WORLD COAL
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JULY 2016
JULY 2016 - VOLUME 25 NUMBER 7
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1906 – 2016
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Contents
Contents 03 Comment
Stackers & Reclaimers
05 Coal News
24 Economic, Ecological And Safe
For decades, scraper reclaimers have been proving their sustainability as an economic, ecological and safe way to manage coal stockpiles at power, steel and cement plants, as Andreas Markiewicz, SCHADE Lagertechnik GmbH, Germany, explains.
10 Industry View: Coal After Paris Debo Adams, IEA Clean Coal Centre.
53 Supplier’s Round-Up
Regional Report: Russia
Conveyor Maintenance
12 Is There A Future For The Russian Coal Industry?
29 Centred: The Art Of Conveyor Belt Tracking
Bilan Uzhakhov, Director General of Russian Coal Group, Russia, reviews the challenges facing the Russian coal industry and explains what Russian coal companies need to do to survive.
Paul Harrison, Martin Engineering, USA, provides part one of a two part series on conveyor belt mistracking, including ways to identify and combat these misalignments.
Room-And-Pillar Mining
Underground Automation & Control
34 The Power Of Information
17 The Strongest Link
Karol Bartodziej, FAMUR, Poland, details the key factors behind automation and control system reliability in underground mines.
Yiwen Sun, Joe Sidhom and Willem Fourie, Joy Global, USA, outline the importance of employing operational excellence to optimise underground haulage systems.
39 Lowering The Cost Of Low-Seam Mining
Uli Lange, Eickhoff Germany, and Francois van Tonder and Werner Marx, Eickhoff South Africa, illustrate the correlation between room-and-pillar production costs and seam heights and explain what OEMs can do to support low-seam mining operators.
General Interest 43 Thinking Outside The Box
Harold A. Walker and Donna F. Walker, PICOR, USA, illustrate how modern coal ports can advance shiploading and eliminate port pollution.
47 Clean, Green and Pristine
Robin Eves, Clean Coal Technologies Inc., USA, introduces a new clean coal technology that intends to enable coal to provide an economical and environmentally ‘cleaner energy bridge’ to the future.
This month's
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o it happened. On 23 July, the UK voted to leave the EU by a margin of 52% to 48%. The result has thrown the UK’s usually staid politics into disarray; discussions of that, however, I will leave to mainstream and social media. But here are a few thoughts on what a Brexit vote might mean for the coal industry. The short answer is: not a lot. As Nick Butler, Visiting Professor and Chair of the Kings Policy Institute at Kings College London wrote recently in the Financial Times: “At one level, the UK’s exit from the EU should have very little impact on the energy business. The price of oil, gas and coal is set by international markets, not by the institutions in Brussels.” Indeed, other factors will have a much greater impact on the coal market – from Chinese cuts to its coal capacity to the global (over)supply of natural gas. And then, of course, there is a certain US presidential election coming up in November. In the UK itself, it is true that old coal-fired plants have closed as a result of EU regulation. But some of the policies that have most damaged the UK’s coal-fired power sector have been homegrown. The UK’s carbon tax, for example, significantly damaged the economics of coal plants. Similarly the much-publicised promise to close all coal-fired power plants within the decade was a British government decision, as was the withdrawal of funding for carbon capture and storage research. Indeed, as Professor Butler puts it, UK energy policy has been shaped more by “the emotional attachments of individual leaders to particular forms of energy and their hostility to others” than any diktat from Brussels. We will therefore need to wait until the Conservative Party elects its new leader (and the country’s next Prime Minister) until the shape of the UK’s energy policy becomes clearer. Even so, it would be a surprise indeed if coal saw any renaissance. Staying with the EU for a moment – and more interestingly for the coal industry (although much less widely publicised) – Germany has reportedly abandoned plans to set a timetable to end coal-fired power production. Germany had previously said it would phase out coal “well before 2050” in order to help meet its climate goals. More protests at the country’s lignite mines and power plants seem likely – especially as domestic lignite mining is only due to end around 2045, while hard coal mining will be done by 2018. Ultimately, however, the coal industry will be impacted more by decisions made in Beijing, New Delhi and the capitals of ASEAN countries than those made in London, Brussels or Berlin. And there are signs of a slight improvement: BMI Research recently raised its average price forecast for thermal coal to 2020 on the back of aggressive cuts to supply – particularly in China. Moreover, last month saw positive news from a major mining company after months of divestments. BHP Billiton announced that it would be increasing both its thermal and metallurgical coal production over the next few years to take advantage of its low position on the cost curve (see Coal News, p. 6). Making the announcement, BHP’s President Operations Minerals Australia, Mike Henry, presented a bullish case for coal: “The developing world needs steel; steel needs coking coal,” he said. Meanwhile, on thermal coal, the company was “confident that base demand in emerging economies will remain resilient for decades to come.“ After four-years of slowdown – and barring any further exogenous shocks – there may be signs of life in Old King Coal.
