CO

2

Methane & ethane

LPG

Gasoline

Diesel fuel

Heavy vacuumgas oil

Ash reject

Direct coal conversion to liquid fuels

Source: CIAB, Coal to Liquids, Workshop Report, 2007



23

World trade

The beginnings of the world hard coal trade date

back to the middle of the 19th century, when – with

the beginning of steamship navigation – depots

had to be built in all world ports to store bunker

coal. Since supplies from a nearby mine were not

always possible, some coal had to be fetched

across oceans by sailing ship, e.g. from England to

Cape Town and Suez, or from Australia to Dhaka in

what is now Bangladesh. Coal gained world mar-

ket maturity for the supply of overseas consumers

when the efficiency of ocean shipping grew after

the switchover to oil between the two world wars,

although sustained expansion of international hard

coal trade only came after the second oil crisis in

1979/80.

In the period 1976–1999, the world hard coal

market grew by some 300 Mt or 13 – 15 Mt/a on

average. After 1999, a stronger growth phase set

in which has led to growth in world trade by a fur-

ther 357 Mt to the present 867 Mt. So, taking an

average for the last 7 years, the world market has

expanded by 50 – 52 Mt/a. Growth mainly took

place in the seaborne trade of steam coal.

Demand

World trade currently comprises 867 Mt. The world

market can be broken down into

■ Maritime trade 782 Mt

■ Overland trade 85 Mt

Cross-border, overland trade is relatively stable

and is based mainly on traditional supply relations

between neighbouring countries. This brochure

deals primarily with maritime coal trading, because

this is where most of the growth in world trade

takes place.

Developments in total maritime world trade in hard coals

Overland trade

Maritime trade

Steam coals

Coking coals

0

200

100

400

300

600

500

800

700

900

1000

1980 1985 1990 2000 2004 2005 20061995

Mt

Source: VDKI, Hamburg 2007


24

Output and exports of hard coal, 2006 [Mt]

India 390

Ukraine 80

Vietnam 44 22

Canada 34

24

28

Colombia 64 61

Kazakhstan 94

Poland 8

3

Indonesia 205 171

South Africa 247 69

Australia 302

Russia 309 77

USA 1,053 28

China 2,326 63

Maritime exports

Output


94

237

Germany

19UK



25

The maritime hard coal world market is broken

down into the following submarkets, viz.

■ Steam coal market, total 595 Mt

■ Atlantic steam coal market 242 Mt

■ Pacific steam coal market 353 Mt

■ Coking coal market 187 Mt

■ Maritime world trade, total 782 Mt

The breakdown into two steam coal markets is

determined by the supply side in the markets. A

key determining factor is the level of freight rates,

which may enable Atlantic or Pacific producers

to supply more distant customers at competitive

prices.

The coking coal market, by contrast, is a unitary

world market. A few suppliers serve a dispersed cli-

entele worldwide.

The vigorous expansion of international trade has

two main causes

■ Covering the growing demand for raw mate-

rial and energy

■ Substitution of indigenous coal in countries

with uneconomic mines.

Most of the expansion is in steam coal, whereas the

coking coal market has fluctuated in recent years

in the range of 165 – 187 Mt, depending on cycli-

cal developments in the steel industry. However,

the increase in global steel and pig-iron production

could herald a new growth phase, and mean that

the 200-Mt threshold is exceeded as early as 2007.

As for the submarkets, the following applies. In

the Pacific market for steam coal imports (some

60 % of total steam coal trading), the chief growth

engine is the rising electricity needs in nearly all

economies, above all in China. Growing populations

in South-East Asia and high rates of increase in the

gross national product mean that the Pacific steam

coal market will continue to prosper.

Overseas trade in steam coal, 2006 – Supplier structure [in Mt]


Poland 7

Other 12

65 South Africa

31 Indonesia

Colombia 60

Russia 55

4 AustraliaVenezuela 8

Atlantic: 242 Mt

24 Vietnam

110 Australia

59 China

Indonesia 140

Other 8

Russia 12

Pacific: 353 Mt

World overland trade in hard coal, 2006

USA - Canada

USA - Mexico

Canada - USA

Mongolia - China

North Korea - China

Vietnam - China

Poland - EU countries

CR - EU countries

Russia - CIS countries (Ukraine)

Russia - outside CIS

Kazakhstan - Russia

Other (EU-internal)

Total


18.0

0.5

1.7

2.3

2.5

6.0

7.0

6.5

6.5

6.0

24.0

4.0

85.0

Mt

World trade


26

The Atlantic steam coal market (some 40 % of the

total steam coal market) deserves a disaggregated

examination to understand growth prospects.

In Western Europe, the growth in imported coal

mainly offsets falling domestic production, chiefly

in Germany and the UK. In the Mediterranean area,

by contrast, there are countries, like Italy, Turkey,

Morocco and Israel, where the market for coal is

growing.

In South and Central America, it is primarily rising

electricity needs that are boosting demand. The

USA, too, has in recent years evolved into an impor-

tant importer on the Atlantic market, primarily for

its coastal or near-coastal power plants. The US

share of the Atlantic market amounts to 12 %.

The world coking coal market is basically powered

by crude steel and pig-iron production. In 2006,

crude steel output reached some 1,220 Mt, and

pig-iron output, on which coke consumption largely

depends, 868 Mt. In this respect, it must be borne

in mind that, in China, due to a lack of scrap metal,

the growth of crude-steel production is under-

pinned mainly with blast-furnace pig iron. Until

2003, China was largely able to cover the growth

in its pig iron production with its own coking coals;

since 2004, however, China has had to import

smaller additional quantities and, at the same time,

reduce its own exports. This has led to tensions on

the market, since the pattern of supply has shifted

further in Australia’s favour. Overall, the grow-

ing steel production forecast for Asia and South

America will outpace stagnating demand in North

America and Europe, such that higher growth in the

world coking coal trade can be expected.

Supply

The strong growth in the world hard coal market

during recent years poses serious challenges for

export-oriented hard coal pits and their associated

infrastructure. So far, however, the world market

has been able to cover the extra demand in quan-

tity terms, although temporary bottlenecks in the

last few years have led to significant price swings

for coking and steam coal and for sea freights.

Following many years of excess supply with low

fob prices, mining capacity and infrastructure for

export coal have been expanded at only a moder-

ate pace. This is especially true in the supply of

steam coal. According to recent studies (Kopal,

2007), utilization of steam coal capacities rose from

84 % in 2000 to over 94 % in 2006.

In the Pacific import steam coal market, totalling

353 Mt in 2006, the situation continues to be domi-

nated by Australia and Indonesia. Indonesia now

plays the leading role there, achieving a 40 % mar-

ket share. China reduced its steam coal exports on

account of domestic demand from a peak of 81 Mt

in 2003 to 55 Mt in 2006. A further fall to 40 - 45

Mt appears likely in 2007. Greater volumes are now

being supplied by Russia and Vietnam, and small

tonnages by South Africa and Colombia.

Pacific export-oriented production in 2006 exceed-

ed demand in this region and so supplied the

Atlantic market with 35 Mt in the same year. Thanks

to a low sulphur content and favourable prices,

Indonesian coal in particular enjoyed increasing

accep tance, mainly in Europe, but also in smaller

amounts in North and South America – 31 Mt in

total.

Shares in coking coal market – Overseas trade, 2002 - 2006 [in Mt]


0

20

40

60

80

100

120

140

160

180

200

China

Other

Russia

USA

Canada

Australia

2002 2003 2004 2005 2006



27

Australia has long-term expansion potential,

although it has a considerable backlog of domestic

transportation and port enlargement projects. At

present, however, efforts are being made in both

areas to increase exports by implementing expan-

sion measures and improved logistics management.

In recent years, Indonesia has always surpassed

export forecasts. It has increased its exports from

58 Mt in 2000 to over 171 Mt in 2006; growth in

the last year alone was 42 Mt. However, exports

increasingly consist of low calorific value coals. In

the long term (after 2012), growing domestic needs

must be anticipated. Nevertheless, Indonesia is

likely to be able to further expand its exports in the

coming years.

Russia is extending its Far Eastern ports and pro-

poses to exploit its market opportunities there. It

is likely to be an interesting partner thanks to the

short sea routes above all for Japan and Korea, but

also for China.

Vietnam, too, has strongly increased its exports in

very little time and mainly supplies south-west Chi-

na. The rapid expansion of production and exports

is based on opencast mines, however, whose capac-

ity and reserves are limited. Vietnam must switch

to more underground production in future to main-

tain extraction volumes, although there are signs of

further export increases in 2007. In view of growing

Hard coal maritime trade by export and import country/region, 2006 (in Mt)

Export country

Australia

Indonesia

PR China

South Africa

Russia

Colombia

USA

Canada

Poland

Venezuela

Other

Exports

Import country/region

Europe

EU-25

Asia

Japan

South Korea

Taiwan

Hongkong

India

Latin America

Other

Imports


123

0

4

1

9

0

22

25

1

0

2

187

56

47

117

63

13

9

0

25

11

3

187

247

224

470

177

74

63

12

53

22

43

782

191

177

353

114

61

54

12

28

11

40

595

114

171

59

68

68

61

6

3

7

8

30

595

237

171

63

69

77

61

28

28

8

8

32

782

Coking coal Steam coal Total

Coking coal Steam coal Total

World trade



28

domestic demand, the Vietnamese government is

concerned about export levels.

In the Atlantic steam coal market, totalling 242 Mt

in 2006, South Africa, Colombia and Russia play

leading roles and supply 78 % of the market.

Besides Pacific supplies of 35 Mt, Poland, Ven-

ezuela, the US and smaller suppliers like, e.g., Spits-

bergen serve the Atlantic market, too. The expan-

sion potential in Atlantic suppliers mainly lies with

Colombia, South Africa und Russia.

Colombia has been expanding its output year after

year and is now making further extensions to its

infrastructure. If domestic demand is low, Colom-

bia could become the biggest steam coal provider

in the Atlantic region in the medium term.

South African exports are stagnating, although its

export terminal, Richards Bay, is being extended

from 72 Mt to 91 Mt capacity in the medium term.

At the moment, a restructuring process is under-

way in South Africa in which large mining compa-

nies are surrendering sub-areas of their hard coal

production within the scope of the Black Economic

Empowerment programme (BBE), and a number

of new firms with mining rights are being set up,

although they have yet to commence production.

To that extent, South Africa's export potential

should increase further in the medium term. How-

ever, it is notable that the big mining companies

Amcoal, BHP Billiton and Xstrata are currently more

focussed on expanding pits in Colombia.

Russia, too, raised its steam coal exports from

10 Mt in 2000 to 58 Mt in 2006 and is planning fur-

ther expansion. Its infrastructure is being planned

accordingly.

Main trade flows in hard coal traffic by sea, 2006 [in Mt]

Maritime trade: 782 MtIncl. 595 Mt steam coal 187 Mt coking coal

* from Vietnam to China** incl. 3 from Indonesia and 1 from South Africa

Global hard coal production: 5.4 Bt


Canada28

South Africa69

Poland8

China63

Australia237

from Canada

37 from USA

20

4

179

32

64

1

towardsFar east

20

4

19

120

18

59

USA28

Indonesia171

8

6

25

69

Columbia/Venezuela

27

Russia77

2 62

20*

3

3

5

4**5

20


29

even higher shares have been observed due to

extreme upward swings in freight rates.

The freight costs for coal are determined by the

overall market for bulk goods, which grew by 30 %

from 2000 – 2006.

Developments in the bulk market from 2000 – 2006

Iron ore

Coal

Grain

Other

Total


449

524

264

874

2,111

721

782

281

1,008

2,792

61

49

6

15

32

2000Mt

2006Mt

Increase%

Freight rates were at a low level for many years,

such that bulk carrier capacities expanded at only a

moderate pace. China's iron ore imports have shot

up since 2003, leading to a dramatic rise in freight

rates. Despite high new-build rates for bulk carriers

in recent years, no relief has been noted as yet on

the freight market. Extensions to the fleet are cur-

rently lagging behind bulk shipping demand.

Increase of bulk carrier fleet, in M dwt, 2006 - 2008

End- Additions End- 2006 2007 2008 2008

Capesize

Panamax

Handysize

Scrapped,

lump sum

Total 368 25 24 417

Source: Clarkson, Shipping Intelligence Weekly

121

102

145

10

8

10

-3

10

7

10

-3

141

117

165

-6

The main reasons for this are queues off coal and

iron-ore exporting and importing ports as well as

longer average sea routes per transported tonne,

which are making transport capacities scarcer.

Poland’s exports continue to fall, particularly sea-

borne exports, due to rising costs. Exports from

Spitsbergen are stable at 3 Mt, as are those from

Venezuela at around 8 Mt. The USA, with relatively

high costs for export coals and a strong domestic

market, is an Atlantic swing supplier to a small

extent only, and when the market situation is

favourable, sells spot tonnages.

Given today's high global demand, Russia's export

supply is indispensable. With an 11 % world market

share and nearly 25 % market share in the Atlantic

region, Russia has grown to be an important player.

The global market volume for coking coals currently

stands at 187 Mt, having stagnated in 2005/06.

Despite considerable growth in crude steel and

pig iron production, this has had little impact on

the world market for coking coals in 2005/06. The

reason is that China, on the one hand, the biggest

steel producer, is to a large extent self-sufficient

in coking coal, and that, on the other, consumers

had built up high stockpiles in the boom years

2003/04. In 2007, however, stronger growth of the

coking coal market can be expected again.

The main suppliers are Australia, Canada, the

USA and Russia. Incentivized by the higher world

market prices for coking coal, Mozambique, Indo-

nesia and Colombia are investigating coking coal

projects, with significant investment now being

made by the Brazilian company CVRD in Mozam-

bique.

Owing to the decline in China's coking coal

imports, capacity expansions have stalled in Can-

ada. Without the bottlenecks in Australia's infra-

structure, there would be excess supply, and since

export capacity tends to grow faster than demand,

investors in new coking coal projects remain hesi-

tant.

Developments in sea freights

In addition to the supply of and demand for steam

and coking coal, sea freights, too, are an important

variable that can account for up to 40 – 50 % of

the total cif cost of imported coal. In recent times,

World trade



30

Demand and supply cycles

Supply prospects for world market production

depends crucially on the geological formation of

the deposits and on productivity in mining opera-

tions. In principle, it may be assumed that the

most favourably located deposits are used up first.

Once they are depleted, recourse must be made to

resources that are geologically less favourable or,

due to their geographical situation, more difficult

to develop. Here, the drawbacks of having to switch

to poorer deposits can be more than compensated

by productivity gains. This has been the case in

recent years, although it cannot be expected to the

same extent in the future.

0

10

15

20

5

25

30

35

40

45

50

Australia

USD/t

2002 2003 2004 2005 2006 2007

Freight rates for hard coal

Jan Jan Jan Jan Jan JanJul Jul Jul Jul Jul Jul

South Africa

Colombia

Source: Frachtcontor Junge & Co.

0

200

150

100

50

250

300

€/tce

1973 20031978 2007*1983 1988 1993 1998

Price developments for imported energiesfree German border

Natural gasHard coal(steam coal)

Crude oil

* Average 1Q 2007

Source: BAFA


31

Accordingly, in a buyers’ market, the long-term

marginal cost of mining is the key determinant for

the price trend in ex-mine hard coal. Prices fluctu-

ate in cycles around a trend defined by long-term

marginal costs. Here, price swings depend crucially,

inter alia, on the course of demand, which is, in

turn, determined by the utilization of existing

export capacities and – to a lesser extent – by price

movements in the crude oil market.

In a sellers’ market, on the other hand, the full

costs and margins of the most expensive supplier

required to cover the demand determine the world

market price.

Close interdependencies exist between these fac-

tors. The second oil crisis in 1979/80, for example,

led to an increase in the demand for hard coal and,

hence, to full utilization of supply capacities. The

result was a rise in hard coal prices, which, in turn,

triggered a mobilization of existing, and the devel-

opment of new, export capacities.

There then followed further market cycles with

prices first rising and then falling again, between

1973 and 1987, 1988 and 1993, 1994 and 1999.

Prices peaked in 2000/2001 at USD 42/t cif ARA,

and dipped again to USD 28/t cif ARA in 2002.

With a simultaneous weaker dollar, these prices

were barely viable for steam coal mines in South

Africa. In 2003/2004, however, the special factors

identified triggered leaps in demand, which led to

peak prices of USD 78/t cif ARA. Prices then fell

again to USD 52 – 55/t. Since the start of 2006,

they have tended to rebound. In this respect, fob

prices for South Africa's coal held steady for a long

time within a USD 48 – 58/t price band, although

on a cif basis they were driven up by rising freight

state-run

57 % Lehmann MerchantBanking Partners**

listed

listed

listed

listed

state-run

listed

listed

listed

ExportsMt

OutputMt


Coal India

Peabody Energy Corp.*USA

Shenhua

Rio Tinto Plc.Australia, Indonesia, USA

Arch Coal, Inc.USA

Anglo Coal South Africa, Australia, Venezuela, Colombia

China Coal

SUEKRussia

BHP - Billiton Plc.South Africa, Australia, Indone-sia, USA, Colombia

Xstrata Plc.Australia, South Africa,Colombia

343

232

203

154

127

98

91

90

86

77

0

22

26

35

-

40

27

15

81

59

World's largest hard coal producers, 2006

ShareholderCompanies in:

World trade



32

rates. In mid-2007, fob prices then began to rise

further, thanks to higher demand from the Pacific

region, so that in September 2007 we have cif ARA

prices of over USD 100/t. At this level, extremely

high freight rates have combined with high fob

prices. Today’s prices reflect unusually high capac-

ity utilization, both at export steam coal mines and

among bulk carriers.

Re-formation of markets

The international hard coal market has seen pro-

found structural change in recent years, marked,

first, by ongoing supplier consolidation in Western

exporting countries and, second, by a rise in the

importance of the former centrally-planned econo-

mies and transition economies as world market

suppliers. With their structural adjustments and the

modernization of their coal industries, the latter are

increasingly assuming the role of traditional export-

ers in balancing markets.

At the same time, in line with the trend toward glo-

balization, cross-country mergers and acquisitions

among coal companies have accelerated, whilst

oil firms like Exxon Mobil and Shell have retreated

from coal business.

The only oil company operating coal mines in South

Africa has been Total. The big four - BHP Billiton,

Anglo, Rio Tinto, Glencore/Xstrata – have opened

new mines or bought interests, e.g., Anglo’s inter-

est in Paso Diablo, or Glencore/Xstrata’s further

mining rights in Colombia. In Russia, four large, pri-

vate sector companies have formed and now largely

control the Russian coal sector. A similar pattern is

emerging in China where the government is aiming

to create 8 – 10 large companies with 50 – 100 Mt

or more production volume, and whilst these com-

panies are likely to be privatized in the long run,

they behave increasingly as private concerns. Chi-

na’s WTO accession in 2001 will tend to make the

country more attractive to foreign companies and

investors. India and China are increasingly showing

an interest in coal and iron ore interests overseas

in order to secure their raw material needs. CVRD

– the biggest Brazilian iron ore producer – is plan-

ning the development of a coking coal mine for an

eventual 6 Mt in Mozambique and has bought its

way into Australia.

The world hard coal market is now served by an

estimated 400 export mines, with some 120 pro-

ducers operating in this sector in 2006. The ten

biggest hard coal companies accounted for a 28 %

share of global output in 2006. Seven of these

operators even have a 35 % share in the maritime

hard coal trade.

Where only a few years ago the activities of produc-

ers were largely focussed on their home countries,

they now extend from Australia via South Africa

and Indonesia all the way to North and South

America and, recently, to China as well.

What has also changed are the contractual relations

in international coal business. To a growing extent,

hard coal trading is being handled between produc-

ers and consumers directly. The big producers, like

BHP Billiton, Anglo and Glencore/Xstrata have set

up their own sales companies and are distributing

steam coal and coking coal – partly from different

countries – on a one-stop-shop basis. This example

is also being followed by the biggest privatized

Russian producers, meaning that dealers are los-

ing their once-important position as contractually

involved intermediaries between producers and

consumers. In view of this trend, their remit is

changing and is increasingly focussing on more

opaque niche markets and on handling/distribu-

tion. Also, more dealers are acting as agents for big

producers, providing assistance in arranging con-

tracts and customer care. In Europe, a number of

trading houses are increasingly performing agency

functions. Specific mention must be made of the

following companies:

■ RAG Trading

■ RWE Trading

■ Constellation

■ EDF-Trading

■ Coeclerici

A strong position in the Far-Eastern coal trade is

occupied by more than ten Japanese trading com-


33

panies that mainly handle the supply contracts

concluded between the steel industry or the power

sector and the exporters. Some have consider-

able stakes in a number of export mines. The most

important here are:

■ Mitsubishi

■ Mitsui

■ Itochu

■ Nichimen

■ Nobel

In China, coal exports are mainly handled by the

state-run company Chinese National Coal Import

and Export Corp. (CNCIEC) and by three further

firms. In Poland, WEGLOKOKS, which is likewise

state-run, deals with exports. In Russia, SUEK and

KRUTRADE are by far the most important trading

companies. Nearly 90 % of Vietnam's transactions

are handled by Vinacoal.

Representative costs in the coal chain

In the competition between primary energies, it is

the costs in the coal supply chain, i.e. in the vari-

ous stages from export mine to consumer, that are

crucial.

Investment

One important component in mining costs is the

expenditure on developing the deposits. In the

case of new mining capacities for export coal, i.e.

for prospecting and exploration as well as the

development of new mines, these costs currently

amount worldwide to USD 45 – 50 /t p.a. of min-

ing capacity. This figure also includes the costs of

extending already operating mines (World Energy

Investment Outlook 2003). For new mines that

cannot be linked to existing infrastructure (e.g.

transport links, water and energy supplies, accom-

modation for workers and families, and local com-

munity facilities), specific investment costs can rise

substantially, by 100 % or more. It is remarkable

that average specific investment has fallen slightly

in nominal terms since 1998 and that a slight trend

reversal has been noted only since 2004. This is

due to the strong demand for coal-mining equip-

ment, coupled with demand from iron ore and non-

ferrous metals mining projects, and to the associ-

ated price inflation in recent years. Compared with

gas and oil, coal is the least capital-intensive. The

World Energy Investment Outlook from the IEA, for

example, has identified the following order (con-

verted into tce):

0

100

150

200

50

250

300

350

USD/t/a

1962 19981968 20041974 1980 1986 1992

Specific investment in export-oriented hard-coal mining

Average in nominal USD/tpaAverage in (real) 2005 USD/tpa

Source: Kopal, Christoph: Zeitschrift für Energiewirtschaft, No 1, 2007

World trade



34

■ Coal USD 3.4/tce

■ Oil USD 15.4/tce

■ Gas USD 19.6/tce

The figures are based on the accumulated invest-

ments throughout the entire supply chain of each

energy source in the period 2001 – 2030, divided

by the accumulated production growth in each

case. Hence, coal has less significant investment

risks than gas and oil.