Banpu’s Achievements on Commitment to Sustainability to Become a World-class Organization
BANPU “The Asian Face of Energy”
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Thriving as Sustainability Leader Banpu is recognized as the sustainability leader in the Coal and Consumable Fuels Sector, winning the prestigious ‘Industry Leader’ and ‘Gold Class Sustainability’ awards for two consecutive years (2015 and 2016), as well as the ‘Industry Mover 2016’ award by RobecoSAM, an assessment company in charge of the Dow Jones Sustainability Indices (DJSI).
Attaining International Acceptance Banpu was selected as a member of the Dow Jones Sustainability Indices (DJSI) in the Energy Sector of the Emerging Market Index for two consecutive years (2014 - 2015).
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Coal News
Coal News INTERNATIONAL GE goes “all in” on coal with the launch of Digital Power Plant for Steam
M
edia reports often characterise coal and coal-fired power as a technology of the past: a dirty baseload power source that has no place in today’s cleaner, greener and ultra-flexible power mix. But one company is challenging that perception and helping to bring coal very much into the twenty-first century. That company is GE. World Coal first reported on what GE was doing in the coal-fired power space back in April, when the company announced it was acquiring NeuCo – a supplier of plant optimisation technologies to the coal power industry. But GE is now going further with the launch of the Digital Power Plant for Steam at its Minds + Machines event in Paris. Digital Power Plant for Steam is a suite of technologies that offers coal-fired power plants the opportunity to improve performance and efficiency, reducing greenhouse gas emissions along the way. It follows on the footsteps of similar solutions for the wind and gas power industries – but as Scott Bolick told World Coal in a recent interview, coal throws up its own unique challenges and opportunities.
The coal challenge
Firstly, the average efficiency of coal-fired power plants around the world is just 33%, which is not helped by the relatively old age of the existing fleet: 50% of coal-fired power plants in Europe, for example, are over 25 yrs old. Coal-fired power plants are also increasingly being asked to operate flexibly to work around more intermittent renewables energy sources – not something that they were originally designed to do. And of course there is the challenge of emissions and climate change regulations – particularly after the COP21 Paris Agreement. GE’s Digital Power Plant for Steam helps to tackle these challenges – both in
new plants and as a retrofit on almost all existing plants commissioned in the past 25 yrs, including non-GE and legacy Alstom plants. It represents GE going “all in” on coal-fired power efficiency, said Bolick. For example, Digital Power Plant for Steam is able to contribute 1.5 percentage points of efficiency over the life of the plant, helping to maintain peak efficiency for longer periods of time. This reduces coal consumption (reducing costs) and carbon emissions.
Digital Power Plant for Steam So what exactly does Digital Power Plant for Steam offer coal-fired power plant operators? According to Bolick, it can be broken down into the following major applications:
nn Asset Performance Management for the Digital Steam Plant: monitors equipment health, informing operations decisions and helping to reduce unplanned downtime and extend plant life. nn Operations Opimisation for the Digital Steam Plant: provides customers with plant and fleet-wide visibility of the impact of operations decisions on efficiency, emissions, capacity and production costs. This includes: Boiler optimisation. Coal analysis. Smart start. nn Business Optimisation for the Digital Steam Plant: this aggregates information, such as fuel and power price, demand and plant capacity, to enable energy traders to make better buying and selling decision.
Case study: Owensboro Municipal Utilities
An example of what can be achieved by GE’s Digital Steam Plant system comes
from the town of Owensboro, Kentucky. Owensboro Municipal Utilities (OMU) has been running the boiler optimisation software, also know as BoilerOpt, at its Elmer Smith coal-fired power plant since 2005 – 2006. GE acquired BoilerOpt with its acquisition of NeuCo earlier this year and it now forms a part of the Digital Steam Plant offering. The optimisation software allowed OMU to reduce its NOX formation by 10 – 15% before any post-combustion control systems were added, explained Kevin Frizzell, Director of Power Production at OMU to World Coal. But it also provided a benefit after the NOX control systems started to impact steam temperatures in the plant’s boilers. BoilerOpt allowed OMU to balance the need to manage NOX formation with the need to maintain steam temperature – to “hit the sweet spot”, as Frizzell put it – something that human operators would have found much more difficult.
Setting the platform
Returning to the big picture: coal is set to remain the world’s second largest energy source through to 2030 – and an even more critical power source for emerging economies. Yet the operating environment that coal faces is in almost constant flux at present as renewables disrupt the traditional model of baseload power and regulations make it tougher to operate coal-fired plant. In that environment, innovation is key. As Ganesh Bell, Chief Digital Officer at GE Power said recently, the only way to meet the current challenges “is by applying data science and intelligent software-defined automation to every aspect of the electricity value chain.” Digital Power Plant for Steam “marks another big step on that journey.”
Read the full article: bit.ly/29pZmdd July 2016 | World Coal | 5
Coal News
Coal News DIARY DATES Coaltrans Australia 25 – 26 August 2016 Sydney, Australia www.coaltrans.com/australia 11th ECCRIA 5 – 9 September 2016 Sheffield, UK www.maggichurchouseevents.co.uk/crf Mining Strategic Excellence: South America 6 – 7 September 2016 Santiago, Chile www.metalbulletin.com/events/miningsa Electra Mining Africa 2016 12 – 16 September 2016 Johannesburg, South Africa www.electramining.co.za Coal Marketing Days Conference 20 – 21 September 2016 Pittsburgh, USA www.platts.com/events MINExpo 2016 26 – 28 September 2016 Las Vegas, USA www.minexpo.com Coaltrans Japan 29 – 30 September 2016 Tokyo, Japan www.coaltrans.com/japan Coal Power Asia Conference 3 – 5 October 2016 Kuala Lumpur, Malaysia www.coalpowerasia.com World Coal Leaders Network 16 – 18 October 2016 Lisbon, Portugal www.coaltrans.com/world-coal-conference World Mining Congress 18 – 21 October 2016 Rio de Janeiro, Brazil www.wmc2016.org.br IMARC 7 – 11 November 2016 Melbourne, Australia imarcmelbourne.com COAL-GEN 2016 13 – 15 December 2016 Orlando, USA www.coal-gen.com
6 | World Coal | July 2016
INTERNATIONAL BHP to take advantage of low-cost position
B
HP Billiton is to increase its coal volumes to the 2018 financial year by 5 million t – or 8% – according to a recent presentation by its President Operations Minerals Australia, Mike Henry, as the company exploits its low-cost assets. “Even in today’s difficult environment, all of our operations remain cash positive,” said Henry. The company has delivered over US$3 billion of productivity gains since 2012 and is targeting another US$600 million by the end of FY2017. The company also remained positive on the continued need for both its metallurgical and thermal coal. “The developing world needs steel; steel needs coking coal,” said Henry. “We have the strongest resource position in the seaborne market.”