The highest specific outlays for the creation of

mining capacities are involved in the develop-

ment of completely new coalfields or large-scale

operations, plus infrastructure, in remote and

undeveloped areas (greenfield projects), which

may require amounts of up to USD 160/t p.a. By

contrast, where new mines are being developed or

existing mines extended in areas with an already

developed infrastructure (brownfield projects), the

specific investment can be as little as USD 30 - 60/t

p.a. of mining capacity. In this respect, there are

substantial differences between deposits lying

near to the coast and those lying inland, between

opencast and underground mining, and between

the extraction of coking and steam coal. Assuming

an average mine life of some 20 years, depreciation

is approx. USD 2.5 – 3.0 per mined tonne, and debt

Representative costs of coal chain (2006/2007), cif ARA

Exporting country Region Costs free Transport Port Sea freight* Total costs Extraction method mine domestic handling ø 2006 free ARA port USD/t USD/t USD/t USD/t USD/t

1. Steam coals

Australia Queensland 14-42 6-14 2-3 22 44-81 Opencast

New South Wales 25-40 3-10 2-3 26 56-79 Underground

New South Wales 22-38 3-10 2-3 26 53-77 Opencast

South Africa Opencast 16-28 6-10 1.5-2 16 38-56

Colombia Opencast 22-26 2-3 3-5 15 42-49

Russia Opencast 16-20 24-26 2-3 14** 56-63

(partly plus transit/post-treatment) (6-8)* (60-68)

Indonesia Opencast 16-33 2-7 2-4.5 17 37-61.5

Venezuela Opencast 18-22 7-9 3-5 19 47-53

2. Coking Coals

Australia Queensland 29-43 8-10 2-3 22 61-78 Underground

Queensland 26-36 6-9 2-3 22 56-70 Opencast

New South Wales 26-52 4-6 2-3 26 58-87 Underground

New South Wales 29-35 5-7 2-3 26 62-71 Opencast

Canada British Col. 38-43 33-35 4-6 24 99-110 Opencast

USA/Central Underground 40-80 20-30 3-4 14** 77-128 Appalachia

*incl transit, post-treatment; freight base: Capesize; ** base: Panamax Source: International Energy Agency, Coal Information; Baruya, World Coal Supply Costs; VDKI


35

service USD 3.5 - 4.0/t on the basis of a 10 % rate

of return, i.e. a total of USD 6 – 7 US/t.

Operating costs

The total costs in the coal chain, with a breakdown

by the various interacting links, are specified for

the various exporting countries in the following

Table. The reported cost bands are representative

and are based on our own investigations, on an

analysis of conference talks and on IEA studies.

For the ex-pit costs, the range reported is large

because it depends on the following, project-specif-

ic features:

■ type of mining operation– opencast or

underground,

■ coal type – steam coal or coking coal

■ labour costs – e.g. low-cost developing

country or developed economy,

■ productivity – high or low output per shift,

per man and per year.

Moreover, a number of other factors exist. All of

this goes to explain the large cost range, which can

be seen even within one producer country.

In operational logistics, particularly from the mine

to the ocean-going ship, conditions differ, depend-

ing on the country. For example, significant cost

differences exist between operations where coal

is transported from the mine directly to an export

terminal for loading onto capesize ships, and those

where coal is barged out to vessels lying at anchor

in the roads.

In recent years, costs have risen significantly owing

to the boom in the iron ore and coal industries.

Higher prices for mining equipment, materials,

explosives, fuels and wages have led to a consider-

able rise in costs; as has falling productivity, above

all in Australia and the USA. However, potential

exists for further rationalization which is likely to

improve the cost and productivity situation, at least

in some countries. Given the higher export income,

higher royalties have added to costs, where these

are levied as a percentage.

MCIS price and capacity utilization for steam coal

0

200

300

400

100

500

600

700

800

1987 20051990 2008 20111993 1996 1999 2002

Supply = mining capacity [in Mt]Proj. supply [in Mt]

Proj. demand [in Mt]

MCIS price (USD/t cif ARA = 6,000 Kcal/kg,as received)

Capacity utilization [%]Proj. capacity utilization [%]

Demand = world trade [overseas, in Mt]

Source: Kopal, Christoph, Zeitschrift für Energiewirtschaft, No. 1, 2007

World trade



36

Profit margins are impaired in some countries by

a weak dollar. The Australian dollar, for example,

South Africa's rand and the Canadian dollar have

risen in value compared with the US currency. The

cost and productivity situation in selected export-

ing countries is described in the country reports.

In calculating cif ARA costs, average sea freight

rates for the year 2006 have been used and so

these do not reflect the high volatility seen during

the year.

Price formation

The world’s hard coal market for steam coal has

been expanding since the 1980s, although the mar-

ket initially lacked maturity. Price competition is

governed by supply and demand. Until 1990, sup-

ply was able to satisfy steadily growing demand,

but has tended to run ahead of demand since then.

With hindsight, it is now clear (see Diagram) that

a hefty excess supply emerged for the first time

between 1990 - 1992 which, with demand rising,

did not contract again until 1995 when a further

investment cycle began to create renewed excess

supply. It was not until 2003/2004 that the moder-

ate investment activity of previous years was fol-

lowed by steadily rising capacity utilization and,

hence, price peaks. This volatile situation has con-

tinued since then.

The successive phases of excess supply followed by

shortages are triggering intense price competition.

One main - and leading - indicator of price develop-

Market structure

Mechanisms of price formation for steam coal (Total market 2006: 595 Mt)

Atlantic market (242 Mt) Pacific market (353 Mt)

Price formation

Market leaders: South Africa Colombia RussiaMarginal suppliers: Poland USA Australia Indonesia

fob prices

Freight rates

Currency relations

Buyer‘s marketSeller‘s market

Market leaders: Australia Indonesia Marginal suppliers: South Africa Russia China

Demand242 MtEU-25Eastern EuropeMediterranean areaNorth, Central andSouth America

Supply211 MtColombiaSouth AfricaRussiaPolandVenezuelaUSAetc.

207 Mt

Supply384 MtAustraliaIndonesiaChinaRussiaVietnam

Demand353 MtJapanSouth KoreaTaiwanIndiaChinaetc.

394 Mt

35 Mt4 Mt

Source: VDKI. Hamburg 2007


37

ments in this respect has proved to be the utiliza-

tion of the mining capacities available for exports.

The degree of capacity utilization in export mines is

in sync with steam coal price rises and falls.

This is also true of the recent past, when demand

for both steam coal and coking coal has come up

against capacity limits with corresponding price

fluctuations in an upward direction. Whereas in

the case of steam coal it has still been possible to

mobilize certain capacity reserves, which led to a

moderate dip in prices, coking coal prices rose by

over 100 % to USD 125/t fob shipping port in 2004

due to a lack of elasticity in the supply. Although

coking coal prices have now fallen again by a good

20 % owing to higher supply and more subdued

demand, they have persisted at a historically high

level in 2006/07 compared with previous years.

As mentioned earlier, the world market for the

ocean-going hard coal trade in steam coals involves

two segments. These are the Atlantic market com-

prising Europe, including the neighbouring Medi-

terranean countries, and North, Central and South

America, and the Pacific market, which also extends

to the Asian coastal countries bordering the Indian

Ocean, although it mainly serves Far Asian consum-

ers. This division is mainly a matter of different

transport costs, but also involves different pricing

mechanisms. Nevertheless, deliveries may occur

from one market segment to the other, provided

that the cif prices are competitive and, of course,

profitable for the supplier. The extra transportation

costs (e.g. Australian coal to ARA) are borne by the

supplier. Such exports are often contracted on a cif

basis.

Order of suppliers of steam coal, by production costs on the Atlantic market incl. ocean transport, 2006


65

USD/t

Mt

242 Mt

0

20

40

60

Pola

nd

Russ

ia

Oth

er

Ind

one

sia

Sout

h A

fric

a

Col

om

bia

/Ve

nezu

ela

cif ARA

80

100 200

World trade



38

The competitiveness of more distant suppliers

tends to rise when freight rates are low and to fall

when they are high. Some interdependencies exist

with the coking coal market. Hence, more highly

volatile coking coals are also used in places as

steam coal, and certain steam coal qualities can be

marketed, after better preparation, as more highly

volatile coking coals. Producers decide according to

the price situation which variant earns the highest

“net-back“ price, free mine.

The volume of coal exchanged between the Atlantic

and Pacific markets in 2006 was 35 Mt or just under

6 % of the entire steam coal market of 595 Mt.

Largely synchronous price trends can be observed

on both markets, which is also reflected in the

MCIS (McCloskey Coal Industry Services) price indi-

ces for NW Europe and East Asia.

In view of their high market shares, the price lead-

ers are generally South Africa and Colombia for the

Atlantic market and Australia and Indonesia for the

Pacific market.

However, since considerable quantities are now

being traded on a spot basis, the market leaders

have to include in their thinking the prices offered

by their competitors (e.g., Colombia and Russia in

Europe or Indonesia and China in East Asia), if they

are not to lose market share. The crucial factor in

this respect is the cif price at the destination port.

The price level formed in this way is the benchmark

for the negotiation of long-term prices.

A new element in the evolution of coal prices, at

least in the European section of the Atlantic mar-

ket, is CO2 certificate trading. This affects primarily

the use of gas or coal in power plants. When gas

prices are low, the cost of CO2 certificates curbs the

demand for coal; when they are high, coal can be

competitive in spite of the impact of the CO2 emis-

sions costs. Power plant operators decide on use

Order of suppliers of steam coal, by average production costs free port of shipment on the Pacific market, 2006

0

30

40

50

10

20

Russ

ia

Aus

tral

ia

Chi

na

Ind

one

sia

Vie

tnam

353 Mt

100 200 300


USD/t

Mt

fob


39

by referring to the margins that they achieve with

a given electricity price by deploying gas or coal,

with the cost of CO2 factored into their decision.

In the first CO2 trading period, coal use was virtu-

ally unaffected. CO2 certificate prices peaked at

€ 30/t CO2. Once actual CO2 certificate use was

announced in 2005, the price nosedived to nearly

zero toward the end of the trading period. In the

new trading period (2008 – 2012), CO2 certificates

are currently being traded in a price band of € 15 –

25/t CO2 for 2008.

Contract forms in international coal trade

On the world hard coal market, both long-term sup-

ply contracts and spot transactions are usual. By

concluding spot contracts, consumers seek to main-

tain a particularly close alignment to the current

market situation. In such deals, buyers are guided

by the following considerations:

■ close linkage to the electricity market

■ exploiting price changes wherever possible,

■ procuring "small" quantities under

favourable terms, and

■ cover for unplanned consumption peaks.

Also, it is now virtually the rule that medium-term

requirements are covered on the spot market at

the expense of longer-term contracts. One variant

of spot purchases is the growing number of ten-

der deals, i.e. purchases which are preceded by a

bidding procedure, with the best bid winning the

contract. Deliveries agreed in this way generally

involve larger volumes than single deals, and the

time frame mostly extends across several quarters.

In short-term business, option quantities can be

traded if the intention is to secure additional quan-

tities, while wishing to wait and see how markets

and prices develop.

One feature of spot transactions is that, when the

market situation is tight, mark-ups are charged

on long-term contract prices. Conversely, when

the market situation eases, price reductions are

allowed. Hence, the spot prices in buyers' markets,

such as those that existed in the early 90s and after

* 6000 Kcal/kg NCV

Synchronous price developments for steam coals in the Atlantic and Pacific

0

20

40

60

80

in USD/t cif*

1/03 1/067/03 7/06 1/071/04 7/04 1/05 7/05

MCIS NWEMCIS Pacific

Source: McCloskey Coal Information Services

World trade



40

the mid-90s, were generally below long-term con-

tract prices. Another characteristic of spot prices is

that they have an impact on the contract prices of

future deliveries, for which they perform a marker

function.

Spot deals are no longer arranged and handled

exclusively between producers or dealers and con-

sumers in the traditional manner. In the case of

steam coal, these functions are increasingly being

performed by well-established trading platforms,

commodity markets and the brokers who work

around them.

Long-term contracts were once concluded for peri-

ods of up to 10 years directly between producer

and final consumer. They defined the annual quan-

tities to be purchased, including buyer and seller

options, as well as the fixed prices for the current

year. The annual price negotiation had to consider

any cost rises that had occurred in the meantime

– a practice that had mostly discontinued by the

1980s. The contract year, in this respect, was the

calendar year or, in East Asia, often the Japanese

fiscal year (1 April to 31 March). Today, long-term

contracts are encountered, if at all, only in domestic

markets, e.g. for supplies to near-mine power plants

or steel mills, or where long-term mutual depen-

dencies exist between producer and consumer.

On the world market, by contrast, the character

of long-term contracts has changed considerably

under the growing pressure of spot transactions,

especially for steam coal. Today, their terms rarely

go beyond five years, and they are merely used to

underpin long-term cooperation between the con-

tracting parties, with selling or purchasing rights

for specific contract quantities (including buyer

options), assuming a purchase price is agreed. On

the basis of the current spot price, the contract-

ing partners submit their offers for a quarter and,

where no agreement comes about, the supply

envisaged for that quarter ceases to apply. In East

Asia, it is true, there are still annual contract or

marker prices, but with a steep fall in the number

of deals, above all for steam coals.

One new variant for long-term pricing is that

futures are now being offered by trading platforms

and commodity markets for spot quantities. These

prices can be agreed in advance.

CO² price developments in der EU

/t CO 2

EUA 2008EUA 2007

35

30

25

20

15

10

5

0

Nov.03

Mar.04

Jul.04

Nov.04

Mar.05

Jul.05

Nov.05

Mar.06

Jul.06

Nov.06

Mar.07

Jul.07

Source: RWE Trading


41

In physical procurements, account must be taken of

the lead times between contracting and delivery of

coal to the power plant. The Table shows some lead

times for the German market.

Influence of electricity markets

As of late, electricity markets in Europe, the USA

and the Far East have undergone radical change.

Liberalization, deregulation and the associated

abandoning of monopoly supply regions have seen

the collapse of traditional market structures and

the launch of free competition among power pro-

ducers. What matters for the power suppliers now

is that they offer competitive electricity prices by

making optimal use of their own power plant fleet

or purchase electricity from elsewhere to underpin

or extend their market share. This is forcing power

plant operators to reduce their fuel costs, which is

true especially for plants today whose primary fuel

supply is imported coal with its high transport costs.

They try to pass these competitive pressures on

to coal suppliers. This pressure exists in particular

when it is the marginal costs of power production in

the mid-merit load that determine power prices.

Decisions to build new hard coal-fired power plants

are much riskier in liberalized and, hence, short-term

energy markets than in the case of demarcated sup-

ply regions with statutory supply duties. Coal-fired

power plants are investment goods that are only

able to earn their capital costs across very long

amortization periods: 20 or more years are needed

to obtain a reasonable ROI. Thereafter, it is true,

they usually have a "golden end", unless technical

innovation or new requirements, e.g., in environ-

mental protection, put a premature end to these

plants. Otherwise, service lives of 35 - 40 years or

more are nothing unusual.

By contrast, gas-fired power plants can be erected

more quickly than coal-based plants and require

only half the investment needed for a hard coal-

fired unit. Coal can be competitive only if operat-

ing costs are low, hence fuel costs must be low. So

overseas coal producers must quote export prices

that offset the handling and combustion advan-

tages of natural gas and its lower CO2 cost in terms

of certificates required. On the other hand, it must

not be forgotten that, outside EU-27, the world

steam coal market need not bear any CO2 certificate

costs at all. In the case of a seller’s market, interna-

tional coal producers will channel their products to

those markets where they obtain the best net-back

price, free mine, which may be markets outside the

EU-27. What is more, a decision on the erection of

a hard coal-fired power plant presumes electricity

prices that permit long-term full cost coverage. This

demands, especially in Germany, a stable framework

for the use of coal-fired power plants. Besides the

prices of gas, coal and CO2 certificates, the long-

term availability and security of supply of coal and

gas play a big part in investment decisions.

Pinpointed subsidies for renewables-based and dis-

tributed generation are disrupting the development

of a market economy-oriented electricity supply

and, hence, the emergence of an optimized power

plant fleet, including hard coal plants.

Lead times in coal logistics for imports to Germany (in weeks)

Australia

Indonesia/China

South Africa

Colombia

Poland/Russia

Source: Kopal, Christoph; Zeitschrift für Energiewirtschaft, No 1, 2007

13

13

10

9

8

1

1

1

1

1

6

6

3

2

1

4

4

4

4

4

2

2

2

2

2

Reporting period Loading time window Sea trip Domestic transport Total

World trade



42

Decisions to construct coal-fired power plants and

the conditions for using coal are less complex in

East Asian industrialized countries. There, imported

coal still enjoys a considerable price advantage rela-

tive to imported liquefied natural gas. Moreover,

the preconditions are not in place there – as they

are in Europe, say – for the creation of a joint and

integrated gas grid, since Japan, Taiwan and South

Korea will remain stand-alone markets for the fore-

seeable future.

Risk management

In view of the more complex conditions applying

to hard coal trading, increasing use is being made

in coal procurement, in securing sea freight, and

in exchanging currencies, of the risk management

techniques that have been used for some time now

in other commodity markets.

Hedging deals designed to avoid the financial

losses associated with supply and charter contracts

now help underpin the traditional coal and ocean

freight trade. In fact, they often enable such trans-

actions to be entered into in the first place and

help safeguard them. Here, the players involved

think less in physical than in paper terms. Since

volatility in both coal trade and the freight busi-

ness has risen significantly, the prerequisites have

now been created, not only to strike additional

deals using speculative tools like swaps, futures

or options, but also to handle a growing number

of transactions that previously would have been

agreed under the terms of negotiated contracts.

The biggest obstacle to an innovative coal trade in

the past was the heterogeneous quality of coal as

a commodity. Unlike other raw materials markets

where risk management methods, standardized

contract forms and forward trading are already the

rule, such activities are still hampered in the coal

sector by the existence of a large number of mea-

surable quality parameters and the different ways

these are assessed by customers, especially in the

case of coking coal.

Despite this, steam coal is now well on track to

become an accepted and heavily traded commod-

Hard coal prices for the next tradable calendar year each

2004 2005 2006 2007

USD/t

Source: RWE Trading


43

ity worldwide, both on commodity markets and

international trading platforms. The physical pre-

conditions for this have been created recently by a

number of ”coal indices“ that precisely define and

standardize provenance, quality, place of delivery

and conditions; they are replacing the subjective

assessments and interpretations of market partici-

pants that were usual in the past. Among these

coal indices we currently find the following:

TFS API #2

NAR CIF ARA

Basis: South African coal ex Richards Bay, capesize

freight to ARA ports, with a net calorific value of

6,000 kcal.

TFS API #4

NAR FOB RBCT

Basis: South African coal fob Richards Bay, with a

net calorific value of 6,000 kcal.

Mc Closkey publishes two price indices,

■ Northwest European ”steam coal marker“

■ Asian ”marker price“

which are based on fob prices Richards Bay (South

Africa) or Newcastle (Australia), likewise for stan-

dard quality 6,000 kcal/kg, and are partly employed

as a basis for price estimates. Recently, the EU has

also been publishing average import prices again

for steam coal and coking coal. Besides these indi-

ces, there are also special quotations for US coal at

the NYMEX and for the Powder River Basin.

Unlike conventional ”physical“ coal trade with con-

tracts and options at fixed prices, the coal indices

now permit trade on commodity markets and trad-

ing platforms involving coal derivatives, i.e. paper

transactions with real-time, over-the-counter (OTC),

bid-offer prices. Here, deals on a swap, futures and

options basis are possible.

The volume of the paper trade has increased expo-

nentially since 2000 and is now about 2.5 times

greater than the physical world trade in steam coal.

The focus of the paper trade is on the Atlantic

region. It is only a question of time, however,

before the Pacific market moves in the same direc-

tion.

The OTC prices on the Atlantic market, which are

published at least on a weekly or monthly basis,

have created an unheard-of transparency on the

world hard coal market, and now largely determine

the spot trade in steam coal and its price trends

on the Atlantic and, increasingly, on the Pacific

market. For medium-term deliveries the price to

be paid is increasingly established on the basis of

specific indices, with price determinants fixed upon

contracting. Also, market players have the option

of hedging their coal purchases to manage future

price risks.

Such deals are handled by broker firms (e.g. TFS)

or trading platforms like the digital platform glo-

balCOAL set up in 2000 by coal producers and

consumers. As an ideal medium, Internet trade

offers ready access to updated market data with

Hard-coal trade

Physical trade

Options Futures

Coal derivates

OptionsSwaps


World trade



44

fast response times. It has certainly speeded up

commodity trade in coal and ensured a quick accep-

tance by traders. The number of companies in the

coal business has risen in recent years.

On the coal-derivatives market, a number of compa-

nies are active, and they can be broken down into

three groups:

■ power producers

■ raw-material companies/traders

■ banks

The most important are set forth in the following

overview.

While coal derivatives were traded mainly on the

OTC market from 2000 – 2005, EEX (Leipzig) and

ICE-Futures (Atlanta) have been offering a stock

Steam coal trade volume

Maritime derivative, 2000 - 2006

Source: Perret Associates

0

200

400

600

800

1000

1200

1400

2000 2001 2002 2003 2004 2005 2006

Mt

fob Newcastle

API#4

API#2

World trade

GFI

ICAP

Spectron

TFS

Tullet Prebon

globalCOAL

London Commodity Brokers

London

London

London

London

London

London

London

Singapore

Singapore

Singapore

Singapore

Singapore

Singapore

Singapore

5-10

5-10

<5

<5

5

5-10

<5

yes

yes

yes

yes

yes

yes

no

yes

no

no

no

no

yes

yes

2000

2001

1999

1999

2007

2001

2005

Main registered office

Other coal offices

Number of persons

Papertrade

Year-Start ofcoal activities

Physicaltrade

Overview of broker companies in coal business

Source: Perret Associates


45

market-based trading platform since 2006. This

trade is in its infancy and in 2006, both exchanges

reached a mere 1 % of the total market for coal

derivatives or 1.4 Bt.

Perspectives

Developments in the world coal market in recent

years exceeded all forecasts, and the first six

months of 2007 show above-average growth.

Demand

The steam coal market grew in the last two years

(2004 - 2006) by 90 Mt or 18 %. This high growth

was the result of dynamic expansion in the Pacific

region and economy- and weather-related growth in

the Atlantic area. High gas prices, too, favoured the

consumption of world-market coal.

The main driver for growth in the coming years is

still expected to be the Asian region. While Japan,

South Korea and Taiwan now report moderate

growth, China's and India's demand and that of

the other Asian emerging markets show a stronger

increase. Specifically, developments in China, with

growing imports, coupled with falling exports, are

a challenge to the international market. China's

steam coal imports exceeded its exports for the

first time in 1H07.