Meanwhile, despite greater uncertainty in the outlook for thermal coal, the company was “confident that base demand in emerging economies will remain resilient for decades to come,” Henry added. “Our higher-quality coals position us well in an increasingly carbon-constrained world.” On the back of this positive outlook, the company will increase its coal production in both Queensland and New South Wales. In Queensland, where the company’s metallurgical coal assets are located, the company is aiming to increase production from 42.5 million t in FY2016 to 46 million t in FY2018. Meanwhile, thermal coal production in New South Wales will jump from 17 million t in FY2016 to 21 million t in FY2018.
INTERNATIONAL Rio Tinto restructures (again)
U
nder Rio Tinto’s new CEO, Jean-Sébastien Jacques, changes have been made to the mining giant’s organisational structure. Jacques has indicated the company is “performing remarkably well” and it is committed to “balance sheet strength”. “Focus on shareholder returns will not change, but we are strengthening our structure and delivery by placing our assets at the heart of the business to drive improved performance,” saidd Jacques. As of 2 July 2016, Rio Tinto’s product group structure will be reduced to four product groups: Aluminium, Copper & Diamonds, Energy & Minerals and Iron Ore. A newly shaped Growth & Innovation group has also been created to focus on future assets and technical support. Under the new structure, aluminium will retain its focus on safety, cash and value creation from its high-quality bauxite, alumina and aluminium businesses. Iron Ore will be exclusively
focused on the group’s well-established iron ore operations in Western Australia. Copper & Diamonds will combine two businesses into a single product group, which the company has indicated will help it maximise its technical underground mining expertise. The Energy & Minerals division will combine Rio Tinto’s coal, uranium, salt, borates and titanium dioxide businesses, as well as the Iron Ore Co. of Canada. This has led to speculation among analysts that the company could be preparing to spin off these assets. According to Sanford C. Bernstein, as reported by Bloomberg, the restructure and apparent combining of unwanted assets into the new Energy & Minerals product group could signal the initial steps towards a spin off. It highlighted the parallels to BHP Billiton’s actions last year, when BHP’s unwanted coal, aluminium, nickel, magnesium, silver, lead and zinc assets were combined and spun off to form South32.
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Coal News
Coal News INTERNATIONAL Coal exploration and mine development news
A
term is for 5 months, with a production target of 70 000 tph.
Tanzania
Australia
Canada
Cockatoo Coal
Atrum Coal
Feasibility work on the Mbeya coal‑to‑power project (MCPP) has now advanced to a level where Kibo can commence the formal EPC-bid process for both the Mbeya power plant and the Mbeya coal mine. On 31 May 2016, the company met with SEPCO III to start the EPC-bid process for the Mbeya power plant in accordance with the provisions of the joint development agreement in place between Kibo and SEPCO III. The EPC bid process for the Mbeya coal mine is also well under way and the company is set to receive the first EPC budget quotations from the eight bidders that have expressed an interest to bid for the mine EPC and mining contract.
round-up of news from coal projects around the world.
The Queensland state government has granted an additional mining lease for Cockatoo Coal’s Baralaba North mine. The lease covers an area of 1446 ha. and has been granted for a 25 year term. The new lease extends the life of the Baralaba North mine and – in conjunction with the environmental authority approved in February – will allow Cockatoo to continue to produce ROM coal at a rate of up to 4.1 million tpy. Cockatoo now expects to complete an updated reserve update over the new lease and two other lease areas associated with the Baralaba North mine as part of the development of new mine plans for the restart of the mine.
JOGMEC
Mitsui Matsushima is to form a joint venture with Japan Oil, Gas and Metals National Corp. (JOGMEC) to fund exploration of the Eastern Coal project in the southern part of the Bowen Basin in southeast Queensland. Under the agreement, JOGMEC will earn up to 42.1% of Mitsui Matsushima’s 41.7% stake in the Eastern Coal project.