Since coal continues to be a cheaper source of

energy – even at today’s higher price level – than

LNG, and since no account need be taken of CO2

certificates in the Pacific region, it is mainly coal-

based power plants that are being built for growing

domestic electricity needs. Large sections of Asia's

populations do not yet have access to electricity.

In the Atlantic region, a moderate consumption

trend may be expected. The weak growth rates in

gross national product, along with higher energy

efficiency, especially in the EU-27 region, mean

that only slight growth in coal consumption should

be expected. In the long term, South America and

Africa will grow, since here too, large sections of

the population have no access to electricity.

In Europe, the demand for coal from the world coal

market will rise because of declining domestic hard

coal production. In addition, conversion from natu-

ral gas to coal is underway in places, e.g. in Italy.

In the USA, a trend toward increased imports must

be expected for the coastal regions, since output

from the Appalachian mining areas is in decline.

Beyond that, many Central and South American

countries are increasing their steam coal imports,

although from a low base.

After a consolidation phase, the coking coal market

is likely to return to growth. So far, China has been

largely self-sufficient in coking coal, so that the

demand for coking coal on the world market has

been mainly defined by the economic situation of

steel producers in North and South America, the

Asian industrialized countries and Europe. If China,

too, were to rely more heavily on the world market,

growth could accelerate, although the country is

currently increasing its coke exports.

Overall, the preconditions for further growth on

the world coal market, viewed against the back-

ground of a prospering world economy, must be

described as very good. If the 6 – 8 % growth rates

of recent years continue, demand could top 1 Bt

in the seaborne world hard coal market as early as

2010 – 2012. Relevant forecasts, like the IEA World

Energy Outlook 2006 and the 2007 International

Energy Outlook from the DOE/EIA, are assuming

more subdued growth rates, although the IEA will

Suppliers

Constellation

EDF

E.ON

Essent

Nuon

RWE

Sempra

Vattenfall

Source: Perret Associates, Brokers, Principals

BHP Billiton

Cargill

Glencore

Koch Metals

Louis Dreyfus

Noble

Peabody

Banks

Barcap

BNP Paribas

Deutsche Bank

Goldman Sachs

Macquarie Bank

Merrill Lynch

Morgan Stanley

Société Générale

Standard Bank

Providers/traders

Important companies on the coal-derivates market



46

interest for the market in China's south-west. South

Africa has been a swing supplier for India in recent

years.

In addition to supplying the Pacific market, Pacific

producers – above all Indonesia – are delivering

larger amounts of low-sulphur coal to the Atlan-

tic region. The latter is supplied by South Africa,

Colombia and Russia. Smaller exporters are Poland,

Venezuela, the USA and Spitsbergen. Russia was

able to increase its exports in recent years by

6 – 8 Mt each year and is likely to go on doing so.

Colombia is increasing its output and could, from

2010 – 2012 on, reach an export volume of

100 Mt/a. South Africa is currently extending its

Richards Bay export terminal from 72 Mt/a to

91 Mt/a. After a phase of stagnation, South Africa's

exports ought to rise again. The smaller exporting

countries contribute about 20 – 25 Mt/a of supplies

to the Atlantic market. In this respect, decreases

and increases balance out and their aggregate vol-

ume is unlikely to change in the medium term.

consider a high-growth scenario in the 2007 edition

of its outlook.

Supply

Capacity utilization in the export mines for steam

coal has increased in recent years, and this trend is

continuing in 2007. This has tended to be accompa-

nied by price swings that have been observed more

frequently of late.

The Pacific steam coal market is mainly supplied

by Indonesia and Australia. Smaller suppliers are

Vietnam, Russia and China. Between them, Indone-

sia and Vietnam alone expanded their exports by a

good 80 Mt in 2005/06.

Australia and Indonesia have further expansion po-

tential. Australia in particular is likely to extend its

position again after overcoming its infrastructure

problems in domestic transport and port handling.

Russia, too, is planning an expansion of its Far-East

activities. To date, Vietnam has been increasing its

exports year after year, although this is mainly of

World trade in hard coals [in Mtce]

Source: DOE/EIA, International Energy Outlook 2007, Washington 2007, Reference Scenario

202

661

238

795

283

953

557

670

459

2005 2015 2030

Coking coal

Steam coal


47

Overall, global coking coal capacities, above all in

Australia, are not yet fully utilized. This is due, inter

alia, to bottlenecks in the infrastructure, although

Australia and Canada are further extending their

infrastructure and increasing export capacities.

For this purpose, new projects are being planned

by Indonesia, Mozambique, Colombia and Rus-

sia, so that the range of exporting countries is

likely to broaden in the medium term. Until China

makes more use of the world market, the supply

of coking coal is likely to be completely sufficient

in the medium and long term, since the world's

steel industry – without China – is growing at only a

moderate pace.

Upshot

The steep growth in the world coal market during

recent years has led to high utilization rates above

all at steam coal mines and in the infrastructure

(inland transport and shipping ports) to move

steam coal. This is driving up prices.

Despite what are in places hefty rises in produc-

tion costs, the current price level ought to provide

renewed incentives to further expand capacities.

To that extent, a "liquid" world trade in steam and

coking coals is still expected in the medium term.

According to long-term forecasts of the IEA (Paris)

and EIA (Washington), world trade is set to go

on rising until 2030, though more slowly than in

recent years. The IEA, for example, sees a 3 %

annual growth rate in the long term, and the EIA

even a mere 1.5 %. In the recent past, however,

events have repeatedly surpassed forecasts.

World trade



48

Australia

General

Australia is a democratically governed federa-

tion within the Commonwealth of Nations with

firmly established legal structures. It is among

the world‘s most important producers and export-

ers of minerals and energy raw materials. In view

of the vast undeveloped reserves of this sparsely

populated continent and the strong rise in demand

among emerging Asian markets, the Australian

government is promoting the development of

mining activities and the exploration of further

deposits. The Department of Industry, Tourism and

Re sources anticipates much higher exports of coal,

iron ore, gold, aluminium and nickel. Coal is already

the country’s leading export by tonnage and by

value.

Reserves/qualities

According to figures supplied by BGR, Australia has

hard coal resources of 153 Bt and hard coal reserves

of 41 Bt, i.e. a total potential of 194 Bt. t. The most

important coal reserves at present are located in

Coal-exporting countries


49

to growing needs at home in the medium to long

term.

It remains to be seen whether coal-to-liquid (CTL)

projects will be developed in the medium to long

term. However, these would use lignite or other

coal deposits not destined for the export market.

Export-oriented mining capacities were further

expanded in 2006.

Export-oriented mining capacities

2005 2006 Increase Mt Mt Mt

Coking coal

Steam coal

Total

151

130

281

162

135

297

+11

+5

+16

With an export volume of 237 Mt, 79 % of capacity

was utilized in 2006. Hence, there is a total capac-

ity reserve of 61 Mt/a in hard coal production.

For steam coal alone, however, capacity utilization

is 84 % and the capacity reserve is 21 Mt/a.

As for further developments, a number of projects

have been reported. The extent and speed of any

increase in output is said to be less a question of

identifying low-cost reserves and financing mines,

than of extensions to the existing rail and port

infrastructure. The Australian government in Can-

berra has made it clear that any extensions to the

infrastructure are largely a matter for the country's

coal sector and of the regions if they wish to exploit

the opportunities offered by the world market.

The capacity of currently planned projects for

steam coal could bring total capacity to about 172

Mt/a over the next five years . Of this total, only a

part is likely to be implemented, however.

Of the total production, 24 % is extracted in under-

ground mining operations and 76 % in opencast

mines. In all, some 100 large and small hard coal

mines are operated, including 51 in NSW, 42 in

QLD and six in South Australia, Western Australia

and Tasmania. Of the mines, 37 are underground

Coal-exporting countries • Australia

New South Wales (NSW) and Queensland (QLD).

The proven reserves in NSW total some 19 Bt that

can be extracted by opencast and underground

mining in roughly equal proportions. The proven

reserves in QLD total some 33 Bt, with approxi-

mately 55 % accessible by opencast mining, and

45 % by underground mining. Australia at present

puts a higher figure on them.

Altogether, the reserves in these two states are

some 52 Bt. With raw hard coal mining now running

at some 400 Mt/a, the reserve to production ratio,

at current levels of output, is approximately 130

years.

Chief mining areas in New South Wales include

the Hunter Valley and Newcastle areas with their

highly volatile (> 30 %) steam and soft coking coals.

To this must be added the southern coalfield with

low-volatile (22 - 25 %) coking and the western

and Gunnedah coalfields with highly volatile steam

coal. In Queensland, the Bowen Basin with low- to

medium-volatile (18 - 28 %) coking and steam coal,

but also anthracitic (12 - 18 %) and semi-soft coking

coal, is of outstanding importance. On top of this

come the Moreton and Tarong basins with highly

volatile steam coal. Australian hard coal is mainly

high in ash and requires washing. It is usually low

in sulphur (< 1.0 %).

Mining development

Scaleable hard coal output in Australia reached

some 314 Mt in 2006, little changed from 2005.

The two main extraction regions are situated on the

east coast of Australia. In 2006, Queensland mined

177 Mt, and New South-Wales 128 Mt. Besides

the East-australian coal production in the state of

Victoria around 70 Mt/a of lignite were produced

(Murray Basin). 9 mt/a of bituminous coal were pro-

duced in West-Australia and in Tasmania.

Of the hard coal output, 237 Mt was exported;

about 54 Mt is consumed domestically.

Future growth in domestic consumption is likely

to be moderate owing to the high lignite output,

so Australia's export potential should not fall due



50

and 62 opencast. The share of opencast mines has

steadily increased in recent years.

In underground operations, the share mined using

longwalls fell 10 % from 77 Mt to 70 Mt between

2001/02 and 2005/06, despite the productivity

benefits of longwall mining.

In opencast pits, with depths down to 70 m,

both draglines (one to two seams) and trucks and

shovels (several seams) are used. In underground

mines, which can reach depths of 200 m, high-

performance longwalling is preferred over bord and

pillar mining, but both methods are employed.

At end-2006, Australia‘s hard coal-mining opera-

tions employed a workforce of 34,000, i.e. having

risen by some 10,000 employees from 24,000 at

the end of 2004. This also has an adverse impact

on productivity.

Consolidation in Australia‘s mining sector is ongo-

ing. The four biggest coal producers mine and

export over 80 % of Australia‘s hard coal. The Table

shows the four major Australian producers and

exporters:

Australia's biggest hard coal producers

No. of Output1) ExportsCompany mines 2006 2006 Mt Mt

BHP-Billiton Ltd. 16 45 40

Rio Tinto Ltd. 8 37 31

Xstrata PLC 21 54 40

Anglo Coal Australia 7 31 20Pty Ltd

Total 167 131

% of 53 55total output, Australia 2006 314 237

1) Output pro rataSource: Australian Coal Report

These four companies produce 167 Mt of Australia‘s

entire hard coal. In 2006, Peabody acquired Excel-

Coal for AUD 2 bn, while Curd bought the mining

activities of AMCI for AUD 838 mill. Chinese com-

panies, too, are increasingly interested in Australian

coking coal pits and are acquiring smaller holdings.

Productivity in Australia‘s pits, measured in market-

able tonnes per man-year, is very high, although

showing a decline in recent years. The following

values are for 2006:

New South Wales

Queensland

Opencast

14,000 t

10,000 t

Underground

8,000 t

5,000 t

Cost developments

Australia is home to some of the lowest-cost hard

coal producers and exporters in the world. In gen-

eral, the seams are in relatively undisturbed depos-

its in geological terms, and most can be mined in

opencast or relatively shallow underground opera-

tions. The distance to ports is 80 – 280 km in New

South Wales, and 130 – 380 km in Queensland. To

that extent, Australia has the prerequisites for hold-

ing and extending its export position in the long

term.

Despite this favourable position, costs will rise in

future owing to

■ longer distances to the ports,

■ more unfavourable overburden-to-coal ratios

at opencast mines,

■ a higher ash content, and

■ higher royalties if prices rise since these are

now levied as a percentage of sales value.

In some locations, higher costs for water supplies

must also be factored in.

Since 2004, substantial cost hikes have been noted.

Costs for fuels, lubricants, explosives and spare

parts, especially for opencast mines, have risen

significantly. Besides the strong growth in world

coal trade, iron-ore production and trade are also

booming, so plant manufacturers and suppliers,

especially of trucks and shovels, are working to

capacity and can push through price increases. At

the same time, the bargaining power of unions has


51

led to higher labour costs. The costs of steam coal

are assessed as follows (fob loading port):

Steam coals

Fob costs2004/05

USD/t 2006/07

USD/t

22-38 30-54

The costs differ between underground and open-

cast mining and between coking coals and steam

coals, and can only be given in broad ranges.

Steam coals

Queensland

New South Wales

Coking coal

Queensland

New South Wales

14-42

12-38

23-35

25-40

29-43

26-52

26-36

29-35

Opencast

USD/t

Underground

USD/t

Due to the weakening US dollar, Australia‘s mining

operations came under considerable pressure dur-

ing 2005 and 2006, since fewer Australian dollars

were earned for constant US dollar export values.

Transport costs, depending on distance, range

between USD 4/t and USD 14/t; port handling

costs are between USD 2/t and USD 3/t.

Infrastructure

The recent strong growth in the world coal market

and the special demands on Australia as a coking

coal exporter have led to bottlenecks at Australia's

ports, and its railway system is increasingly choked.

There is a lack of wagons and locomotives.

Queensland‘s hard coal mining operations are

connected via a 2,000 km long railway network to

the export seaports. Five special lines connect 40

mines to the ports. New South Wales has two coal

lines, totalling 1,050 km and with 26 loading sta-

tions.

Australia has a number of coal exporting ports in

NSW and QLD. In 2006, exports of 237 Mt were

handled by the following ports:

Throughout 2005, 2006 and 2007 queues have

been witnessed off Australia's ports. At peak times

in 2007, up to 200 waiting ships have incurred sig-

nificant demurrage charges.

However, a massive capacity extension programme

is underway at nearly all ports, and this should

bring some relief in 2008/09, as should better port

management.

Extension plans for Australian ports [Mt]

Port

Newcastle

Port Kembla

Dalrymple Bay

Hay Point

Gladstone

Abbot Point

Brisbane

Other

Total

89.0

14.0

60.0

40.0

45.0

15.0

5.0

-

268.0

105.0

14.0

68.0

44.0

68.0

21.0

5.0

-

325.0

130.0

14.0

85.0

57.0

88.0

50.0

5.0

30.0

459.0

Current capacity (2006)

Medium-termextensions

Short-termincrease

Coal-exporting countries • Australia

NWS-ports

Newcastle

Port Kembla

Total NWS

Queensland ports

Dalrymple Bay

Hay Point

Gladstone

Abbot Point

Brisbane

Total Queensland

Total

80,327

9,208

89,535

50,665

33,496

42,745

12,968

4,296

144,170

233,705

79,826

10,169

89,995

51.170

31,953

49,508

11,208

3,931

147,770

237,765

Export ports in Australia

Exports 20051,000 t

Exports 20061,000 t



52

Australia‘s state-owned railways are also supporting

growth of the coal supply chain. Queensland Rail,

which operates the coal railways in Queensland,

has announced a major programme of extensions

that provides for new connecting lines, a doubling

of the tracks in certain sections, and the purchase

of more powerful locomotives in order to increase

transport efficiency and flexibility.

Exports

Australia has steadily expanded its exports in recent

years to the present 237 Mt/a. Steam coal exports

rose to 114 Mt/a, and coking coal exports to

123 Mt/a. Specifically in the case of coking coal, Aus-

tralia, with a market share of 66 %, has achieved an

outstanding position and will be able to maintain this

in the long term thanks to favourable mining costs

and large reserves. For quality reasons, Australia‘s

coking coals are exported to all countries around the

world that produce pig iron.

Australian steam coal exporters are focussed on

the Asian market and, due to the long sea routes

involved, can only compete with Colombian and

South African coal in the Atlantic market when freight

rates are low, certainly much lower than seen today.

In coking coals, Australia is the price leader and, in

this respect, the BHP/Mitsubishi Alliance is domi-

nant. Due to tight supply at the turn of 2005 and into

2006, it was possible to boost the world market price

for hard coking coal to USD 125/t fob. The smaller

exporting countries followed suit and demanded

appropiate price adjustments. Since then, prices have

fallen to USD 98/t fob in 2006/07.

In steam coals, Australia faces broader competition

and has stronger rivals, above all in Asia with China,

Indonesia and, increasingly, Vietnam and Russia.

Outlook

Australia is facing the challenges of a growing world

market for coal. Thanks to the strong demand for cok-

ing coal, Australia will come into its own, especially

in the case of hard coking coal. It has the potential

to increase production and infrastructure capacity to

meet most demand forecasts. In the long term, Aus-

tralia will be the leading hard coal exporting nation

and could expand its exports to 400 Mt/a.

Export developments, Australia, 2004 - 2006

2004 2005 2006 Mt Mt Mt

Hard coal output

Hard coal exports

Steam coal Coking coal

Export rate, in %

Chief import countries/regions

EU-15/after 2004: EU-25

Other Europ. countries*

Japan

South Korea

Taiwan

India

*incl neighbouring Mediterranean countries

297

225

108117

76

27.2

1.9

101.9

30.1

18.8

16.6

306

234

110124

76

26.3

1.2

104.8

30.2

21.9

19.0

314

237

114123

75

26.7

3.1

103.3

23.6

22.7

18.9


53

Indonesia

General

The most dynamic player on the international coal

stage is Indonesia. This, the world‘s fourth most

populous nation is among the growth regions, even

if its pace of growth has significantly slackened.

Due to inadequate mining law reforms, and ques-

tionable privatization measures (“Indonesianiza-

tion” of inward investment), foreign investors cur-

rently favour China. To that extent, Indonesia suf-

fers from a lack of capital for long-term investment

in particular. Nevertheless, Indonesia's Mining Act

is shortly to come into force and is expected to give

future investors more certainty. So far, however,

there have been repeated postponements.

The start of coal mining in Indonesia dates back

to the early 20th century, when most of the output

was used by the steam vessels operated in coastal

shipping. Modern coal mining did not get under-

way until the 1980s, since when it has been stead-

ily expanded and increasingly directed into exports.

Coal mining has evolved on “greenfield” sites

under the control of what used to be the Ministry

of Mining and Energy or its Directorate-General for

Mining. By 1999, state-owned coal reserves had

been offered in three tranches for international

development under a bidding procedure, the first

tranche in 1981 with 11 “Coal Contracts of Work”

(CCOWs), the second in 1993 with 18, and the third

in 1997 with 114. The “contractors” undertake to

prospect for and explore the coal deposits located

in their concession area, possibly to engage in

mining development and, in return, are granted

exclusive rights for a term of 30 years subject to

a royalty (free mine) of 13.5 % of proceeds. The

contractors are also obligated to offer Indonesian

investors at least 51 % of the mining stock after a

10 - year operating period. In 2001, this provision

affected two foreign investors (Rio Tinto/BP and

BHP-Billiton).

Most of the companies are based on generation-I

CCOWs, representing over 140 Mt, generation-

Coal-exporting countries • Indonesia



54

II CCOWs with about 50 Mt, and generation-III

CCOWs with a mere 10 Mt.

The contracts have been implemented as follows so

far (Department of Energy and Mineral Resources):

Active Completed Total

CCOW 1

CCOW 2

CCOW 3

Total

10

12

60

82

1

6

54

61

11

18

114

143

Indonesia‘s coal policy, for the time being at least,

prevents the international move towards consolida-

tion from spreading to Indonesia. To that extent,

Indonesia‘s hard coal mining sector is an impor-

tant element for healthy competition on the world

steam coal market.

Besides foreign and local investors, the state-

owned P.T. Tambang Batubara Bukit Asam has

developed production on Sumatra, mostly for

domestic consumption. This company is to be pri-

vatized in the long term.

A fourth group of companies has recently been

granted so-called mining rights (MRs). These are

no longer issued by the mining ministry or its

directorate-general, but by the provincial authori-

ties, which have been given the authority to do so.

They are in charge of mining supervision over the

MR operating units and collect royalties. These are

smaller Indonesian companies who receive MRs in

what are sometimes as-yet undeveloped regions.

A total of some 442 MRs have been granted. Of

these, 169 firms have production status, and 273

enterprises have not yet made use of their MRs.

Some of these smaller producers sell their output

to the big export players. A total of 525 companies

are actively or inactively involved in coal mining.

Reserves/qualities

According to the most recent official Indonesian

data , resources amount to some 58 Bt, so that

they are estimated to be 20 Bt higher than the fig-

ures given in the last issue of this study. Reserves

amount to 7 Bt and are mostly located in the fol-

lowing provinces:

Province

South Sumatra

East Kalimantan

South Kalimantan

Other

Total

22

20

9

7

58

2.6

2.4

1.8

0.2

7

ResourcesBt

ReservesBt

The qualities of the resources can be broken down

into

■ anthracite 2.0 %

■ hard coal 49.6 %

■ lignite 48.4 %

It is especially the hard coal deposits that can be

considered for exports, though most these coals

are classified as sub-bituminous coals.

In quality terms, Indonesian coals are generally

low in ash and sulphur, but, on account of their low

rank, they are high in volatiles and moisture. All

the same, the raw coal does not generally require

preparation, and simple crushing and screening suf-

fice to make a marketable product. The coal has no,

or only minimal, coking properties, so that – with

few exceptions – it can only be used as steam coal.

Only some higher ranking types are also suitable

as PCI coal. The qualities for export generally have

a 37 - 47 % volatile content, with 1 - 10 % ash and

typically 15 - 22 % moisture. The sulphur content is

below 1 % and, in extreme cases, as low as 0.1 %.

The high moisture translates into a relatively low

calorific value, often below 6,000 kcal/kg (as

received). Impediment to the coal‘s use in power

plants are its high grinding hardness of 40 - 50 HGI

and a certain propensity for spontaneous ignition.

Mining development

Indonesia's coal mining – despite many pessimistic

assessments – expanded again in 2006 and, accord-

ing to official data, reached some 180 Mt (+ 37 Mt

compared with the previous year). To this must be


55

added output of 20 - 30 Mt not officially recorded;

some of this is bought by the big companies. This

is likely to put total output at 200 to 210 Mt, such

that output grew by 40 - 45 Mt or 25 % within the

space of one year.

Of the output, 171 Mt was exported and 42 Mt

went to domestic consumption, mainly for power

generation (30 Mt), the cement industry (6 Mt)

and other needs (6 Mt). Other unofficial estimates

speak of an export rate of between 155 and 165

Mt, and even 184 Mt in 2006.

Indonesia's output and, hence, exports, will tend

toward lower calorific values in the medium to long

term. Of Indonesia's total production of 200 to

210 Mt,

■ 185 - 190 Mt is mined in Kalimantan and

■ 15 - 20 Mt in Sumatra.

Sumatra's output mainly meets domestic consump-

tion, since the deposits are located close to the

populations centres of Java.

Exports now total 87 % of production. In princi-

ple, all of Indonesia's coal deposits are favourably

located. An increase in production to 300 Mt is

planned for the medium term.

Since Indonesia's oil and gas reserves are declin-

ing, efforts are being directed toward making more

use of coal in electricity generation; on the one

hand, by building new coal-fired power plants and,

on the other, by switching oil- and gas-fired power

stations to coal. To that extent, higher domestic

demand is expected in the medium to long term.

While most exports have come from Kalimantan

to date, little use has been made until now of

Sumatra's coal reserves, which are located close

to Indonesia's consumption centres and were

mostly developed to meet Indonesia's own needs.

Kalimantan coal will continue to be available for

exports in the long term since Indonesia's own

requirements are unlikely to restrict exports over

the next 5 – 10 years.

Indonesia is also building its first plant to upgrade

low-calorific value coal. The partners White Energy

and Bayan Group are planning a 5-Mt/a project.

The calorific values of the briquettes produced are

raised from 4,100 – 4,750 kcal/kg to 5,500 – 6,100

kcal/kg by the process.

Announcements suggest that the total output from

new steam coal projects could reach 38 Mt/a within

the next 5 years. In addition to the expansion of

steam coal production, a number of coking coal

projects are being vetted in east and central Kali-

mantan.

Six major companies produce 122 Mt, i.e. some 59

% of the total output of 205 Mt.

Indonesia's biggest hard coal producers

PT Adaro

PT Kaltim Prima

PT Kideco Jaya Agung

PT Arutmin

PT Berau Coal (KKS)

PT Indomico Mandiri

Total

% of

Total ouput, Indonesia

Source: Indonesian Coal Report

33.7

34.1

18.1

15.8

10.6

9.2

121.5

59

205.0

34.3

25.1

18.9

15.6

10.6

10.6

115.1

67

171.0

Output2006

Mt

Exports2006

Mt

In the development of Indonesian coal mining, two

different concepts are pursued by the contractors.

The conventional approach – as in the case of Kal-

tim Prima – involves all investment being borne by

the mining firm with production conducted under

its own management. An alternative approach – as

adopted by BHP-Billiton/Arutmin – provides for

investment only in the mine‘s infrastructure, e.g.,

road access, power supply, crushing and screen-

ing plant and loading equipment, whereas actual

extraction, including waste removal and restoration

of the terrain as well as coal transportation (by road

or inland waterway) is outsourced to companies

with their own personnel under a contracted price

per tonne of coal or cubic metre of waste. Coal is

almost entirely extracted in opencast operations




56

and in mine sizes of 2 - 15 Mt annually. However,

there are also numerous smaller mines and coop-

eratives with an annual output of 0.5 - 1.0 Mt

which sell to the big producers or exporters. Waste

removal and coal extraction are mainly by truck and

shovel operations.

There are no official productivity figures, although

estimates can be made using the data from several

leading producers. Most of the extraction at the

exporting mines is by efficient opencast methods,

and productivity per man-year is likely to be in the

range of 6,000 - 12,000 t. The bigger opencast

mines probably achieve even higher productivity.

Cost developments

Indonesia is among the lowest-cost exporting

countries, since the coal is extracted in opencast

mines only.

The distances to the coast are 50 – 100 km. To date,

only easily accessible deposits have been mined,

the coal being transported by river using barges or

by truck to the coastal loading points.

Higher output from the reserves located further

inland will require the build-up of a railway infra-

structure in the medium to long term, some of

which is in fact already being planned.

As in almost all hard coal producing regions, Indo-

nesia has tackled the best and most accessible

reserves first.

Cost inflation has hit Indonesia's coal producers, as

elsewhere, and in the medium to long term, costs

will continue to rise because of:

■ longer distances to the coast,

■ worsening overburden-to-coal ratio,

■ poorer qualities (lower calorific value),

■ thinner seams.

In recent years (2001 – 2006), costs in Indone-

sia's pits soared 50 %. Since Indonesian mining is

largely based on the truck-and-shovel method, the

strong rise in fuel and tyre costs has hit it particu-

larly hard. What is more, fuel costs were subsidized

by the government until recently. Together with the

cessation of subsidies and the worldwide rise in

fuel costs, the latter increased by up to 250 %.

Against this backdrop of material cost inflation,

labour costs have risen year after year, although the

impact has not been so serious thanks to the low

share of labour costs in the cost structure.

The Indonesian currency is subject to a strong

inflation of 15 % year-to-year and is tending to

weaken against the US dollar. Although this pushed

up income in rupees, operating costs grew strongly

and pushed down profits. Similarly, imports of pit

equipment in USD became correspondingly more

expensive. The mining costs for Indonesian coal

range from USD 16/t to USD 33/t, free pit. While

domestic transport at USD 2.0 - 7.0/t is much lower

than in South Africa, expenditure for port handling

at USD 2.0 - 4.5/t is slightly higher. A significant

reason for low mining costs comes from the low

specific investment in the export capacities devel-

oped in the past decade, which, at USD 20 - 25/t

annual output, are among the lowest in the world,

being half those in South Africa, for instance.

Steam coal

Fob costs

18 - 37.5 20 - 44.5

2004/2005USD/t

2006/2007USD/t

In the medium to long term, Indonesia's coal min-

ing industry will be confronted with deteriorating

extraction conditions and a high dependence on

burgeoning fuel costs. On the other hand, there is

also considerable potential to rationalise the indus-

try. Especially among the big producers, expanding

production has led to falling costs per tonne.

In the long term, costs are likely to go on rising.

However, thanks to the favourable deposit condi-

tions, Indonesia should be able to hold its present

position on the world market for steam coal, and

perhaps even to extend it.


57

Infrastructure

On Kalimantan, Indonesia at present has six major

deep-water ports with an annual handling capac-

ity of 100 Mt, which allow the loading of 60,000

- 180,000 DWT vessels. In addition, there are ten

further coal terminals nation-wide (inter alia, Sama-

rinda and Palikpapan) with a total annual capacity

of 60 - 70 Mt and a depth that is usually suitable

for panamax sizes. Ports on Sumatra, also have

the capacity to handle coal. In addition, there are

a large number of offshore loading facilities for

smaller vessels.

Where there is a convenient river available, domes-

tic transport is by barge, ranging in size between

3,000 DWT and 12,000 DWT.

The range of loading facilities has encouraged the

strong development of exports. In the long term,

further growth will depend on developing local

infrastructure, railways in particular, since the only

coal reserves that have been exploited so far are

those that are either located close to the coast or

have good fresh-water links to the coast.

Export and port capacities, Indonesia

Adang Bay

Banjarmasin

Kotabaru

Pulau Laut

Tanjung Bara

Tarahan

Total

10 furthercoal-loading ports

20 offshoreloading facilities

Capacity, total1)

1) estimate

12

10

10

10

20

14

76

50

126

12

6

14

22

28

2

84

50

1341)

12

7

15

30

34

3

102

75

1771)

2004Mt

2005Mt

2006Mt

In Indonesia, there are no official plans for infra-

structure expansion, although Indonesian compa-

nies were flexible enough in 2006 to ship an extra

40 Mt. Indonesia's customer structure favours the

use of smaller ships (handysize), since many import-

ing countries in East Asia only have smaller ports

that cannot receive capesize or panamax ships.

In contrast, only capesize or panamax ships can

be considered for exports to Europe at competitive

freight rates. Overall, it should be possible to man-

age rising exports using the existing and gradually

expanding loading facilities.

Exports

Indonesia further extended its leading world mar-

ket position as an exporter of steam coal in 2006,

more than compensating for the decline in China's

exports. The focus of Indonesia's exports is on the

Asia Pacific market, but the quantities supplied

to European and American countries are steadily

growing.

Coal exports by markets

Pacific

Europe

USA

Total

91

12

3

106

110

15

4

129

141

25

5

171

2004Mt

2005Mt

2006Mt

The biggest single buyers are in Asia and, in 2006,

China showed high growth, importing 6 Mt. Of

Indonesia's output, an estimated 2 - 3 Mt reaches

the market as PCI coal.

Exports will thus go on evolving in an upward direc-

tion from the centre of export production in Kali-

mantan. Domestic demand, by contrast, is growing

only slowly since many power plant projects are

delayed.

Outlook

Indonesia's coal mining sector has continued its

dynamic development in recent years, exceed-

ing all forecasts, and has become established as

the world's most important steam coal exporter,

well ahead of Australia. In the medium term, an

increase in output to 280 Mt is planned, and to

370 Mt by 2023. For domestic demand, use of low-

calorific value coals is to be prioritized, so that, in




58

the medium and long term, Indonesia is likely to

remain an important exporter.

Export developments, Indonesia, 2004 - 2006

Hard coal output

Steam coal exports

Export rate, in %

Chief import

countries/regions

135

105

78

12.4

22.7

11.7

17.7

10.7

7.4

2004Mt

153

129

84

15.2

27.3

14.4

17.9

16.3

9.4

2005Mt

205

171

87

24.7

32.8

20.8

24.4

19.8

10.5

2006Mt

EU-15/after 2004: EU-25

Japan

South Korea

Taiwan

India

Hongkong


59

Russia

General

Russia‘s coal mining sector has undergone pro-

found structural change in recent years. In the peri-

od from 1993 to 2001, capacities of 173 Mt/a were

shut down, while new capacities of 57 Mt/a were

developed. The number of coal mining employees

fell during this period from around 800,000 to

250,000 today. This restructuring was underpinned

by a USD 1 bn loan from the World Bank. After a

significant drop in output, Russia‘s mining sector is

now back on a steady growth track.

Reserves/qualities

BGR puts Russia's hard coal resources at 2,662 Bt,

and its hard coal reserves at 70 Bt. This gives Rus-

sia, at 2,732 Bt, the biggest hard coal potential in

the world. Large sections of the deposits, located

in the Asian region, are yet to be explored (e.g.

Tunguska basin). Resources are distributed across

a total of six hard coal regions: Pechora/North,

Donetsk, Kuznetsk, Kansk Achinsk, the Far East and

the northeast. Their raw coals have average calo-

rific values of 4,900 - 5,700 kcal/kg (as received),

Urals Donetsk

Ust Luga

Murmansk

Vostochny

Moscow

Kuznetsk

Petchora

Vanino

Irkutsk Basin

TingusskyBasin South Yakutia Basin

(Far East)

Taymyr Basin

Zyryanka Basin

2,000 km

Coalfield

Port of shipment

an ash content of 17 – 25 % and a sulphur content

of 0.9 - 1.1 %. No details are available on the state

of the deposits, seam thicknesses or extraction con-

ditions in the coal-fields

Mining development

Russia was able to further increase its production in

2006 and reached about 309 Mt. Opencast extrac-

tion grew by 5 Mt to 200 Mt, and underground

production from 106 Mt to 109 Mt. Output can be

broken down as follows:

Coal-exporting countries • Russia

Output, Russia

Coking coal

Steam coal

• highly volatile coal

• low volatile coal

• anthracite

• lignite

Total

2005Mt

2006Mt

70

230

96

50

9

75

300

70

239

103

52

9

75

309



60

The focus of Russian hard coal mining is in the

Kemorovo region (Kuzbass), with output totalling

174 Mt in 2006, including 94 Mt from opencast

mines and 80 Mt from underground operations.

At the start of 2007, Gazprom acquired an interest

in the biggest producer SUEK, a strategic move

focussed on cooperation in power generation. The

extent to which this deal has been approved and

finalized under company law is not known.

Of the output, some 90 Mt or 29 % goes into

exports, and 219 Mt is consumed by Russia itself.

Average extraction depth at underground mines

is between 500 - 550 m. The chief mining method

since 1980 has been longwalling, accounting

for 85 %. The rest has involved block caving and

hydromechanical extraction. Lignite mining is by

bucket wheel excavator and hard coal mining by

shovel and truck at opencast sites. Owing to the

high degree of mechanization, the raw hard coal

output contains much mineral matter that must be

removed prior to sale, so roughly two thirds of the

raw output is washed in coal preparation plants.

This is true of all coking coals and most steam

coals. Preparation is largely by jigs (50 %), followed

by heavy media processes (30 %). The resulting

products, which are suitable for export, are of the

following qualities. Steam coals have medium to

high, 27 - 34 % volatility, 11 - 15 % ash and 8 - 15 %

moisture; their calorific value is 6,000 - 6,200 kcal/

kg; the 0.3 - 0.6 % sulphur content is favourable, as

is the grinding hardness of 55 - 67 HGI.

Coking coals, by contrast, exhibit a wide volatile

range of 19 - 42 %, but with good coking proper-

ties (7 - 9 FSI). Their ash content varies between 8

and 11 %, with 6 - 10 % moisture and 0.5 - 0.8 %

sulphur.

The six biggest coal producers mine 55 % of Rus-

sia's coal.

Productivity in the opencast mines per man-year is

between 1,000 – 3,000 t and, in the underground

pits, between 500 – 2,000 t. Some opencast mines

achieve productivities of up to 8,000 t/man-year.

Russia's mining sector still has considerable ration-

alization potential and, thanks to a combination

of low wages and improved technology, can go on

reporting favourable ex-pit costs.

Cost developments

The pits suitable for exporting steam coal, mainly

from Kemorovo, are mostly opencast operations.

The opencast mines' production costs generally

fall in the range of USD 5 – 26/t, making them the

world’s lowest-cost pits.

The great distances of the main extraction regions

from export ports – e.g. some 4,000 km from

Kemorovo to both the Baltic Sea and to the Far East

ports – are a serious handicap. Actual transport

costs remain unknown. The freight rates charged to

the coal industry rose from about USD 10/t in 2000

to USD 25/t in 2007. Compared with Canadian and

American railway costs, however, they are still low.

Exports are also partially burdened by high trans-

port fees and port handling costs in non-Russian

countries, which can total between USD 7 - 11/t.

In the long term, no special factors are discernible

that could have a particularly adverse impact on

the ex-pit costs. The evolution of transport costs is

likely to remain crucial for the export potential of

Russian coal. In any market fluctuations, Russian

railways have always proved to be flexible in their

pricing in order to retain transport volumes. How-

ever, the fleet of rolling stock is in urgent need of

renewal.

Russia's biggest hard coal producers

SUEK

Kuzbassrazrezugol

Yuzhkuzbassugol

Yakutugol

Vorkutaugol

LuTEK

Total

% of Total output, Russia

Source: McCloskey's Coal Report

89.4

41.4

16.1

9.5

6.8

5.5

168.7

55309

Output 2006Mt


61

Fob costs in recent years are likely to have risen

with transport costs, and are estimated as follows:

Steam coal

Fob costs

21-45 40-60

2004/2005 USD/t

2006/2007USD/t

Infrastructure

The infrastructure that serves coal mining is relative-

ly well developed and dependable. Still, the indus-

try is marked by, and bears the burdens of, long

rail distances to the consumer centres in Western

Russia or to the exporting ports. These distances

are between 2,000 and 2,400 km (Pechora) and

3,500/4,500 km (Kuznetsk) or 3,000 km to the Pacif-

ic ports. After the dissolution of the Soviet Union,

Russia lost its traditional coal exporting ports in

the Baltic and the Black Sea to the Baltic states and

Ukraine, so that exports are increasingly redirected

to other ports. In the Atlantic area, the changes can

be seen in the extensions to Murmansk (6 Mt/a)

to enable that port to handle coal exports, and

in the new port Ust Luga near St. Petersburg, still

unfinished, with an annual coal handling capacity

of 8 Mt and handling options for panamax freight-

ers. Similarly, in the Far East the handling capacity

of the capesize port of Vostochny is planned to be

extended from currently 16 Mt to 25 Mt while, in

the northern Sea of Japan, 2001 saw the start of

construction on the coal port Vanino with sched-

uled handling capacity of 10 Mt/a.

At present, both the Baltic ports and the Russian

ports are planning a series of expansions to keep

pace with growing exports. Increasingly, producers

or their trading houses (e.g. Krutrade) are becoming

involved in investment projects at ports.

Due to the high transit fees and handling rates at

Baltic ports, Russia is increasingly using Murmansk

for its exports. More use has also been made of the

Baltic Sea port Ust-Luga, although ice can close this

port in the winter. Despite these developments, the

port of Tallin (Muuga) in Estonia has had to be used

increasingly for exports in order to satisfy growing

demand.

Even with the bottlenecks resulting from rolling

stock shortages, Russia's seaborne coal exports rose

by 33 Mt over the last four years. Looking to the

future, various efforts are being made to address

the bottlenecks.

Russian ports

Baitic Sea portsand Northern Russia

Murmansk

Vysotsk

Riga

Ventspils

Tallin (Muuga)

St. Petersburg

Ust-Luga

Other

Mariupol

Tuapse

Yuzhny

Other

Vostochny

Vanino

Other

Total

Total

South Russia and Ukraine

Russia/Far East

8.9

3.1

9.4

3.9

2.3

2.5

0.5

0.6

2.6

3.1

5.0

3.1

14-4

-

0-8

11.0

3.5

10.8

4.6

4.4

2.5

0.5

0.6

2.0

3.0

4.7

4.1

14.1

0.3

2.1

11.1

4.0

10.7

3.9

7.5

1.9

3.5

0.7

1.8

3.1

4.8

5.5

15.4

0.5

2.4

31.2 43.337.9

13.8 15.213.8

Total 16.5 18.315.2

Grand total 68.2 76.860.2

2004Mt

2005Mt

2006Mt

Exports

Coal exports again increased in 2006 to 89,9 Mt,

including 6.7 Mt across the land border to the CIS.

Exports to other countries amounted to 83.2 Mt, of

which 76.8 Mt was seaborne and 6.4 Mt overland.

Total exports of 89.9 Mt can be broken down into

some 14 Mt of coking and PCI coals and 76 Mt of

steam coal and anthracite. Seaborne exports of 76.8

Mt can be broken down into 9 Mt of coking and

Coal-exporting countries • Russia



62

expand its coal exporting capacities in the coun-

try's ports from 44 Mt in 2006 to 155 Mt in 2020.

Russia's coal production is set to rise from today's

310 Mt or so to 440 – 460 Mt by 2020, including

357 – 377 Mt of steam coal and 83 Mt of coking

coal. Such expansion plans are likely to cover both

an increase in domestic demand and additional

exports.

PCI coals and about 68 Mt of steam coal. In the Far

East, 18.3 Mt of coal was shipped, including approx-

imately 5 Mt of coking coal; leaving 59 Mt that went

to the European region, of which about 5 Mt was

coking and PCI coals.

In Europe, it was above all the UK that increased its

imports of Russian coal, thus making a crucial con-

tribution to Russia’s export growth. Germany also

bought considerably more Russian coal.

Due to the high domestic freight burden, averaging

USD 25/t, Russia's exports are only sustainable at

high international prices. With an 11.4 % share of

the world market for seaborne steam coal, Russia is

now an important player and it would not be easy

to substitute its exports at short notice. The quality

of Russia's exports has steadily improved.

Export developments, Russia, 2004-2006

2004 2005 2006 Mt Mt Mt

Coal output 283 300 309

Hard coal exports* 60 68 77

Steam coal 53 60 68

Coking coal 7 8 9

Export rate in % 23 23 25(only sea-bound)

**to countries outside the former USSR, only sea-bound

Chief import countries/regions

EU-15/after 2004 EU-25 32.0 37.0 50.3

Turkey 6.5 7.0 6.5

Romania 2.5 3.0 1.7

Japan 9.3 10.7 11.0

South Korea 5.1 3.3 5.0

In the medium to long term, Russia's exports are

likely to go on rising. The Far East market is particu-

larly interesting for Russia due to the rapid decline

in Chinese exports.

Outlook

Despite the burdens of hefty domestic transport

costs and transit fees, Russia proposes to increase

its exports. For instance, Russia is planning to


63

South Africa

General

South Africa‘s economy continues to thrive and is

benefiting from strong demand for raw materials

worldwide. Nevertheless, there are still huge struc-

tural problems like unemployment and a housing

shortage. AIDS continues to be a problem. The

rand has stabilized and appreciated against the dol-

lar, though the flipside is less local currency income

from South African raw-material exports. However,

since most commodity prices have risen even more

strongly than the increase in the currency value, the

margins for raw material and coal producers have

improved.

Until recently, the extraction of natural resources

in South Africa had been by land-owner mining, i.e.

mining rights lay with the owners of the land. State

control merely took the form of a statutory approval

procedure and mining supervision, so that no roy-

alty had to be paid to the state. Wide areas of land

were owned by big mining companies, and this was

also true of the country‘s coal deposits. In 2002,

the government and the mining companies agreed

on a new mining law, whereby all of the country‘s

natural resources were transferred to state owner-

ship. Present and future mining companies must

reapply for their mining rights, subject to statutory

stipulations. Deposits which are not exploited at

present or whose short-term exploitation has not

been applied for by the landowner can now be

granted to other interested parties. The idea is to

remove the often decade-old backlog of unused

natural resources on the part of landowners, and

to give mining and employment fresh impetus by

encouraging small- and medium-sized businesses.

Together with the policy of Black Economic Empow-

erment (BEE), this should lead to a strong participa-

tion of the African people in South Africa's mining

sector. A number of new companies have been

able to acquire mining rights and large enterprises

are surrendering some of their properties to BEE

companies or offering holdings in subsidiaries or

divisions.

However, there is a lack of know-how and financial

resources above all among the small new compa-

Coal-exporting countries • South Africa



64

nies, so that the much hoped-for increase in output

by BEE shareholders has failed to materialize to

date, although this is likely to change once the

teething difficulties are overcome.

Reserves/qualities

According to BGR data, South Africa's hard coal

resources are put at 115 Bt, while reserves amount

to 49 Bt, making a total potential of 164 Bt. If

extraction goes on rising beyond the current level,

some of the best-quality deposits, like the Witbank,

Highveld, Ermelo and KwaZulu/Natal mining areas,

will be depleted in 30 - 40 years. The reserve min-

ing area Waterbank has been classified by more

recent estimates as being less copious.

With future output of 330 Mt and reserves of 45 Bt,

we nevertheless estimate a total reserve life of

some 150 years.

There are eleven coalfields in all, extending from

the border with Botswana in the Northern Province,

via the provinces of Gauteng, Mpumalanga, and

Freestate, to KwaZulu/Natal in the southeast, with

83 % of the reserves being concentrated in the

mining areas of Witbank, Highveld, Vereeneging/

Sasolburg, Ermelo and Waterberg. While the first

four mining areas are relatively close to the coast

of the Indian Ocean, just under 600 km by rail, the

distance from the Waterberg area, located at the

Botswana border, doubles to 1,120 km.