Stanmore Coal
Stanmore Coal Ltd has reported that it has awarded a contract to UGM Highwall Mining Pty Ltd to commence highwall mining operations at Isaac Plains. The contract is for the extraction of over 300 000 t of low cost ROM coal. This coal will be extracted at approximately 20% lower FOB than the existing opencast and will be supplied to Asia. The contract 8 | World Coal | July 2016
Atrum Coal is finalising an updated pre-feasibility study (PFS) for its Groundhog North anthracite project in British Columbia. Under the new development plan, the company will begin with a smaller “starter” underground mine, in the so-called Western Domain of the Groundhog North Complex, with production of up to 880 000 tpy of ultra-high-grade anthracite. The updated PFS will then include subsequent development stages for larger underground operations. Additionally, following the granting of a Bulk Sample Permit in early May, Atrum is now preparing for site operations to extract bulk samples of anthracite at the Groundhog project to supply to potential customers, primarily in Japan and South Korea.
Jameson Resources
The pre-application phase of the environmental assessment (EA) process for the Crown Mountain metallurgical coal project in the Elk Valley coalfield of British Columbia is nearing completion. Two key documents have been completed in draft form: the valued components (VC) document and the AIR. The VC document identifies environmental and human environment components that will be assessed during the EA process. The AIR specifies the information that is required for the application for an EA certificate. The VC document is open for public comment. Following this, the company will finalise the VC document and produce a final AIR.
Kibo Mining
USA Paringa Resources
The CAPEX estimate for the construction and development of the 1.8 million tpy Buck Creek No.2 mine has been finalised. The estimate, based on pricing provided by vendors and contractors, has been reduced by US$5 million from US$44 million to US$39 million due to continued reductions in the costs of labour, materials and supplies, as well as the optimisation of the facility’s design. This estimate encompasses all major capital items, including site development, electrical substation, box-cut access to the coal seam, surface facilities, coal preparation plant, materials handling and the Green River barge load-out facility. The final CAPEX estimate will be incorporated into the bankable feasibility study, which is due later this year.
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Industry View
Industry View COAL AFTER PARIS Debo Adams, IEA Clean Coal Centre
T
he December 2015 Paris Agreement aims to hold the average global temperature increase to well below 2˚C and to pursue efforts to limit the global temperature increase to 1.5˚C. Greenhouse gas (GHG) emissions should peak as soon as possible and then reduce rapidly after peaking, to reach a balance between GHG sources and sinks by the second half of this century. It also says that finance flows should be consistent with a pathway to low-emissions of GHG. A technology mechanism has been introduced to strengthen cooperative action on technology development and transfer, as it is recognised that accelerating, encouraging and enabling innovation is critical. The importance of capacity building for developing countries was also identified to facilitate technology development, dissemination and deployment, as well as the timely and accurate communication of information – among other aims. So this was an encouraging result. There is a target agreed by 195 countries and mechanisms established to encourage the transfer of technology and finance to poorer parts of the world. Many of the emerging economies do not have reliable access to electricity, but do have substantial coal resources or access to cheap coal. Thus regardless of the aims agreed in Paris, the IEA expects that 44% of energy needs will still be met by fossil fuels in 2050. This means that high-efficiency, low-emissions (HELE) technologies and carbon capture and storage (CCS) are vital if the Paris ambitions are to be realised. The mechanisms agreed in Paris are important as it is in Asia mainly that most coal developments will take place. 10 | World Coal | July 2016
Currently, ultra-supercritical (USC) coal power plants emit almost 20% less CO2 per unit output than traditional subcritical ones. Developments in advanced ultra‑supercritical (AUSC) plants mean that a plant operating at 51% efficiency (net LHV basis) would emit up to 28% less CO2 than a subcritical plant. In 1993, the first USC unit was installed in Japan. All units built there are subsequently also USC and operate at about 45% efficiency. Japan has a technology roadmap to 2030 to increase the efficiency of coal-fired plants and develop carbon capture. They also aim to build an AUSC plant. In 2006, the first USC unit was commissioned in China. By 2017, USC capacity in China will be over 208 000 MWe, with efficiencies of up to 46 – 47%. USC units operate in more than ten countries, including China, Germany, India, Japan, Korea and the US, and the first units are under construction in Malaysia (2015) and Taiwan (2016). There are further coal-based transformational technologies under development, including the integration of gasification‑based units with fuel cells, chemical looping combustion and various cycles that use supercritical CO2 as a working fluid to drive a gas turbine to achieve very high efficiencies with lower capital costs. In China in 2014, 67% of total power generated was supplied by coal. The policy of closing small old inefficient coal-fired power plants and replacing them with large efficient ones is significantly improving the average efficiency of coal use. At the same time, China is diversifying its fuel mix to include significant quantities of wind, solar and hydropower, with a rise in nuclear power.