South Africa‘s hard coal is classified as so-called

Gondwana coal dating from the Permian geologi-

cal period and deposited in a moderate climate,

so that it is comparatively rich in ash and must be

treated, at least for exporting. The coal has only

limited – if any – coking properties and, to that

extent, is low- to medium - volatile (16 - 29 %). It

is attractive as a relatively low-sulphur steam coal

(<1 %).

Mining development

Marketable coal output rose by some 2 Mt to

247 Mt in 2006 and is set to grow to 290 Mt by

2010, according to the South African Minerals

Bureau. Of this, 90 Mt will then be exported and

200 Mt go into the domestic market.

In 2006, the Spanish utility Fenosa acquired 70 %

of the shares in Kangra. Kangra produces 3 Mt/a

and has export rights of 1.65 Mt at RBCT. In the

neighbouring countries Botswana, Mozambique

and Zimbabwe interest in an expansion of coal min-

ing is growing.

The domestic markets in South Africa consumed

the following quantities in 2006:

Consumption of domestic markets

Power generation

Synthetic fuels(Sasol)

Industry/household

Metallurgic industry

Total

106.0

41.5

18.0

6.5

172.0

108.6

43.8

18.2

5.1

175.7

2005Mt

2006Mt

Domestic demand in South Africa will rise in

future, since coal-based power generation is to be

expanded, although there are also plans to make

increasing use of nuclear energy. To cover electric-

ity needs, there are plans for the construction of a

large-scale coal-fired power plant and associated

pits in Botswana to supply both countries with elec-

tricity.

A further increase in domestic demand could come

from further expansion of the coal-to-liquids indus-

try. Given high oil prices, the probability is high

that a further plant will be built.

In recent years, output has remained stable,

although a further production push is now expect-

ed. At present, there are projects in the pipeline

with a volume of 40 Mt/a over the next 5 years.

The Richards Bay export terminal is being expanded

from 72 Mt to 91 Mt. Demand for additional export

capacities at the terminal has been high and over-

subscribed. Overall, it should be possible, with the


65

faults. In bord and pillar operations, coal extraction

is dominated by the continuous miner, but mecha-

nized drilling and blasting are still used occasion-

ally. Opencast mining accounts for some 65 % of

output, with the remainder coming from the under-

ground mines.

Productivity averages about 5,000 t/man-year,

although larger companies reach 7,000 t/man-year

at times. Certain operations can achieve up to

10,000 -13,000 t/man-year.

Cost developments

South Africa, too, has to cope with rising costs.

Wage costs in recent years (2005 – 2007), for exam-

ple, have grown at 7 - 8 % per year. Material costs,

such as fuels and lubricants, are now more expen-

sive, and the country has had to come to terms with

a much less favourable overburden-to-coal ratio.

The costs range between USD 16 and 28/t.

Transport costs (USD 6 – 10/t), by contrast, have

risen only moderately, as have handling costs

(some USD 2/t). Since the overburden in South

Africa's opencast mines is mainly removed by drag-

lines, the increase in diesel prices does not have

such a strong impact as in overburden removal by

truck and shovel. Costs are likely to have developed

as follows:

Steam coal

Fob costs

24-36 26-40

2004/2005USD/t

2006/2007USD/t

Thanks to the advancing extraction of these

reserves, costs are not expected to rise sharply

for any reason in the long term. However, if the

reserves of the more distant Waterberg deposit are

included among exports, higher transport costs

must be expected.

The rand has strengthened against the dollar from

12 rand per dollar in 2001/02 to the current 7 rand

per dollar in June 2007. This places considerable

margin pressure on the rand-based results of South

African producers.

planned output, to cover both growing domestic

needs and higher exports. At the moment, how-

ever, Anglo Coal, BHP/Biliton and Xstrata-Coal are

increasing their outputs more strongly in Colombia

than in South Africa.

In South Africa, a new important company has

formed in the shape of EXXARCO within the frame-

work of BEE. It comprises the activities of former

Eyesizwe Coal and Kumba Coal and, reporting

24 Mt/a of production in 2006, has joined the ranks

of the big South African producers.

South Africa's biggest hard coal producers

Company 2006

Anglo Coal

BHP-Billiton Plc.

SASOL

Exxaro

Xstrata Plc.

Total

% of South Africa

59

52

47

24

21

203

82247

19

21

4

2

13

59

8669

Output2006

Mt

Exports2006

Mt

Among the chief mining regions are Witbank,

Highveld, Vereeneging/Sasolburg, Ermelo and

Waterberg – areas with a 98 % share of current

production. The coal is mined both in underground

and opencast operations. The opencast pits reach

depths of 60 m, with a maximum of five seams,

though only two or three are usually suitable for

dragline operations, which account for two thirds

of opencast pit output. Truck and shovel mining,

by contrast, is mainly used in the multi-seam min-

ing area of Waterberg. Sections of the deposit

where opencast mining is uneconomical are often

exploited by underground mining. The flat seams

lend themselves to extraction at depths of rarely

more than 200 m. The mining technique deployed

here is bord and pillar, which accounts for over

90 % of underground mine production, with long-

walling being used only in exceptional cases due to

the prevalence of dolerite intrusions and geological




66

Infrastructure

Some two thirds of coal output is used as untreated

raw coal or middlings in nearby power stations or

liquefaction plants at mine-mouth operations, such

that infrastructure needs are reduced, at least, as

far as coal transport is concerned. This is not the

case for coal exports. Driven by the knowledge that

South Africa has coal reserves capable of cover-

ing more than just domestic demand for decades

to come, the government and mining companies

decided in the 1970s to embrace the long-term

development of coal exports and build up a modern

infrastructure.

As a result, three railway corridors exist today to

the export ports located on the Indian Ocean at

Richards Bay, Durban and Maputo (Mozambique).

The most important link is the 600-km long, state-

run standard-gauge COALlink line from the Witbank

mining area to Richards Bay, which has already

transported 1.5 Bt of coal between its commission-

ing in 1976 and year-end 2006. The electrified rail-

way has a current capacity of 72 Mt/a, with twelve

unit trains a day, each with a loading capacity of up

to 16,800 t. Of minor importance, by contrast, are

the narrow-gauge rail links to Durban and Maputo.

While mainly standardized steam coal is trans-

ported to Richards Bay in large quantities, the other

two lines are used to haul smaller quantities of

special types, like anthracite or screened lumps for

use in industry and households. The government is

planning medium-term privatization of rail traffic.

The coal ports have always been operated by the

private sector. They have a current total handling

capacity of 78 Mt/a The most important is the Rich-

ards Bay Coal Terminal with a handling capacity of

72 Mt/a where capesize ships can be loaded. Own-

ership and operation comes under a joint venture

of the seven largest South African coal producers.

The ports of Durban and Maputo, by contrast, can

only load panamax and handysize ships.

The extension to Richards Bay from 72 Mt/a to

91 Mt/a has been agreed, although only about

65 Mt/a (90 %) of the terminal is currently being

used owing to serious deficits in rail transport. In

addition to the existing partners, the South Dunes

Coal Terminal project will include participation by

the so-called common users who are pressing for

coal exports within the scope of the Black Economic

Empowerment efforts.

The extensions to the Richards Bay export terminal

mean that the state-run railway company Spoornet

must expand capacities from the current 72 Mt to

91 Mt/a in the medium term (by 2010).

Export rights at Richards Bay Coal Terminal after extensions

RBCT = Richards Bay Coal Terminal

Ingwe

Anglo Coal

Xstrata-Coal

Total

Sasol

Kangra

Eyesizwe

SDCT = South Dunes Coal Terminal

Other exporters (inc. BEE)

Common Users (inc. BEE)

Total

79.13

29.62

21.74

16.54

4.49

3.96

1.82

0.96

6.59

9.89

4.39

100.0

72.00

26.95

19.78

15.06

4.09

3.60

1.65

0.87

6.00

9.00

4.00

91.00

Mt %

The originally planned capacity of 92 Mt was re -

duced slightly by 1 Mt to 91 Mt in 2006, with the

former owners having 79 % of the export alloca-

tions.

The auctioning of 5 Mt of export rights met with

inquiries totalling 26.85 Mt/a from South African

BEE companies.

Exports via South African ports

RBCT

Durban

Maputo

Total

65.9

1.1

0.9

67.9

69.2

0.8

1.1

71.1

66.5

1.4

1.1

69.0

2004Mt

2005Mt

2006Mt


67

Some 69 Mt was exported via the ports of Richards

Bay (RBCT), Durban and Maputo in 2006.

While RBCT, at 66.5 Mt, worked considerably below

its target capacity of 72.0 Mt, Durban – follow-

ing completion of the conversion of its handling

facilities – was able to slightly improve on its poor

performance of just 0.8 Mt in 2005 to reach 1.4 Mt

in 2006.

Exports

South Africa was again unable to exploit its export

potential in 2006. Seaborne exports fell by 2 Mt to

69 Mt, and overland exports to Mozambique were

also down.

Structure of oversea exports in 2006

Steam coal

Anthracite

Coking coal

Total

¹) inc. neighbouring Mediterranean countries

67.0

0.8

1.2

69.0

Total

4.1

-

-

4.1

Asia

4.5

0.4

0.3

5.2

Other

58.4

0.4

0.9

59.7

Europe¹

At 59.7 Mt, Europe remained the biggest market,

including deliveries to the Mediterranean area

(7.2 Mt). This market makes up some 86 % of South

Africa's export sales. The biggest European con-

sumers were the UK, Spain and Germany, taking

about 8 Mt each.

Outlook

The importance of South Africa on the world hard

coal market has stagnated in recent years. The

extensions to Richards Bay to 91 Mt and the brisk

demand for export rights show that South Africa's

mining sector is optimistic about future exports.

The formation of many BEE companies is likely to

lead to an increase in South Africa's output in the

medium term. South Africa has the potential to

cover both rising domestic demand and additional

exports.

Export developments, South Africa, 2004 - 2006

2004 2005 2006 Mt Mt Mt

Hard coal output 243 245 247

Hard coal exports 68 71 69

Steam coal 66 70 68 Coking coal 2 1 1

Export rate, in % 28 29 28

Chief importcountries/regions

EU-15/after 2004: EU-25 52.6 54.3 52.3

Israel 6.9 5.2 4.8

Morocco 1.8 2.1 0.0

Turkey 1.6 1.6 1.9

Taiwan 1.4 1.6 0.1




68

China

General

In the years 2003/2004, the “China factor” made

itself felt on the world markets for raw materials,

energy and transport services. Against a backdrop

of high demand in China and GDP growth averag-

ing 9 %, crude steel production rose from 127 Mt

in 2000 to 422 Mt in 2006, while iron-ore imports

were up from 70 Mt to 362 Mt over the same peri-

od. With increasing electrification and power needs

growing at a rate of 10 - 15 % per year, the demand

for coal, copper and aluminium strengthened. This

demand clashed with scarcities on the world mar-

ket and led to rising energy and commodity prices

across the board.

Primary energy consumption reached 2.6 Btce in

2006, with 70 % or 1.8 Btce being accounted for by

coal.

Power plant capacity rose to 622 GW in 2006, with

the majority, 78 %, being accounted for by coal-

fired plants. By 2020, capacity is set to double to

1,500 GW. With a population of 1.3 bn, China’s per

capita electricity consumption of 2,200 kWh is low;


69

in Germany, the figure is 6,400 kWh per capita. Chi-

na‘s coal activities are coordinated by the Energy

Bureau of the National Development and Reform

Commission.

Reserves/qualities

China‘s coal resources are vast with considerable

variation in type and quality.

BGR quotes hard coal resources of 4,200 Bt and

reserves of 167 Bt, i.e. a total potential of 4,367 Bt.

The latest information from official Chinese repre-

sentatives speaks of over 5,500 Bt of resources, of

which some 1,000 Bt are economically mineable

today. Of these reserves, 200 Bt are said to be

proven.

The deposits mainly date from the Jurassic (60 %)

or Carboniferous (25 %) periods, i.e. they sediment-

ed 140 - 205 and 290 - 360 million years ago and

have been subject to several phases of rock forma-

tion since then. This being so, deposits close to the

surface are characterized by strong seam inclines,

such that the reserves mineable in opencast pits

are relatively small and most mining takes place

underground. Coal qualities range from anthracite,

through low-volatile, to highly volatile hard coals.

Only 12 % of the hard coal resources are medium to

highly volatile coking coals, while most of the rest

(63 %) comprises highly volatile steam coal. Geo-

graphically, the coal resources are concentrated in

North China, with 48 % being located in the prov-

inces of Hebei, Shanxi and Inner Mongolia.

Mining development

Against a background of rapid economic growth,

coal output has had to be further increased and

rose by 135 Mt/a to 2,326 Mt in 2006.

Coking capacity is put at 320 Mt/a (2006) and is

to be further expanded in 2007/2008 (by 30 to 40

Mt), although coking capacity is poorly utilized.

In places, coking times are too long in outmoded

plants, and this translates into low productivity.

Coal production is increasingly burdened by state

levies for recultivation, pit safety and explora-

tion. Output is to be further increased, however.

At present, projects with a volume of 800 Mt/a

are being pursued as replacement and additional

capacities. By 2010, output of 2.6 Bt is to be

reached in official forecasts, a level that is likely to

be exceeded. Some estimates are assuming up to 3

Bt in 2010.

In 2006 already, 705 Mt of the total output of

2,371 Mt (according to Chinese figures), were

based on 100 % mechanization. Output per man

and year moves within a range of 200 – 20.000 t.

Hard coal production, China

State-owned mines

Provincial mines

Small operators

Total

1,070

305

815

2,190

1,126

308

892

2,326

+5.1

+1.0

+9.4

+6.2

2005Mt

2006Mt %

The consolidation processes in China's coal indus-

try are ongoing.

For example, the 11th Five-Year Plan (2006 -2010)

includes the following:

■ formation of 5 – 7 large coal companies,

each producing over 100 Mt/a

■ reducing the number of small pits to less

than 10,000

■ closure of 7,000 small pits by 2007

■ creation of 13 coal logistics centres to which

38 large pits are linked.

In 2006, eight of the biggest coal companies pro-

duced 590 Mt or some 25 % of total output, and

the 32 biggest companies 1,023 Mt or 44 % of total

output. In 2010, the planned 13 coal centres are to

handle 2,240 Mt or 86 % of the scheduled 2,600 Mt

annual production. Altogether, these measures

gave a considerable boost to consolidation in the

Chinese coal sector.

Coal-exporting countries • China



70

China's biggest hard coal producers, 2006

Shenhua

Datang

China National Coal

Yanzhou

Pingdingshan

Lu`an Mining

Total

% of China

137

62

91

38

33

32

393

172,326

OutputMt

China consumes most of its own coal production

and domestic demand is growing strongly. Since

2003, exports have declined sharply. In 1Q07,

China for the first time imported more coal than it

exported.

Power plants

Steel industry

Construction/cemment industry

Other

Total

970

257

306

291

1,824

1,127

350

332

323

2,132

1,274

404

365

328

2,371

2004Mt

2005Mt

2006Mt

Cost developments

Representative costs for China cannot be stated

in practice. The methods of coal mining extend

from manually operated coal galleries all the way

to highly efficient underground pits and opencast

mines which compare very favourably with the best

Australian and Indonesian operations. It may be

assumed that export coal only stems from efficient

pits.

Like elsewhere, wage costs are rising in China.

Average wages increased by 24 % in Shanxi

between 2005 and 2006. On average, a miner

earned USD 2,800 per year or USD 234 per month.

Fob costs of export-oriented mines are within a

wide range.

Fob costs2004/05

USD/t2006/07

USD/t

16-48 18-52Steam coal

In the medium to long term, costs will rise further.

At the pits suitable for export production, costs are

likely to evolve in a similar manner to those of the

leading export nations.

Infrastructure

China‘s coal industry now benefits from an infra-

structure that has recently been extended and

become more efficient. To start with, this includes

the railways, which transported a total of some

1.1 Bt across an average distance of 550 km in

2006.

China‘s coal seaports handle both domestic sup-

plies, via coastal shipping, and coal exports. To this

must be added numerous river ports which handle

unknown quantities. The demand of south China's

coastal regions is estimated at 460 Mt most of

which is served by north China’s mines. At present,

China's infrastructure is being massively and swiftly

extended.

The Daqin line, for example, has been expanded

by 50 Mt (Datong-Qinhuangdao port) to the cur-

rent 250 Mt per annum and, in a next phase, will

be raised to 300 Mt in 2010. The capacity of the

Shenshuahuang line (Shanxi-Huanghua port) is

to be increased from the present 95 Mt/a to 200

Mt/a. Infrastructure projects are being rigorously

implemented in China. In 2006, the railways moved

1,102 Mt in China.

Port handling in China of coal alone amounted to

407 Mt in 2006. This can be broken down into:

■ 78 Mt coal/coke exports

■ 38 Mt coal imports

■ 291 Mt handling for inland supplies trans-

ported along the coast

The breakdown of the 2006 figures by port is not

yet available.


71

power generation – was up by a total of some

14.4 Mt.

The export licences for 2006, amounting to 80 Mt,

were not used in full and in 2007, China may

emerge as a net importer.

The quotas for the companies licensed to export

have evolved as follows:

Companies licensed to export coal

CNCIEC

Shenhua

Shanxi

Minmetals

Total

42.2

27.6

12.4

3.8

86.0

34.0

25.6

7.6

3.9

71.1

27.2

25.5

5.3

3.9

61.9

2004Mt

2005Mt

2006Mt

The number of coke exporters is said to have been

reduced from 70 to 40 companies. Other informa-

tion speaks of 60 licensed exporters. Rebates for

value-added tax on exports were completely abol-

ished in 2006 and import tariffs were reduced.

Since 01/11/2006, export tariffs of 5 % have even

been introduced for coking coal and coke.

No export bottlenecks in the ports have occurred to

date in China. Should China export more strongly

again in the future, then the infrastructure for this

would be in place.

Exports

Exports in 2006 again declined, falling to some

63 Mt. and affecting all qualities, i.e. steam coal,

coking coal and anthracite.

The biggest buyers of steam coal were Japan, tak-

ing 17 Mt, South Korea, taking 15 Mt, and Taiwan,

taking 13 Mt. Practically none was shipped to

Europe. In the case of coking coal, Japan, taking

2 Mt, and South Korea, taking 1.5 Mt, were the

biggest customers. This is also true of anthracite

(Japan: 1.9 Mt, South Korea: 2.6 Mt).

Coal imports were up by some 12 Mt, but two quite

different underlying trends can be noted. In cok-

ing coal – unlike iron ore and other metals – China

is largely self-sufficient and reported declining

imports, mainly at Canada’s expense. Imported

steam coal – mostly Vietnamese anthracite used in

Balance of exports/imports

Exports

Imports

Balance

94

11

83

87

19

68

72

26

46

63

38

25

53

50

3

2003Mt

2004Mt

2005Mt

2006Mt

2007¹)

Mt

¹) estimate

Coal-exporting countries • China

Coal-loading ports, China, 2005

Quinhuangdao

Tianjin (Xingang)

Qingdao (Tsingtao)

Rizhao (Shijuso)

Lianyungang

Huanghua

Other

Total

169

241

187

56

61

68

38

820

145

69

8

20

12

67

50

371

Total handlingMt

inc. hard coalMt

Coal imports by type

Steam coal

Coking coal

Anthracite

Total

6.2

7.2

12.8

26.2

10.8

4.8

22.6

38.2

+4.6

-2.4

+9.8

+12.0

2005Mt

2006Mt

Change%



72

There is also talk of raising a tax on use of the

domestic infrastructure from production site to

export seaport. Levies are also being debated on

steam coal exports.

The government’s aim is to make exports dearer

and imports cheaper. Perhaps more importantly,

the steadily rising domestic prices for coking coal

and steam coal make exports less attractive.

Export developments, China, 2004 - 2006

2004 2005 2006 Mt Mt Mt

Hard coal output 1,992.0 2,190.0 2,326.0

Hard coal exports 86.6 71.7 63.2

Steam coal 80.9 66.4 58.8

incl. anthracite 6.4 5.7 5.2

Coking coal 5.7 5.3 4.4

Coke exports 15.0 12.8 14.5

Export rate, in % 5.0 4.0 3.0

Chief importantcountries/regions

EU-15/after 2004: EU-25 1.5 0.9 0.8

Japan 28.5 23.2 20.6

South Korea 24.8 21.2 18.8

Taiwan 19.9 16.2 13.3

India 3.1 3.9 5.0

Hongkong 1.1 0.9 0.9

Philippines 2.9 1.9 1.0

China's pits are increasingly working on market-

economy principles and commanding higher prices

at home. Export volumes are determined by ex-

mine prices and the sales prices that can be real-

ized in the domestic and export markets. This ties

China more strongly to world-market prices. Rising

domestic prices could also have consumption-curb-

ing effects. Indeed, if world-market prices continue

to rise, China might be expected to export more

again.

Outlook

The growth of China's coal industry will probably

continue unabated and the country is likely to reach

an output of 3 Bt of raw coal in the medium term.

The country‘s thirst for energy can be met most

easily by domestic coal. The introduction of market-

economy principles and rising domestic prices

could dampen consumption in the coming years.

In the power sector and in the steel and cement

industries, for example, inefficient operations are

to be shut down as part of a process of consolida-

tion. Viewed from the perspective of costs and

logistics, China also has the potential at any time

to return to a higher export level if world market

prices were to exceed domestic prices.


73

Colombia

General

Colombia is one of the richest Latin American

countries in raw material terms. Its hard coal

reserves are the largest in South America. Even so,

the country has only recently joined the group of

coal exporting countries. Although its coal depos-

its have been known for decades and are located

near the coast, they long remained undeveloped

because of poor infrastructure. Development was

started finally in the wake of the second oil crisis

of 1979/1980, which caused a shortage of steam

coals on world markets. The American mineral oil

group EXXON and the Colombian state - owned

company CARBOCOL then resolved to jointly devel-

op the El Cerrejón North deposit on the Guajira

peninsula where, by the standards of the time, a

mega export project with a planned annual output

of 15 Mt started extracting coal in 1985. This exam-

ple was followed by several new developments, so

that Colombia has grown to become the second

largest steam coal supplier to the Atlantic market

after South Africa and ahead of Russia.

Raw materials in Colombia are in public ownership,

and the state decides on their exploitation. Super-

vision of the coal industry has lain with ECOCAR-

BON, which reports to the Ministry of Mining and

Energy. It explores the country‘s coal resources to

check their development potential, draws up initial

development plans and, in an international bidding

process, offers deposits for tendering by private

companies. It issues 30-year extraction licences.

An 8 % royalty is levied on the proceeds from all

extracted coal.

Reserves/qualities

Hard coal resources are put by BGR at 56 Bt, and

reserves at some 8 Bt. Geologically, these are

young coal formations dating from the more recent

Cretaceous and early Tertiary periods (approximate-

Coal-exporting countries • Colombia



74

ly 70 mill. years ago). They are located in seven coal

basins in all, the Guajira and Cesar coalfields being

closest to the coast and most interesting in com-

mercial terms.

The quality of Colombian hard coals varies, extend-

ing from the highly volatile range all the way to

anthracite. The coals located in the Cordillera Occi-

dental (Cesar) and its foothills (Guajira) are of low

rank and, hence, highly volatile (30 - 39 %) or rich

in moisture (7 - 16 %). By contrast, ash (4 - 10 %)

and sulphur content (0.4 - 1.0 %) are low, so that

high net calorific values of 6,500 - 7,000 kcal/kg are

reached. This being so, the coal needs no prepara-

tion except crushing and screening and is excellent-

ly suitable as steam coal and, in some cases, even

as PCI coal. The drawbacks include a proneness

to self-ignition, but also a relatively high grinding

hardness of 40 - 45 HGI. The seams of the deposits

located in the Cordillera Central (e.g. Cundinamar-

ca/Boyacá, Santander, Norte de Santander) are usu-

ally of a higher rank and also bear coking coals.

Mining development

Colombia's hard coal output rose in 2006 by some

4 Mt to 63.7 Mt. A stronger increase was thwarted

by difficult weather conditions and industrial action

at Drummond Coal, the country’s second-largest

producer. Colombia's output is to reach about

76 Mt in 2010, 69 Mt of which is to be exported.

Drummond especially is planning a strong increase

in its output, up to 50 Mt. Other estimates are

assuming a greater total output of 84 - 85 Mt in

2008 and of up to 102 Mt/a in 2010.

In addition to incumbents, newcomers have been

granted coal licences. The Spanish power plant

company Union Fenosa is considering buying coal

reserves in Colombia to supply its power stations.

Colombia’s production capacity rose by some 7 Mt/a

from 2005 to 2006. For the medium term, 27 Mt/a

of new capacity is planned; much of this is to be

implemented as early as 2007 and 2008.

Colombia's own needs amount to a mere 5 – 6 Mt

and are covered by smaller, inland deposits. It is

unlikely that domestic demand will impair exports

in the medium or long term.

Almost all of the output destined for export came

from opencast mines. Seam formations are usually

level (0 - 15°) and reach thicknesses of up to 150 m;

they comprise up to 27 workable seams with thick-

nesses of 1 - 15 m. Extraction is normally by truck

and shovel with occasional support from draglines

to remove the overlying strata. Just one – as far as

is known – export pit is engaged in underground

mining; its operations are only partly mechanized

using the bord and pillar method with drilling and

blasting. Much more widespread, by contrast, are

underground operations in small and very small

mines, which produce for the local market and are

not included in the statistics.

The coal industry experienced another wave of con-

solidation in recent years. The owner consortium

of Carbones del Cerrejón (BHP-Billiton, Anglo Coal,

Xstrata each holding 1/3) has now been renamed

Cerrejón Coal Co.; it also owns 100 % of the Cerre-

jón Zona Norte pit.

The output of Cerrejón Coal Co. is marketed via

CMC in Dublin, and is organizationally separate

from the distribution of BHP/Amcoal/Xstrata. This

being so, most of Colombia's output is marketed by

the consortium. Beyond this, Glencore has secured

further mining shares in the Prodeco/Caribe pit.

In 2007, Glencore acquired the Carboandes com-

pany, so that it now controls the La Jagua deposit.

Plans have been announced to raise output to

17 Mt.

Colombia's biggest hard coal producers

Company, 2006

Cerrejon

Drummond Ltda.

Prodeco (Glencore)

Carbones del Caribe

Other

Total

% of Total output, Colombia

Source: Coal Americas

27.5

20.8

8.2

0.3

4.0

60.8

95.063.7

Exports, 2006Mt


75

In 2007, BHP/Billiton likewise developed its posi-

tion in Colombia and concluded a cooperation

agreement with Canadian Coalcorp to develop the

pits Caypa and La Francia. The Canadians have min-

ing rights, but lack the financial resources for any

further expansion. It is planned to increase output

to 8 Mt in 2010.

Besides steam coal projects, investors, among them

CVRD, now also have an eye on smaller coking coal

deposits.

The productivity of Colombia's output is character-

ized by large-scale opencast mines. Cerrejon, with

a headcount of approx. 5,000 and 25 Mt/a, reaches

a productivity of 7,000 – 8,000 t/man-year. The

smaller mines have lower productivity, but also low

infrastructure costs in mine development. They are

partially dependent on transport by truck.

Cost development

The representative costs in Colombia reflect the

large-scale opencast mines that extract most of the

export tonnage.

Since most of the coal is extracted using the truck-

and-shovel method, the opencast mines have been

affected by rising fuel and tyre costs. Wage costs,

too, are steadily rising. Compared with Australia

and Indonesia, productivity is lower. However,

since the important mines have steadily increased

their production, the specific costs for infrastruc-

ture and overheads have fallen.

As regards rail transport, USD 2 - 3/t must be antic-

ipated; handling costs are in the range of

USD 3 - 5/t. Fob costs are estimated as follows:

Steam coal

Fob costs

26-32 27-34

2004/2005USD/t

2006/2007USD/t

In the long term, a higher overburden-to-coal ratio

and ash-richer qualities will place a burden on

costs, while rationalization potentials may offset

this.

The free-pit costs of mines with little mechaniza-

tion and of only medium size in the Cordilleras are

lower, but they are burdened with truck-transport

costs to the port of some USD 12 – 14/t, so that

any competitiveness they may have, compared with

major operations, is only marginal.

Infrastructure

Colombia's infrastructure is to be greatly expanded

to meet the planned growth in coal exports. The

country's government bought back the railway com-

pany Atlantic-Rail with a view to handing it over

to an international consortium (including Glencore

and Drummond) which is to extend and maintain

the system. In this way, plans call for the capac-

ity of the La Loma/Santa Marta line (200 km) to

be increased from the current 25 Mt/a or so to an

annual capacity of 45 Mt. The ports of Cartagena,

Bolivar, Santa Marta and Barranquilla are also to be

enlarged. In regions that are difficult to access by

rail, the government has pledged the construction

of feeder roads.

Port capacities, Colombia

Puerto Bolivar

Santa Marta

Rio Cordoba

Barranquilla

Cartagena

Total

32.0

24.0

5.0

6.0

4.0

1.5

2.0

74.5

32.0

24.0

6.5

6.0

4.0

1.5

2.0

76.0

2005Mt

2006Mt

Cienaga

Prodeco Puerto

Carbosam

Some of the ports on the Caribbean Sea are to be

extended as follows:

■ Puerto Bolivar from 32 Mt/a to 40 Mt/a

■ Santa Marta ports from 35 Mt/a to 45 Mt/a

■ Cartagena from 2.0 Mt to 10 – 12 Mt/a

■ Barranqilla from 1.5 Mt to 8 -12 Mt/a

Coal-exporting countries • Colombia



76

Exports

Most of Colombia's coal is delivered to the Atlantic

market. Of total exports amounting to 60.8 Mt,

a mere 1.2 Mt or so went to Chile and Peru and,

hence, to the Pacific region. The largest recipient

of exports was the USA which increased its imports

from 17.6 Mt in 2005 to 22.4 Mt in 2006. European

countries also bought about 1 Mt more coal.

Big importers included Germany (4.0 Mt), France

(3.3 Mt), Portugal (2.9 Mt) and Israel (3.3 Mt).

Exports will go on rising in 2007. The precondition

for this is the realization of infrastructure measures,

some of which have been already initiated

and implemented.

Outlook

The outlook for Colombia's hard coal mining sector

has improved in recent years. In North, Central and

South America demand is growing. South Africa is

unable to increase its exports at present because its

railway problems go unresolved, so that Colombia

is in a fine position to become the biggest supplier

of steam coal on the Atlantic market.

The big companies have announced quite notable

expansion plans and, from a deposit angle, the

potential for further expansion exists. However, the

infrastructure must keep pace, and considerable

efforts must be made in the next two years if logis-

tics are not to become a bottleneck for exports.

Export developments, Colombia, 2004 - 2006

2004 2005 2006 Mt Mt Mt

Hard coal output 58 60 63.7




EU-15/after 2004: EU-25 25.6 23.4 25.0

Other Europ. countries* 2.9 2.7 2.9

USA 13.3 17.6 22.4

Canada 1.7 2.1 1.9

*incl. neighbouring Mediterranean countries

Export structure, Colombia

America

of which North America

of which South and Central America

Europe

of which Mediterranean area

of which northwest Europe

Total

23.8

19.8

4.0

30.8

10.4

20.4

54.6

29.5

24.3

5.2

31.3

6.3

25.0

60.8

2005Mt

2006Mt


77

U S A

General

In future, the USA will continue to rely on coal as

an important energy source to cover its energy

needs. Today accounting for 24 % of the country‘s

total energy consumption and 51 % of its power

generation, coal will remain an indispensable pri-

mary energy source for some time to come. Against

this background, the government is making efforts

to simplify the approval procedure for the develop-

ment and exploitation of coal deposits. The USA

is not a signatory to the Kyoto Protocol on climate

protection to reduce GHG emissions, although it

is trying to make a contribution toward protecting

the climate by improving coal combustion through

its initiatives to develop clean coal technologies,

including those where CO2 is captured and stored.

The President of the USA again confirmed this

stance at the G8 summit in Russia in June 2006.

The US government supports massive technology

programmes to reduce CO2 emissions and is seek-

ing to include the newly industrialized countries in

emission-control efforts after 2012. These efforts

are to be concluded in 2008 and incorporated in

the UN strategy.

Coal has a strong competitive position in the USA,

since natural gas prices have steadily risen over

recent years. Yet, since it is mainly gas-fired power

plants that have been commissioned recently, gas

demand is set to rise.

With the strong economy, electricity generation

rose and coal-fired generation, at 1,966 TWh in

2006, made a 51 % contribution toward total elec-

tricity supplies. A further rise can be expected.

The high dependence on oil imports and soaring oil

prices have triggered interest in the USA on coal-to-

liquid projects.

Coal-exporting countries • USA



78

Reserves/qualities

BGR puts US hard coal resources at some 719 Bt,

and reserves at 213 Bt, i.e. a total potential of 932

Bt. Hence, unlike crude oil and natural gas, the USA

sits on a huge coal asset. To this must be added a

potential of around 430 Bt of lignite.

Deposits are located in the Appalachian coalfield

near the country‘s east coast. These contain bitumi-

nous coal and anthracite, and are followed by the

Illinois basin, east of the Mississippi, in which high

sulphur, bituminous coal is found. In the West,

there are the sub-bituminous coals of the Powder

River, Green River, Uinta and San Juan basins, typi-

cally low in sulphur. Extensive lignite reserves can

be found in the southern Gulf region and in the

northern lignite basin on the Canadian border.

In the Midwest and West, coal reserves are owned

by the respective states. They are auctioned to

the highest bidder by the Departments of Mines

for exploration and investigation and released for

long-term mining against payment of royalties. In

the country's east, by contrast, landowner mining

still applies, stemming from the time when only the

owners of land had control over any natural resourc-

es lying beneath. Since then, mining rights have

often been traded separately from land ownership

and can be assigned to mining companies in return

for payment of a royalty, typically 4 - 7 % of pro-

ceeds per t and freely negotiated with the owners.

The coals have a wide quality spectrum. Whereas

the sub-bituminous coals in the Western coalfields

require no further preparation, other than crushing

and screening, raw coals in the Eastern coalfields

generally have to be washed. This is particularly

true of coking coal. The sub-bituminous coals in the

Western coalfields are high in moisture (26 %) and

volatile matter (> 30 %) with a high grinding hard-

ness (< 50 HGI), while their ash (5 %) and sulphur

(0.3 %) content is low, as are the calorific values of

4,800 - 5,050 kcal/kg (as received). Such coals are

used exclusively in power generation. By contrast,

the hard coals of the Appalachians have less mois-

ture (5 - 12 %) and volatile matter (17 - 39 %), but

higher ash values (5 - 15 %), calorific values (6,000

- 7,200 kcal/kg as received) and good grindability

(50 - 90 HGI). The sulphur content (0.5 - 3.0 %) is

much higher in places. These coals are used both in

power generation and as coking coal. In the latter

case, however, only coals with a low ash (6 - 8 %),

moisture (8 %), sulphur (0.7 - 0.9 %) and volatile

matter (18 - 33 %) content are suitable. Among

Asian consumers, US coking coals are classified as

hard coking coal and were once very popular as ad-

ditives in view of their reactivity and fluidity.

Mining development

US output rose slightly in 2006 (+2.3 %) and stood

just over 1 Bt. Extraction from the Appalachian

mining areas continued to decline, while output

from the Interior and Western coalfields remained

largely stable.

Demand for hard coal in the electricity sector was

down slightly. However, half of the electricity pro-

duction in the USA is based on coal, a share that

has followed a rising trend in recent years.

There has been an ongoing trend for several years

now toward mining west of the Mississipi at the

expense of the mining areas located to its east.

This shift is due above all to the provisions in force

since 1995 under the Clean Air Act which con-

siderably restricts the admissible sulphur dioxide

emissions from coal-fired power plants. In order to

minimize the investment in flue gas desulphuriza-

tion associated with this, utilities have increasingly

turned to low sulphur coals from the Powder River

basin, despite higher transport costs. This move

comes at the expense of the more sulphurous coals,

mainly displacing those from the Illinois basin, but

also some Appalachian coal.

The pollution control equipment at US coal-fired

power plants, now improved by order of statute,

particularly desulphurization systems, increases the

attractiveness of coal from the Illinois basin.

US coal mining is entirely a private-sector activ-

ity. In 2006, some 1,400 mines were operational,

including 800 opencast pits and 600 underground

mines. The number of coal mining operations has


79

shrunk by 200 over the last eight years. Output

largely stagnated during this period. In the wake of

a trend towards consolidation, ten producers now

account for 67 % of total US coal output.

Coal mining in the USA is highly mechanized, and

some 67 % takes place in opencast mines with

depths of approximately 60 m. This extraction

method is particularly widespread in the Western

coalfields. There, one or two seams, mostly over

5 m thick, are cleared of waste using draglines to

permit subsequent coal extraction by truck and

shovel. In the Appalachian coalfield, by contrast,

draglines are used rarely, only where there are huge

amounts of waste above the coal seams as in moun-

tain top removal. The coal seams, which are mostly

thinner, and the interburden are then removed by

truck and shovel. Underground or deep mining,

accounting for 33 % of output, is more economic

than opencast mining in the Appalachians, and also

in the Western coalfields, wherever the overburden-

to-coal ratio exceeds 8 cubic metres per tonne of

coal. Deep mining mainly involves driving tunnels

to create bord and pillar workings using continu-

ous miners and shuttle cars. Increasingly, longwall

operations are being adopted at the most efficient

mines.

The US coal mining workforce has risen by 13,000

or 18 % since 2003. In 2006, the hard coal mining

industry employed a workforce of 84,000. With an

output of 1,053 Mt, this translates into average

productivity of 12,500 t/man-year. In contrast

to this average, productivities as high as 22,000

t/man-year are reported in some opencast pits,

notably in the large operations of the Powder River

basin, while underground mines, located mainly in

the Appalachian coalfield, only manage 8,300 t/

man-year. Due to the strong rise in the workforce,

average productivity has fallen.

Coal consumption in 2006 totalled 1,010 Mt, with

934 Mt (92 %) being accounted for by power gen-

eration and 55 Mt (6 %) by industry. A mere 21 Mt

(2 %) was delivered to coking plants for the supply

of steel mills.

Distribution of production, USA

Appalachian¹�

Interior

Western

Total

East of Mississippi

West of Mississippi

Total

¹) includes coal from stockpile treatment

*) metric tonnes

353

132

498

983

436

547

983

366

132

522

1,020

451

569

1,020

367

132

530

1,029

454

575

1,029

355

137

561

1,053

444

609

1,053

2003Mt*

2004Mt*

2005Mt*

2006Mt*


Biggest US coal producers, 2006

Company Output Exports 2006 2006 Mt Mt

Peabody Energy Corp. 195 18

Rio Tinto America (Kennecott) 125 -

Arch Coal Inc. 114 -

Foundation Coal Corp. 65 -

CONSOL Energy Inc. 61 10

Massey Energy Co. 35 6

North American Coal Corp. 32 -

Kiewit Mining Group, Inc. 29 -

Westmoreland Coal Company 27 -

Alpha Natural Resources 23 7

Total 706 41

% of 67 89USA, 2006 1,053 46

Source: National Coal Mining Association



80

According to an EIA forecast, coal output in the

USA is set to rise to some 1.6 Bt by 2030; its share

in power generation would then be 57 %.

Cost developments

Mining costs have continued to rise in recent years,

partially due to government regulations which

compelled companies to maintain higher provisions

for social commitments, as well as environmental

regulations. Across the USA, there are huge differ-

ences in mining costs. In the Appalachian coalfield,

ex-mine costs have the following spread:

■ Steam coal USD 35 - 65/t

■ Coking coal USD 40 - 80/t

As regards coking coal, it must be borne in mind

that it has to be better processed and, frequently,

that it is extracted from thinner seams involving

higher costs.

By contrast, costs in the Powder River basin, with

its large-scale opencast mines and thick seams, lie

in the USD 4 - 6/t range.

Rail transportation to the exporting ports costs

USD 20 - 30/t for Appalachian coal, with port han-

dling adding a further USD 3 - 4/t.

Steam coal

Fob costs

43-65 53-77

2004/2005USD/t

2006/2007USD/t

The cessation of the synfuel tax credit in 2007

could lead to further cost increases in the future.

Infrastructure

US coal mining has a well developed and efficient

infrastructure which moves more than 969 Mt of

coal p.a. to domestic consumers or to the export-

ing ports. This involves both the railroad network

and inland shipping, which transport 64 % and 8 %

respectively. Following several mergers of railroad

companies in the last three years, coal transporta-

tion from the Western coalfields of over 400 Mt/a

is now concentrated on Burlington Northern and

Union Pacific, while CSX and Norfolk Southern

mainly serve the Appalachian coalfield, handling

a good 200 Mt/a between them. For export coals

from the Appalachian coalfield to the seaports, the

rail distances range between 600 and 1,000 km

and, for inland shipping to Gulf ports , between

700 and 2,500 km. There are few capacity bottle-

necks in coal transportation.

At present, the USA has some 19 coal ports with

more than 20 terminals and an annual handling

capacity of 269 t. Chief among these are Baltimore

and Hampton Roads on the East coast followed by

Davant and Mobile on the Gulf coast. As steam coal

imports grow, the Gulf ports in particular are gain-

ing in importance, and are being reequipped to

improve efficiency.

Transport routes, 2006

Rail

Inland shipping

Truck

Conveyor belt

Great Lakes

Other

Total

640

80

120

120

10

30

1,000

64

8

12

12

1

3

100

Mt %

Exports (maritime)

Imports (maritime)

Balance

33

11

-22

21

15

-6

27

27

0

26

30

+4

2000Mt

2000Mt

2005Mt

2006Mt

Balance of imports and exports, USA


81

Exports

2006 exports of some 46 Mt were little changed

from 2005:

Seaborne

Overland (Canada/Mexico)

Total

20.5

5.5

26.0

5.8

14.2

20.0

26.3

19.7

46.0

Coking coalMt

Steam coalMt

TotalMt

Exports 2006

It must be assumed that some of the amounts

declared as steam coal were used as coking coal.

This could apply to an estimated volume of 2 - 3 Mt.

The balance of imports and exports for coal trans-

ported by sea has gradually changed such that, in

2006, the USA became a small net importer. Over-

all, including overland trade with Canada, the USA

remains a net exporter of around 16 Mt/a.

Seaborne exports of coking coal mainly went to

Europe and South America,

The East Asian markets took a mere 0.5 Mt (Japan

and South Korea). Imports went on rising and

exceeded the 30-Mt level. The biggest suppliers

were Colombia and Venezuela, although quantities

from Indonesia and Russia also reached the US

market.

Outlook

The prospects for US coal mining are still very good.

Due to increasing oil and natural gas prices in the

USA, the share of coal in power generation will go

on rising. The trend toward higher world market

prices may underpin a revival in exports, above all

of coking coal.

In 2006, seaborne imports and exports, from and

to the world market, were again virtually in balance.

Production from the Appalachian coalfield, which is

important for exports, is said to be on the decline.

However, with higher prices, more difficult deposits

can be considered for mining. Nevertheless, imports

from the world market may continue to gain signifi-

cance, especially on the East coast.

For the foreseeable future, the USA’s role as a swing

supplier of coking coal will continue, at least on a

modest scale.


2004 2005 2006 Mt Mt Mt

Coal output 1,020 1,029 1,053


Steam coal 19 19 20

Coking coal 24 26 26


Hard coal imports 25 27 30

Chief important countries/regions

EU-15/after 2004: EU-25 12.0 14.6 15.3

Other Europe 0.2 1.5 0.3

Canada 15.7 17.6 18.7

Latin America 5.1 4.9 4.9

Japan 4.0 1.9 0.3

Export developments, USA, 2004 - 2006



82

also-ran in terms of competitiveness. The reasons

for this are the changing quality requirements to

be met by coking coals and the relatively high min-

ing and transportation costs to the coast, but also

long-stagnating demand on the world coking-coal

market. The higher coking-coal price level in recent

years has led to a revival of hard coal-mining.

Reserves/qualities

BGR quantifies Canada's hard-coal resources at

141 Bt and reserves at 4.3 Bt, giving Canada a

potential of 145.3 Bt. Approx. 91 % of all deposits

are located in the Western provinces of Alberta and

British Columbia. Lignite basins are confined to the

Province of Saskatchewan, while subbituminous

coals are located in a belt starting in the United

States, extending to Alberta and reaching into the

northwest via the foothills of the Rocky Mountains.

Canada

General

Canada had its coal-exporting début in the early

1970s; until then, the country‘s coal industry had

almost entirely served the domestic market. The

move into the world coal market was triggered by

the growing coking-coal requirements of the Japa-

nese and the Korean steel industries in the second

half of the last century.

Their strategic aim was the development of assured

supplies as a second string to their Australian

bow in the Pacific and in addition to the quanti-

ties bought from the US at that time. Canadian

companies developed three coal deposits, com-

plete with infrastructure, within two decades to

serve the export market. Exports surged from nil

in 1969 to 36.5 Mt in 1997. Since then, however,

the export-oriented hard coal-mining industry is an


83

Coal-exporting countries • Canada

Still, there are many significant new coal develop-

ments underway in Canada. Most of these are PCI

coal developments which are taking place in west-

ern Canada. Big mining companies (e.g. Amcoal),

too, are interested in PCI projects.