Coal consumption and coal imports to India will continue to grow, as will its demand for energy. India has a national programme for AUSC plant, with a target efficiency of 49% (LHV). There is a huge market in India for clean coal technologies (CCT). But extensive research is required to match CCT to Indian coal, which typically has a high ash content. In the EU, coal will remain important for the foreseeable future. Currently, coal supplies more than 26% of electricity generated and is on a par with nuclear and renewables. Although coal power may well decline further in the US, it will continue to be the second largest user of coal after China. There is a substantial clean coal R&D programme underway in the US with some focus on developing AUSC plant and establishing CCS. The US is funding an advanced combustion programme and investing in pressurised oxy-combustion research for carbon capture as part of a drive to establish second generation coal based CCS schemes with lower efficiencies penalties and reduced capital costs. Coal will continue to make a vital contribution to the energy mix until 2050 at least, across most of the world. Any growth in coal use is not consistent with current climate policies, unless HELE technologies and CCS are included. The IEA Clean Coal Centre has an important role to play in analysing and disseminating information and knowledge on these practical ways to improve efficiency and reduce emissions from fossil fuel-fired plants.
Author
Debo Adams is Communications Manager at the IEA Clean Coal Centre.
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PROVEN SOLUTIONS GLOBAL REACH
Is there a future for the Russian coal industry? Bilan Uzhakhov, Director General of Russian Coal Group, Russia, reviews the challenges facing the Russian coal industry and explains what Russian coal companies need to do to survive.
A
ccording to the Russian Prime Minister, Dmitri Medvedev, Russia’s coal exports in 2016 are forecast to remain level with the previous year and can be described as ‘rather good results considering the current climate’. Actually, the current state of the Russian coal industry is far from being favourable. Is there a future for Russian coal miners and what can the government do to support the industry? Russia ranks sixth in the world when it comes to total coal output. In 2015, coal in Russia was mined by 192 companies: 121 opencast mining operations and 71 underground operations. In 1Q16, 95.7 million t of coal was mined in Russia with thermal coal occupying a substantial share in the total output. At first glance, the state of the Russian coal mining industry does not seem to be dismal: in 2015 coal
12 | World Coal | July 2016
Russian Coal Co.'s Pereyaslovskiy coal mine.
July 2016 | World Coal | 13
extremely low global prices make the domestic market attractive for selling thermal coal. And the competition in that market will get fiercer. The domestic market is, however, faced with a significant problem in the form of the rates charged by Russian Railways. These rates result in all potential profits often being used to cover logistical expenses. As a result, transportation costs have decreased profit on some coal deliveries to almost nothing. It appears that the domestic sales market of Russian coal is now fully dependent on railway rates.
Export: devaluation as respite
Russian coal output (million t).
Russian coal production by type. production increased by 4% to reach 373 million t, while consumption growth hit 2%. However, the Russian coal industry is facing a number of problems and risks both in the domestic market and relating to exports.