In eastern Canada, "Xstrata", together with

"Erdene Gold", is pursuing a project to re-open the

Donkin mine on Cape Breton Island (Nova Scotia).

The mine is said to have 200 Mt of power plant and

coking-coal deposits.

Coal mining in the Western provinces is confined

to opencast pits. As in the Powder River basin/

US, the waste is removed by dragline and the sub-

bituminous coals and lignite extracted by truck and

shovel. Once crushed, the coal goes directly via

belt conveyor to the nearby power plant without

further preparation. Hard-coalmining, by contrast,

involves numerous 1 - 10 m thick seams, usually

with a 20 - 40° incline, requiring selective mining

using bulldozer/frontend loader/shovel and truck.

The life span of the opencast hard-coal pits located

in the Eastern foothills of the Rocky Mountains is

seriously limited owing to the rapid rise in the coal/

waste ratio to values of over 8 bcm/t coal. However,

the deposits located close to the surface are usually

still sufficient for operations to continue for some

time to come. In 2006, twenty-five coal mines were

in operations in Canada. Five companies produced

coking and PCI coal for exports, two companies

produced bituminous steam coal for exports and

domestic use, and three companies produced sub-

bituminous, lignite and bituminous coal exclusively

for domestic coal-fired power generation.

The productivity of Canada's mining sector is in a

bandwidth of 7,000 – 11,000 t/ man-year.

Cost developments

In recent years, Canada, too, has had to cope with

hefty increases in its operating costs on a similar

scale to those of its Australian and American com-

petitors.

A hard-coal belt that starts in the Alberta Rocky

Mountains, also extends into British Columbia.

The subbituminous coalfields located in the foot-

hills are in largely undisturbed and flat layers while

the hard-coal deposits in the foothills are often

inclined, faulted, folded, and generally impacted

by plate tectonics. In some cases, the coal-bearing

layers are up to 650 m thick with up to 60 seams of

workable thickness.

The country commercially exploits both lignites/

subbituminous coals and hard coals. The former are

mostly consumed at mine-mouth power plants to

generate electricity, whereas nearly all of the hard

coal – incl 90 % coking coal – is exported.

The coking coals have the following typical quality

features: generally low volatility of 21 - 25 % (also

medium volatility in places: 26 - 29 %), 8 - 9.5 %

ash, 1 % (inherent) moisture and 0.5 % sulphur

with a swelling index of 6 - 8. The coking coals are

classified by Asian consumers as hard to semi-soft.

Exported steam coals have calorific values of 5,800

- 7,100 kcal/kg (as received) with 19 - 32 % volatile

matter, 10 - 15 % ash, 7 - 9 % moisture and 0.3 -

1.0 % sulphur, and have a good grinding hardness

of 60 - 70 HGI. The subbituminous coals of the

Rocky Mountain foothills are largely equivalent

in quality terms to those of the US Powder River

basin.

Mining development

IIn 2006, Canada mined some 70 Mt, incl 30 Mt

coking coal and PCI coal, which was mainly export-

ed. Steam coal was mined in an amount of 40 Mt.

This can be broken down into 4 Mt hard coal, 24 Mt

subbituminous coal and 12 Mt lignite.

World market prices, which are tending to weaken

at a high level, and the decline in China's coking-

coal imports again led to slower developments in

Canada's export-geared mining sector. The export-

coal mining sector facing sinking export income on

one hand, was also impacted by worldwide increas-

es in mining equipment and operation’s costs

which led to an overall lower capacity utilization.



84

short notice. The Ridley Terminal has a capacity

of 12 Mt. In 2006, at 2.8 Mt, larger amounts were

handled for the first time. New projects by the

Western Canadian Coal Company could revive the

terminal. The two leading rail operators – CN and

CP – have announced massive investment. CP wants

to invest CD 160 mill. in 25 projects, and CN as

much as CD 474 mill. The investments have a 5-year

time span.

For inland loading of Canadian coal to the US on

ships that travel on the Great Lakes, the Thunder

Bay Terminal is used, capacity 11 - 12 Mt. The Thun-

der Bay Terminal also handles US coal from the Pow-

der River basin.

Handling capacities

Neptune Bulk Terminal

Westshore Terminal

Ridley Terminal

Total

8

26

12

46

CapacitiesMtTerminal

Exports

Exports dipped 0.6 Mt to 27.6 Mt. A more serious

fall by nearly 1 Mt was noted in exports to China.

Seabound exports amounted to 25.9 Mt, incl

23.3 Mt coking coal and 2.6 Mt steam coal. The US

took 1.7 Mt on the land route. The biggest buyers

were Japan, taking 8.7 Mt, and South Korea, tak-

ing 5.0 Mt; 7.6 Mt reached the European area, incl

Turkey.

For any long-term increase in Canada's exports,

developments in imports by India and China will be

crucial.

Outlook

Due to long transportation routes, West Canada‘s

hard coal-mining has a considerable cost disadvan-

tage compared with Australian and US coking-coal

pits. Nonetheless, the outlook for Canada‘s coking-

coal exports are vastly improving thanks to higher

world market prices and a tightening of the supply

Also, transport costs have seen a disproportionate

rise, so that Canadian producers have hit the limits

of their competitiveness. They are USD 34 – 35/t.

Free-pit costs are in a bandwidth of USD 38/t to

USD 45/t, and handling costs USD 4 – 6/t.

The Canadian dollar has continuously firmed

against the USD, leaving margins to dwindle.

Steam coal

Fob costs

49-63 76-86

2004/2005USD/t

2006/2007USD/t

While the costs of coking coal free pit in Canada are

among the most favourable in the world, transport

costs are the highest and make Canada the most

expensive coking-coal provider.

Infrastructure

The infrastructure available to the Canadian coal

industry is excellently developed, reliable and

efficient, but nonetheless remains the sector‘s

weak point on account of the transport distances

involved. All exporting mines have rail links either

to Canadian National (CN), Canadian Pacific (CP) or

BC Rail Ltd., with transport distances of over 1,000

km to the exporting ports on the Pacific coast. Even

more serious is the distance of 2,400 km to the

densely populated industrial centres on the North

American lakes. Compared with other exporting

countries like Australia, Indonesia, South Africa

and even China, which serve the Pacific market, this

is a definite drag on the industry‘s cost situation

and competitiveness. The coal is exported via the

Pacific ports of Roberts Bank (Westshore Terminal)

and Neptune Terminal (both Vancouver), Texada on

Vancouver Island and Ridley Island (Prince Rupert),

with a handling capacity of 51.5 Mt annually.

At present, the Westshore Terminal, with about

25 Mt, is the most used loading port. The termi-

nal is now being modernized and has expansion

potential. The Neptune Terminal has a capacity of

8 Mt, only half of which is currently being used. Its

capacity can be expanded to 10 Mt/a at relatively


85

Coal-exporting countries • Canada

Cline Mining - Lodgepole Mine Project

The mine is projected to produce 2 Mt/a of coking

coal for exports.

Hillsborough Resources Limited in partnership

with Anglo Coal Canada and NEMI - Horizon

Mine Project

The project is planning to produce 1.6 Mt/a of cok-

ing coal.

Fortune Minerals Limited - Mount Klappan Mine

Project

The project includes an open pit mine and a prepa-

ration plant with an anticipated production of 1.5

Mt/a of anthracite coal.

The hard coal market leader in Canada continues to

be Elk Valley Coal. The company has completed the

development of the Cheviot pit.

In aggregate, these projects could add an extra 10

- 12 Mt per annum of export quantities.

In summary and relative to worldwide supply,

Canada remains a marginal provider in coking-coal

business.

range due to China‘s withdrawal from exporting

coking coal, since many consumers prefer not to

cover their needs with Australian coal only. Hence,

Canada‘s exports are on the up again at present. A

brief summary follows.

Western Canadian Coal received regulatory approv-

al in July 2007 for it’s Brule Mine, located in north-

eastern British Columbia. It will reach full produc-

tion in 2007 and thereafter produce 2 Mt/a of PCI

coal for exports.

In addition, there are six coal projects currently

waiting for environmental assessment approval

from the British Columbia government:

Dehua International Mines Group Inc. - Gething

Coal Mine Project

The mine is projected to produce 2 Mt/a of coking

coal with a mine life for 40 years.

Western Canadian Coal - Hermann Mine Project

The mine is projected to produce 0.8 - 1.1 Mt/a

of coking coal with a mine life expectancy for 10

years.

Export developments, Canada, 2004 - 2006

2004 2005 2006 Mt Mt Mt



Steam coal 2 2 3

Coking coal 24 26 25



EU-15/after 2004: EU-25 6.2 7.1 6.4

Other Europ. countries* 1.7 1.2 1.1

Japan 5.4 7.5 8.7

South Korea 0.0 5.0 5.0

USA 2.5 1.7 1.7

Latin America 3.2 2.7 2.6

*incl neighbouring Mediterranean countries



86

Reserves/qualities

BGR puts Vietnam's hard coal resources at 6.5 Bt

and reserves at 564 Mt, i.e. a total potential of

some 7 Bt. The deposits are mainly located in

northern Vietnam, with smaller deposits of anthra-

cite, hard coal and lignite in the centre and north of

the country. The most noteworthy reserves can be

found in the Quang-Ninh basin, these being divid-

ed into the three coalfields Hongai, Compha and

Vietnam

General

Vietnam is making efforts to boost its economy.

The country has lost no time in recent years in

expanding its coal mining activities, including

significantly increased exports. Vietnam reported

strong rises in its energy needs of 13 % a year in

the period from 1996 to 2005. The economy is

growing at the remarkable rate of 8 - 9 % per year.


87

Coal-exporting countries • Vietnam

The current strong increases in production and

exports are said to have been enabled in part with

Chinese support.

The opencast mines use truck-and-shovel methods,

while underground operations use bord and pillar,

and longwalls. Productivity, at 500 – 600 t/man-

year, is very low. Opencast deposits being limited,

Vietnam must develop modern underground min-

ing methods and is making use of support from

abroad to achieve this.

The Vietnam National Coal Corporation (VINA-

COAL) controls 95 % of the mining. The qualitites

are characterized by low sulphur contents (0.6 %)

and can, following preparation, reach calorific val-

ues of over 7,000 kcal/kg.

After 2013, in addition to today's focus, the Red

River deposit is set to commence production and

reach an output of 5 Mt by 2020. In the long term

(by 2023), Vietnam proposes to generate 70 % of

its power needs from coal.

Cost developments

Data on employees and costs are not yet available.

Since Vietnam is exporting more and more, it must

be assumed that this is profitable in Vietnam's cur-

rent economic setting.

Productivity per man-year is said to be 500 – 600 t.

Infrastructure

The coasts on the eastern side of Vietnam are most-

ly shallow and so far have only permitted access

for ships below 10,000 DWT. Thanks to excavation

work, bigger ships can be loaded in Campha, so

that 65,000 DWT ships can also be handled, with

additional loads when lying in the roads.

Hongai port can handle 10,000 DWT ships quayside

and 30,000 DWT ships in the roads.

According to Vinacom, total export capacity at Viet-

nam’s ports amounts to approximately 34 Mt/a:

Hong Bi and containing – according to Vietnamese

data – 6.6 Bt of measured, including 3.1 Bt of mine-

able, anthracite reserves.

Production is both in underground pits and open-

cast mines. The share of opencast mines is on the

decline, since the deposits drop to depths of 350 m,

so that they are no longer accessible for opencast

operations. Ninety-five per cent of output is anthra-

cite.

Besides the anthracite reserves, there are also sub-

bituminous coal resources in the Red River basin,

said to contain over a total area of 3,500 km2, 210

- 300 Bt lying 250 - 1,200 m beneath the basin. The

Red River basin is currently being explored more

thoroughly in order to determine which deposits

will be accessible in the medium term.

The qualities are low in sulphur (0.6 %) and,

depending on processing, can reach calorific values

of over 7,000 kcal/kg.

Mining development

Precise output figures are not available, although

on the basis of domestic consumption of approxi-

mately 14 Mt and exports of some 29.8 Mt we esti-

mate an output of about 44 Mt in 2006, extracted

from around 35 known mines. According to Vina-

com, the mining capacities of Vietnam's pits were

estimated as follows (most likely raw coal):

■ Opencast 26.5 Mt

■ Underground 38.1 Mt

■ Total 64.6 Mt

This helps explain the rapid rises in exports. The

government now demands that exports be kept

below 20 Mt/a in future with a view to securing

domestic needs.

Output is set to rise further and reach 80 Mt in the

long term (by 2025). At present, opencast produc-

tion predominates but, if output targets are to be

achieved, there will have to be a switch to more

underground operations due to deposit depletion.



88

In 2007, Vietnam's government levied a 10 %

export tariff to curb exports. Average export pro-

ceeds were approx. USD 30/t fob in 2006. This low

value suggests that it is relatively high-ash coal that

is reaching China, supplies which are competitive

only because of the short transport distance.

Outlook

Official Vietnamese data and the realities of actual

developments do not always agree. In the future,

Vietnam's energy needs will tend to rise and

restrict its export opportunities. The recent rapid

increases in output and exports are partially due

to the easily-worked deposits at opencast mines,

yet the future potential for opencast production

remains limited.

The hinterland infrastructure, i.e. roads and railway

lines, is being boosted with Chinese assistance, in

order to supply consumers in China's south-west.

Exports

Vietnam increased its exports from 17.1 Mt in 2005

to 29.8 Mt in 2006. The main takers are the south-

western Chinese power plants, some of them locat-

ed close to the coast in the provinces Guanxi and

Guangdong. They buy nearly 20 Mt and are used to

anthracite or low-volatile coal from China. Besides

China, Japan (2.2 Mt), Thailand and South Korea

(0.6 Mt) purchased further quantities in 2006.

Some of Vietnam's anthracite coal is also used as

PCI coal.

The growing Vietnamese exports of anthracite

steam coal, some of it low CV, is only viable thanks

to the short shipping distance across the sea to

China. In the normal international steam coal mar-

ket, this coal would stand no chance. All the same,

it covers a demand that possibly would have to be

covered from elsewhere in the world market, thus

providing some relief to a tight market. Some of

Vietnam’s exports also reach China via overland

routes.

Export and port capacities, Vietnam, 2006

Campha/Cua Ong

New ports in Campha

Hon Gai/Nam Cau Trang

Hon Gai/Dien Väng

Hon Gai/Troi

Uong Bi/dien Cong

Total

Mt

15.0

10.0

3.0

1.5

1.5

3.0

34.0

Hard Coal Production and Export Data for Vietnam

Output

Exports

Inc. China

Export rate in %

¹) estimate

28.0

11.3

6.1

40

34.0

17.1

9.9

50

44.0

29.8

20.1

68

2004Mt

2006¹)Mt

2005Mt


89

Coal-exporting countries • Poland

country’s power generation is based on hard coals

and lignite, three fifths being accounted for by hard

coal and two fifths by lignite.

Reserves/qualities

According to BGR, Poland has hard coal resources of

167 Bt and reserves of 12.5 Bt, i.e. a total potential

of 179.5 Bt. Polish data put currently accessible

reserves at 4.8 Bt and "easily reachable" reserves at

2.8 Bt.

They are distributed between the Upper and Lower

Silesian and the Lublin basins, with the Upper Sile-

sian coalfield accounting for 93 % of the total. The

coal formation there contains some 400 coal seams,

about half of which are of economic interest with

a thickness of 0.8 - 3.0 m. About two thirds of the

seams are at an incline of less than 10°, and the

rest at a maximum of 35°. Some 56 % of the minea-

ble coal reserves consist of steam coal, and 44 % of

Poland

General

Poland is not only one of Europe‘s traditional hard

coal producers; it was once one of the main sup-

pliers to the world hard coal market. The country

assumed the leading role among European coal

mining countries in 1972 with an output of 150.7

Mt and, until 1979, was the world‘s second largest

coal exporter after the USA, selling 41.4 Mt in that

year. Although its role as an exporting country was

already fading in the 1980s, output was maintained

at a significant level (1988: 193 Mt) compared with

other European countries. It was not until the polit-

ical turnaround in eastern bloc countries associated

with a growing market-economy that Poland experi-

enced, in the early 1990s, a contraction of its hard

coal mining industry, a process that had already

begun in Western Europe 20 years previously. Thus,

output amounted to a mere 94 Mt in 2006 and has

stabilized in recent years. Poland‘s coal is currently

in a better competitive situation than in the past

thanks to high world market prices. 93 % of the



90

The planned privatization of Poland's state-run pits

has failed to materialize to date and there is strong

opposition from the workforce to this policy. In any

event, for the steam coal mines, there are no seri-

ously interested buyers. More recent thinking aims

at an initial public offering with a sale of minority

shareholdings. Poland's mining sector urgently

needs investment to maintain output.

By 2010, the Polish state proposes to discontinue

its subsidies, which are currently some USD 2.0 –

2.3/t for steam coal. Work is now underway on a

new concept for 2007 – 2013 which is set to make

Poland's pits competitive and subsidy-free.

In the long term, output is nevertheless expected

to fall to 77 - 78 Mt in 2010 and to 70 Mt in 2020.

In the medium term, more investment will have to

go into the development of new reserves – above

all coking coal – in order to maintain output. So far,

the funds for this have been lacking. According to

Polish data, hard coal mining needs capital spend-

ing of USD 6.2 – 7.7 bn if it is to be competitive.

All mines in Poland are underground operations,

with average extraction depths around 600 m.

Extraction is fully mechanized, the coal being

mined by longwalling.

Poland's output is supplemented by imports of

5 Mt of mainly Russian coal. Coking capacity is

approx. 10 Mt/a. Some 55 – 60 % of coke output is

exported.

Cost developments

At present, the Polish hard coal mining sector has

a workforce of some 120,000. This suggests a

coking coal. All of the country‘s natural resources,

including coal, are state-owned.

The raw coal from modern underground operations

is diluted by secondary rock and requires prepara-

tion. In the past, this produced “western” quality

standards only for coking coal. The extension of

existing, and the commissioning of new, prepara-

tion plants in recent years has led to a closer match

to world market requirements, for all coals. This

quality is marked by 25 - 31 % volatile matter, 8

- 16 % ash, 7 - 11 % moisture, 0.6 - 1.0 % sulphur

content, and has a calorific value of > 6,000 kcal/kg

(as received), though the grinding hardness of 45 -

50 HGI is usually less favourable. The coking coals

are of medium to high volatility (23 - 33 %) with an

ash and sulphur content of 7 - 9 % and 0.6 - 1.0 %

respectively. Their coking properties with a swell-

ing index of 6 - 9 are excellent.

Mining development

Total output was down by 2.7 Mt in 2006 to some

94 Mt, so that the steady decline in Poland's out-

put continued. The scale-down in production came

mainly at the expense of seaborne exports (- 5.6

Mt), while domestic sales remained largely stable in

2006. Most output was lost at Kompania Weglowa

(- 2.2 Mt). Some pits were shut due to depletion of

deposits, others owing to inefficiency.

The coking coal group Jastrzebska, by contrast, was

able to increase its output and exports. The com-

pany is also profitable thanks to high income from

coking coal sales.

Poland`s largest hard coal producers

Kompania Weglowa SA

Katowicka Group Kapitalowa

Jastrzebska Spolka Weglowa SA

Independent mines

Total

18

7

5

4

34

17

7

5

4

33

52.6

17.7

12.8

14.0

97.1

50.4

17.0

13.3

13.7

94.4

15.1

1.6

2.3

0.5

19.5

10.7

1.4

2.9

0.8

15.8

Company 2005 2006Number of mines

2005 2006Output Mt

2005 2006Exports Mt


91

Coal-exporting countries • Poland

Exports in 2006 can be broken down as follows:

Exports

Seaborne

Overland

Total

0.8

2.2

3.0

7.8

5.2

13.0

8.6

7.4

16.0

Coking coalMt

Steam coalMt

TotalMt

While exports of steam coal fell by 3.7 Mt, cok-

ing coal exports edged up by just under 0.5 Mt in

2006.

The biggest takers of Polish coal – excluding coke

– were neighbouring states, like Germany (7.3 Mt),

the Czech Republic (1.6 Mt), Slovakia (1.0 Mt) as

well as Austria (1.2 Mt). The UK took 1 Mt.

Coke exports totalled 6.3 Mt in 2006. Poland

imported smaller amounts (5 Mt) of coal from Rus-

sia, Ukraine and the Czech Republic. The Russian

quantities could increase as Polish production

declines.

Export developments, Poland, 2004 - 2006

2004 2005 2006 Mt Mt Mt



Steam coal 18 16 13

Coking coal 3 3 3

Coking exports 5 4.5 6.3


Chief important countries/regions

EU-15/after 2004: EU-25 17.5 17.1 15.9

Outlook

Poland's mining sector faces further change.

Although output has stabilized in recent years, fur-

ther falls must be expected since too little is being

invested in the development of new reserves. Ris-

ing wages without matching advances in productiv-

ity, are also making the situation more difficult. For

productivity of just under 800 t/man-year. Major

improvements can hardly be expected with work-

ing depths of 500 - 600 m. Polish mining costs are

estimated at USD 60 - 65. If we include freight and

handling (some USD 20/t), Poland‘s mining sec-

tor requires export prices of at least USD 80 - 85/t

for steam coal. The labour cost share is over 50 %.

Together with the USA, this makes Poland a mar-

ginal seller to the Atlantic steam coal market.

The zloty has recently firmed against the USD,

and this is having an adverse effect on income for

Poland. The zloty has also firmed against the euro.

Steam coal

Fob costs

60-65 70-75

2004/2005USD/t

2006/2007USD/t

Due to high wage agreements in recent years,

which are well above the advances in productivity,

the competitive position has further deteriorated.

This is also reflected in declining exports, above all

seaborne exports.

Infrastructure

In view of falling export volumes, transport infra-

structure is now rather oversized and saw no chang-

es in 2006. Export logistics are well developed in

Poland. Loading ports include Gdańsk, Świnoujście,

Szczecin and Gdynia. While in Gdańsk, the load-

ing of capesize freighters is possible, Świnoujście

and Gdynia are accessible to panamax ships, and

Szczecin only for handysize ships. Also of growing

importance are the railways for coking and high-ash

coal exports, above all to Germany. This is where

both Polish and German freight companies operate.

Inland shipping (Oder River) is of no great impor-

tance for exports, at approximately 1.5 Mt or 8 % of

total exports.

Exports

Hard coal exports fell from 19.5 Mt in 2005 to 16

Mt in 2006. Of this, Weglokoks exported 15.3 Mt;

smaller amounts were exported via other distribu-

tion routes, going mainly to neighbouring coun-

tries.



92

its exports to be competitive, Poland needs a high

world-market price level. Increasingly, the country

is confining itself to neighbouring countries as buy-

ers, i.e. the Baltic states, Germany and Austria. In

the medium term, more coal could be exported to

the Czech Republic where a strong decline in out-

put is expected for the next few years.


93

Coal-exporting countries • Venezuela

able, since the state has substantial holdings in the

big coal companies. The envisaged expansion of

the coal mining industry is being hindered by state

intervention in the private sector‘s development

plans for the infrastructure. To this must be added

uncertainty among foreign investors about the

security of investment and about the future taxa-

tion of profits and their transfer abroad.

With Hugo Chavez now exerting an even greater

influence on raw-material policy than in the past,

investment certainty for foreign investors has con-

tinued to fall.

Reserves/qualities

The country‘s coal resources of some 7 Bt are rela-

tively modest by world standards. This is true in

particular of the measured and mineable 1.4 Bt

reported by the Venezuelan energy ministry. The

BGR puts reserves at 480 Mt, i.e. a total potential of

some 7.5 Bt. Most of these resources can be mined

in opencast operations and are distributed across

five coal basins, i.e. the Fila Maestra and Naricual

basins located on the East coast; the Falcon basin,

likewise near the coast; the Andine basin situated

southwest of Lake Maracaibo; and, finally, the Gua-

Venezuela

General

One potential major contributor to the world hard

coal market is Venezuela. This country made its

first big impression in 1991 with exports of 1.9 Mt

and now supplies the world market with a volume

of some 8 Mt, in 2006, a 1 % share. Although Ven-

ezuela will never be a big player on an international

level, its development potential is nevertheless

substantial and of growing interest to European

and North American consumers in particular.

One obstacle to the speedy development of coal

exporting is poor infrastructure, which has been

inadequate for some years. There has been a lack

of efficient rail links from the exporting mines to

the deep-water ports and of facilities for handling

capesize vessels.

As in all of South America, raw materials are in

state ownership. Coal mining rights are granted by

the mining ministry (Ministerio de Minas), which

issues licences for prospecting, exploration and

extraction. The royalty levied on the coal mined

is 10 % of the sales proceeds, free mine. As in

the mineral oil sector, state influence on the coal

mining industry, which has been unimportant as

regards exports and foreign currency, is consider-



94

seams. Since the seams are not seriously contami-

nated with mineral matter, even the raw coal is

of very high quality and needs no further costly

preparation apart from crushing and screening. The

remaining underground mines are confined to small

companies with low degrees of mechanization.

Coal mining is currently concentrated on the Gua-

sare region, which accounts for some 90 % of total

output, while mining by the small operators in the

east of the country (Fila Maestra/Falcon) has been

dormant for some years now.

The biggest producers currently are CARBONES

DEL GUASARE and CARBONES DEL GUAJIRA, with

other mines located in the Falcon and Fila Maestra/

Naricual basins not producing at the moment. Alto-

gether, Venezuela‘s hard coal mining sector has a

mining capacity of just under 9 Mt/a.

Venezuela's output is largely a function of the Paso

Dieblo opencast mine. Here, productivity is 5,000

to 6,000 t/man-year. Due to transport logistics

based on trucks and to the truck-and-shovel meth-

od, output as well as transport by truck to the coast

are heavily affected by fuel-price rises.

Cost developments

Mining or operating costs in modern large-scale

opencast mines are currently quantified at USD 18

- 22/t. Transport by truck to the port (some 80 km)

costs a further USD 3 - 9/t with handling costs of

USD 3 - 5/t, since the coal must be transported to

an offshore loading terminal by barge. This means

that the coal finally reaches the ship with fob costs

of USD 28 – 36/t.

sare basin in the extreme northwest of the country

which, with more than 90 % of total reserves, is the

most important by far. A coal formation located

there dates back to the more recent Cretaceous or

the late Tertiary (approximately 70 mill. years ago).

It is 130 m thick with up to 23 seams having a max-

imum thickness of 13 m. With a moderate incline,

the deposits are hardly disturbed. The Guasare

basin is a continuation of the neighbouring Colom-

bian Guajira coalfield.

The quality of the Guasare coals is largely identical

with Colombian Guajira coal. The highly volatile (35

%) coal contains a mere 6 - 7 % ash and 7 % mois-

ture, so that a calorific value of 6,900 kcal/kg (as

received) is reached. This being so, it makes excel-

lent steam coal, especially since it contains only 0.5

% sulphur. What is more, it also has slight coking

properties, so that it is increasingly being used as

PCI coal, and some can also be employed as semi-

soft coking coal.

Mining development

Venezuela's coal mining sector, despite attractive

deposits and short routes to the coast, is making

little headway. Difficult weather conditions have

again impaired existing production. The small

opencast mine Fila Maestro was even shut down.

The Brazilian coal, iron and steel group CVRD is

interested in the Socuy project. After the project

was delayed by Venezuela's elections, talks are now

to be resumed. The Venezuelan state is said to be

getting involved itself in the extensions to the nec-

essary coal port and financing it.

According to the Zulia-State Coal Authority, the

planned infrastructure measures are said to permit

a considerable expansion of coal production. The

rise in output could be achieved by projects at the

Socuy, Mina Norte, Las Carmelitas, Paso Diablo and

Cosila mines. By 2012, output in Zulia province is

set to grow to 24 Mt. The potential for this certainly

exists, although despite many announcements

there have been no results so far.

Most of the coal is mined in opencast pits using

truck and shovel in view of the large number of

Output/exports by company

Carbones Desl Guasare

Interamerican Coal

Carbones De La Guajira

Other

Total

5.27

0.52

0.77

0.52

7.08

5.50

1.00

0.63

0.62

7.75

2005Mt

2006Mt


95

Coal-exporting countries • Venezuela

Planning for new infrastructure is slow in getting

off the ground. For the Socuy project, the construc-

tion of both a port and an 80-km railway line is

necessary. The project, going by the name Zona

Portuaria Simon Bolivar and with an initial capacity

of 12 Mt/a for panamax ships, is making only slug-

gish progress; the same is true of planning for the

railway line from Socuy/Paso Diablo to the port.

Venezuela's ports also shipped some 1.5 Mt of

Colombian coal.

Exports

In line with disappointing production develop-

ments, exports have been similarly disappointing.

The biggest buyer was the USA, taking 4.5 Mt.

Canada imported 0.5 Mt. South American states

bought 0.7 Mt. About 2 Mt went to Europe. Vene-

zuela's export figures also include some Colombian

quantities.

Export developments, Venezuela, 2004 - 2006

2004 2005 2006 Mt Mt Mt





EU-15/after 2004: EU-25 2.4 2.1 2.0

USA 4.4 4.3 4.5

Outlook

Venezuela's full output and export potential

remains unused. The Guasare basin with current

operations at Paso Diablo and the projects Mina

Norte, Socuy and Caduivi would have the potential

for 20 Mt/a. For this, a deep-sea port is necessary.

If CVRD – thanks to the good Brazil/Venezuela

link-up – can go ahead with the Socuy project, this

would be a breakthrough for the Venezuelan coal

sector.

Given this cost range, it should be borne in mind

that the exported coal has a favourably high calo-

rific value in comparison with most internationally

traded coal.

Infrastructure

The infrastructure of the Guasare coalfield is poor.

There is no rail link from the mines to the ports of

shipment, so that the entire amount of several mil-

lion tonnes a year has to be transported by truck

over a distance of 85 km on public roads. All ports,

like Santa Cruz de Mara, Palmarejo, Baja TCSV and

Ceiba, are located on Lake Maracaibo. They have a

handling capacity of just under 10 Mt annually, but

are only directly accessible for handysize ships with

a low draught. Panamax ships, by contrast, can only

be handled far from the coast either by barge and

pontoon crane or by tanker converted into a float-

ing interim store. Although now technically opti-

mized, this is still a costly procedure.

Exports via Venezuelan ports

Total

Bulk Wayuu

Carbones Del Guasare

El Bajo

Carbones Della Guajira

Interamerican Coal

Guanta

Geoconsa

La Ceiba

Carbones Del Caribe

Interamerican

Millinton

Palmarejo

Xcoal

Canevca

Millinton

Carbones Del Guasare

2005Mt

2006Mt

5.61

0.81

0.13

0.78

0.47

7.80

5.60

1.00

0.20

0.80

0.40

8.00

Steam coal

Fob costs

24-31 27-34

2004/2005US $/t

2006/2007US $/t



96

Western, Central and Eastern Europe, while in Asia

they can be found in Siberia and above all in China.

In North America, they are supplemented by hard

coals from the Mesozoic era, i.e. the Jurassic and

the Cretaceous periods (130 - 70 mill. years). They

are located in the mining areas of the Rocky Moun-

tains in the US and Canada and in their eastern

foothills.

The hard coal deposits of the southern hemisphere,

by contrast, were formed in the Palaeozoic era or

the Permian period, i.e. 250 – 290 mill. years ago

and in what were then temperate zones. They are

found only sporadically in southern Brazil (Santa

Catarina), but above all in South Africa and in the

east Australian coalfields of New South Wales and

Queensland. India's hard coals, too, (from the

time when India still formed part of South Africa

in earth's evolution) belong to the Permian, and

only the hard coals of South America's northern

Deposits

Coal, which is a product of organic, i.e. plant, sedi-

mentation, occurs in seam-shaped deposits. Since

this process was not continuous, the sediment is

often interspersed with clayey-sandy sediments,

so that we usually encounter coal in multi-seam

deposits. Growing pressure from more recent rock

sediments triggered a carbonization process which,

with increasing dewatering of the organic substanc-

es and carbon enrichment, ended in the formation

of coal. The rock formations that followed then

frequently deformed what had originally been hori-

zontal seams with a series of folds and faults.

Most of the hard coal resources in the northern

hemisphere date back to the Carboniferous period,

i.e. their sedimentation occurred 290 - 355 mill.

years ago. The deposits in North America include

the hard coal mining areas of the Appalachians

and Canada's eastern provinces, in Europe those of


Coal Conveyor

Coal Pillar

Underground coal mining operation

Coal Conveyor to Surface

Mine Surface Facilities

Mined Area

Coal Shearer and Roof Supports

Coal Pillars Retained forRoof Support

Direction ofMining

Next Longwall Panel to be Mined

Coal seam

Coal Shearerand Roof Supports

Mined AreaPreviously Mined Longwall Panel

Source: World Coal Institute

ContinuousMiners Developing Roadways


97

increasing use has been made of hydraulic shovels

recently. By contrast, the extraction of several, and

more inclined (upward of 15°) seams is by truck and

shovel, with the entire group of seams and waste

layers being worked in horizontal slices (levels). The

group of seams is first drilled and blasted and then

worked from top to bottom, separately for waste

and seams, the material being loaded onto heavy

trucks. Rope and smaller hydraulic shovels as well

as frontend loaders are deployed, occasionally sup-

ported by bulldozers.

A technique hardly ever used in hard coal mining,

by contrast, is the extraction method usual in lig-

nite mining involving bucket wheel excavator, since

its deployment requires relatively soft coal and sur-

rounding strata.

Deposits where the above waste/coal ratio of 6 –

8 bcm/t is exceeded are worked in underground

mines. Where deposit depth allows, this is done

from the surface by tunnelling using gently sloping

tunnels fitted with conveyor belts. Coal deposits

at greater depths, by contrast, are developed by

shafts, through which the coal is conveyed. In

underground mining, it is now rare for seams of less

than 1.5 m thickness to be worked. Higher-quality

coking coal is also mined to thicknesses of 1 m in

places. Extraction involves either board and pillar

or longwall mining. In the former case, a continu-

ous miner is used to drive haulage roads crossing at

Andes, i.e. Colombia and Venezuela, are assigned

to earth's late Mesozoic era, i.e. the Cretaceous

period.

Mining techniques

Coal deposits can extend to depths of several thou-

sand metres in complex conditions, but can also be

flat deposits close to the surface, so that extrac-

tion conditions, too, vary, and the coal must be

extracted selectively from the surrounding strata.

Depending on the depth of the coal seams and

their overlying layers (waste), the coal is extracted

either in opencast pits or underground mines.

The profitability threshold worldwide in the open-

cast mining of hard coal is currently an average

waste/coal ratio of some 6 – 8 bank cubic metres

(bcm) to 1 t of raw coal for the entire opencast

pit content and its life. The higher the sales pro-

ceeds for the coal, the higher the feasible waste/

coal ratios. The mining technology employed in

opencast pit operations depends on the number

and thickness of the seams and on their inclina-

tion. Minimum thicknesses of 0.5 to 1.0 m are

considered workable. Where the seams worked are

flat, the waste is crushed or loosened by drilling

and blasting and removed by dragline. The seam

exposed in dragline operations is likewise drilled

and blasted and then loaded by shovel or frontend

loader onto heavy-duty trucks for transportation. In

this work, rope shovels are generally deployed, but

Overburden

Graded embank-mentto act as baffle against noise and dust

Topsoil and subsoilstripped by motor scrapers and carefully stored

Overburden from benches dug by shovels and hauled by dump trucks

Overburden being excavated by dragline

Spoil pile Dragline bucket unloads burden

Dragline backfill levelled by bulldozers

Tipping overbur-den frombenchesto backfill

Subsoil and topsoil being replaced and shaped

Grass and trees

Surface coal mining operations and mine rehabilitation

Source: World Coal Institute

Coal seamsexcavation

After the soils are replaced in their proper sequence, they are ripped to relieve compaction and then cultivated, limed and fertilised

Dragline




98

the Carboniferous period, which are widely distrib-

uted in the northern hemisphere, prove to be rela-

tively easy to prepare, the situation is much more

difficult in the case of the "Gondwana" coals of the

southern continents from the Permian period owing

to the intimate intergrowth of coal with inorganic

sedimentary substances.

right angles into the coal seam, with pillars being

left standing between them to bear the cover.

Transportation of the raw coal to the belt conveyors

is often by shuttle cars. One variant of the board

and pillar method involves conventional drilling

and blasting using frontend loaders to load the coal

onto the belts. In longwalling, by contrast, continu-

ous miners are used to drive horizontal roads into

the seams to be mined and then longwall equip-

ment is installed, frequently several hundreds of

metres long. This system consists of walking roof

support, face conveyor and extraction machine, i.e.

shearer. This face moves as mining advances uphill,

leaving a worked-out space without pillars, which

causes the cover to collapse behind the advancing

operations.

Preparation

Since raw coal is often seriously diluted owing to

the high degree of mechanization in mining opera-

tions, it must be subjected to a cleaning process,

i.e. preparation, to meet customer requirements.

This is true, above all, if the hard coal has to be

transported over longer distances as is usually the

case in export coal. No preparation is required,

by contrast, if the hard coal is to be used in the

immediate vicinity of its mining area, e.g., in power

plants.

For preparation, the run-of-mine coal is first

crushed while still moist and then separated by

grain size, i.e. as coarse, fine and very fine. In the

subsequent sorting of coal and tailings, the crucial

features are specific weight in the case of coarse

and fine grain, and surface properties in the case

of very fine grain. The separating medium in the

former case is either water or heavy media (sink/

float process), with the separation taking place

in sink-float vessels (for coarse grain) or washers

(jigs), or in water cyclones or heavy media cyclones

(for medium grain). The very fine grain, by contrast,

is cleaned by froth flotation. The crucial economic

factor in preparation is the share of clean coal

obtained from the raw coal. This is some 80 % for

steam coal and 65 - 70 % for coking coal. As qual-

ity requirements rise, the share of clean products

in the raw coal falls. While the hard coal types from


99

They have their absolute limits in:

Canada

Russia

1,100

4,000

4,500

2,450

on average

Kuznetsk/Baltic ports

Yakutia/Far East

km

The railroad is often double-track with standard,

but also wide (Russia) gauges and low inclinations,

and is designed for high axle loads (> 25 t). The

unit trains of up to 2.5 km in length (200 wagons

and 4 - 6 engines) are powered by diesel or elec-

tric engines and have a capacity between 10,000

– 16,000 t. Where rail links to the coast are non-

existent, the coal can also be taken to the port by

truck (Colombia 300 km, Venezuela 80 km). Another

option is shipping by inland waterway, e.g. to the

US Gulf ports (600 - 2,900 km) or, in Indonesia, to

the deep-water ports/loading points.

In the port of shipment, the coal is discharged by

tippler and moved by belt conveyor and stacker

to stockyards that can take a total volume of up

to 6 Mt with up to 50 different varieties. Recovery

is by bucket wheel reclaimer or subsurface extrac-

tor onto conveyor belts, which take the coal to the

shiploader and, finally, to the ship. For each ship to

be loaded, there are one or two shiploaders avail-

able with loading capacities of up to 6,000 t/h,

so that loading a large freighter hardly ever takes

more than a day. Altogether, there were some 100

ports of shipment and/or offshore loading facilities

worldwide in 2006 with an annual handling capac-

ity of about 1,200 – 1,300 Mt of coal.

Marine transport of coal is by bulk freighter. The

entire bulk volume on the world market amounted

to approx. 2,900 Mt in 2006. It can be broken

down as follows:

The transportation costs for hard coal – especially

where purchases are made overseas – have a crucial

share in the end-consumer price, which can account

for more than half the total costs depending on the

supplier country.

In view of the impact of transportation costs on

prices, the efficiency of the coal chain is being con-

tinuously improved. The chain from mining location

to end consumer consists of the following links:

■ Transportation in the exporting country to

the coast

■ Storage in the exporting port

■ Port handling and, in places, additional

transportation to an offshore loading facility

■ Marine transportation

■ Discharge at the port of destination

■ Storage in the importing port

■ Transportation to the consumer.

Transportation of hard coal to the port of shipment

is generally by rail. The feasible distances for eco-

nomic transportation are limited by cost considera-

tions, i.e. the export mines are located relatively

near the coast. For example, rail distances for

export coal from the following countries are:

Colombia

Indonesia*

Australia

New South Wales

Queensland

South Africa

USA

China

45-210

50-200

80-280

132-380

420-590

480-1,425

1,690-3,650

550-650.

Appalachians

Powder River Basin

km

* inl. shipping only





100

for delivery in the next three years. Depending on

cargo size, distance to the port of discharge and

permissible draught in the ports, three ship sizes

are deployed to transport the coal, viz.

■ 10,000 to 50,000 dwt = handysize,

■ 50,000 to 60,000 dwt = panamax and

■ 80,000 to 150,000 dwt = capesize

Handysize ships are mainly used for small quanti-

ties (e.g. anthracite, lump coal), short distances,

coastal shipping and ports of shipment/destina-

tion with only little draught. However, most coal

transportation on the oceans uses panamax and

capesize freighters. The first can pass through the

Panama Canal, while the second have to round

Cape Horn or the Cape of Good Hope; in the lat-

ter case, this is not entirely true, since the Suez

Canal can now be used by smaller capesize ships as

Entire bulk volume on the world market 2006

Coal

Steam coal

Coking coal

Iron ore

Cereals

Bauxite

Phosphate

Other

Total

Mt %

782

595

187

721

281

69

31

989

2,873

27.2

25.1

9.8

2.4

1.1

34.4

100.0

For traffic in dry bulk commodities, a freight hold of

373 mill. dwt in 6,369 ships was available in 2006.

Coal travelled some 4,000 Btonne-miles, equiva-

lent to an average transport distance per tonne of

approx. 5,000 nautical miles. At end-2006, about

1,183 bulk carriers had been ordered, scheduled

Cost structure of various export countries for steam coalCIF ARA 2006

Aus

tral

ia(N

SW)

Russ

ia

Ind

one

sia

Col

om

bia

Sout

h A

fric

a

USD/t tce

0

10

20

30

40

50

60

70

80

0

Ocean transport

Domestic transport/transhipment

Mining costs

Source: VDKI. Hamburg 2007


101

well. In coal shipments, 45 % are accounted for by

capesize ships, 30 % by panamax units and 25 % by

handysize freighters.

In the receiving countries, some 220 ports of dis-

charge were available in 2006 with a total annual

handling capacity of 1,200 – 1,300 Mt, although

this does have to be shared with other dry bulk

commodities. Some of these have dedicated coal

terminals, however, e.g. in the ARA ports (Amster-

dam-Rotterdam-Antwerp). Coal discharge is usually

by grab unloader onto belt conveyors, which move

the coal to stockyards, though the discharge proc-

ess, with some 15,000 – 25,000 t/d, takes much

longer than loading.

Subsequent inland transportation is from the stock-

yards, where the coal is loaded onto unit trains or

river boats and shipped to consumers. The train

sizes deployed are much smaller, however, than in

the exporting countries and rarely reach 2,000 t. In

some places, e.g. in the ARA ports, the coal can be

loaded directly or via stock-yards onto river ships.

The standard barge size takes 2,000 - 2,500 t and is

able, depending on water levels, to travel the Cen-

tral Rhine in tows of four barges and on parts of the

German waterway network in single barges.




102

World Coal Institute: Ecoal, The Newsletter of the

World Coal Institute – various publications, London.

Also, items of information from the international

coal press, editions 2005 - 2007

Australian Coal Report, Sydney, Australia

China Coal Report

Clarkson Dry Bulk Trade Outlook

Coal Americas, Knoxville, USA

Coal Trans, Epsom/Surrey, UK

Indonesian Coal & Power, Sydney, Australia

McCloskey´s Coal Report, Petersfield, UK

Platts International Coal Report, London, UK

South African Coal Report, Randburg, South Africa

World Coal, Farnham, UK

As well as brochures and news of the national

umbrella organizations of the coal mining sector

and of coal producers and consumers; talks at coal

conferences, in particular Coaltrans conferences

and McCloskey coal conferences

Baruya, Paul: World Coal supply costs, IEA Clean

Coal Centre, London 2007.

BP Plc: Statistical Review of World Energy 2006,

London 2007.

Coal Industry Advisory Board: Coal to Liquids,

Workshop Report 2006, Paris 2007

Energy Information Administration – EIA: Interna-

tional Energy Outlook 2007, Washington 2007.

Gesamtverband des deutschen Steinkohlenberg-

baus (Central Association of German Hard Coal

Producers): Jahresbericht "Steinkohle 2006", Essen

2007.

International Energy Agency: Coal Information,

Paris 2007.

International Energy Agency: World Energy Invest-

ment Outlook, Paris 2003.

International Energy Agency: World Energy Out-

look 2006, Paris 2006.

Kopal, Christoph: Weltmarkt Steinkohle, Zeitschrift

für Energiewirtschaft, Number 1, 2007.

National Mining Association: 2006 Coal Producer

Survey, Washington 2007.

Perret, Guillaume: The International Coal Trading

Market, London 2007.

Verein der Kohlenimporteure (Association of Coal

Importers): Jahresbericht 2006 (Annual Report

2006), Hamburg 2007.

World Coal Institute: Coal: Liquid Fuels, London

2006.

Literature


RWE Power


2007 Edition

RWE Power

Essen • Cologne

www.rwe.com

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ring

end

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10/

2007

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for

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