Domestic consumption: gas and Kazakh imports are coming
Russian coal miners admit that 2015 was successful in the domestic market due to low water levels in
14 | World Coal | July 2016
the hydraulic power systems of Siberia and the Far East. This resulted in the load being shifted from hydropower plants to steam plants, including coal-steam plants. But this year is unlikely to bring such good luck. The programme of Siberia gasification is being implemented as planned. With low gas prices, it will develop more quickly. Another stumbling block for coal miners will be an increase in cheap coal imports from Kazakhstan. However, today’s
Coal is Russia’s fifth largest basic export product. When it comes to coal exports, Russia ranks third in the world after Indonesia and Australia. In 2015, the export proceeds totalled US$9.5 billion and in 1Q16 they stood at US$1.9 billion. Russian coal mining companies would prefer to export coal rather than deliver it to the domestic market from the standpoint of cost effectiveness. In 2015, the volume of exports was 155 million t, or 40% of the total coal output in Russia. The county’s export volume has constantly increased starting from the post‑Soviet era, when global coal prices began to increase. Between 2007 and 2009, the world coal market witnessed a decrease in prices that then gave way to the price increase recorded until 2012. From 2012 to the present day, the global fall in prices have been balanced by a rise in the strength of the dollar against the rouble. The devaluation of the rouble supported exports and offered some advantages to Russian coal in the world market. In addition to low prices, the reduction in coal consumption by many countries for environmental reasons is still the major stumbling block for export. For example, in 2015, Russian coal deliveries to China decreased by 11 million t. In spite of this, China is still one of the
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Russian thermal coal ouput in 2015 (million t): top five producers. primary export markets for Russian coal. In 2015, the main export areas for Russian Coal Group included Poland, South Korea, Japan, China, Bulgaria and the Baltics. The company’s exports can be divided into Europe (51% of export) and Asia and Pacific countries (49%). Deliveries to China are still treated as one of the priority export areas and are carried out via traders, as well as directly through overland borders. Russian Coal Group treats Poland as another top priority foreign sales market, as local production falls due to the high costs of mining.
Reduced investment a stumbling block
Investment in the Russian coal sector will not exceed RUB 52 billion this year, a fall on previous years, representing one of the major threats to the industry. At the current rate of exchange, it is less than US$1 billion. For comparison, in 2013, investments in the Russian coal industry totalled around US$2 billion. The consequences of this reduced investment will make themselves felt not only in 2016 but also in 2017 – 2018. The investment reserve created in 2013 – 2014 is now used to maintain current production levels. In the opinion of the author, further reduction in investments is impossible because that would pose a threat to the existence of the industry itself. Lack of manufacturing investments will result in an increase in production
16 | World Coal | July 2016
cost. Coal producers have low profitability and the lack of investment will only make these profitability figures worse. In 2015, Russian Coal Group’s investments totalled around RUB 1.5 billion. In 2016, depending on the market situation, the company plans to invest another RUB 1.5 billion. This level of investment is necessary in order to support its existing facilities, namely seven companies in the Amur region, the Republic of Khakassia and the Krasnoyarsk Territory that employ over 4000 miners.
Best savers to survive
Today, most Russian coal producers suffer losses. Over recent years, the companies’ costs have increased dramatically, while export prices are now at the level of the years 2003 – 2004. If the dollar stands at less than RUB 70, all the positive impact of the 2015 devaluation will be lost. It will be the major stumbling block for business efficiency of domestic coal producers, whose costs continue to increase. After all, considering the devaluation, to upgrade equipment, 60% of which consists of imported equipment, companies will have to pay a much higher price. The list of survivors of the current severe conditions can only include those coal companies that: nn Are not afraid of carrying out restructuring by getting rid of
non-performing assets with high operating costs. nn Continuously optimise costs. Today’s market conditions are forcing coal miners to cut down on everything. Many companies are not adapted to such a state of things. nn Regularly improve the efficiency of production and management processes. Optimising business processes and increasing labour productivity are now of vital importance.
What can the Russian government do?
What can the Russian government do in order to support the coal industry? To begin with, it can support the development and deployment of advanced coal processing technologies, which can contribute to making applications of coal more diverse. Developing those technologies is not possible without government support. Taking such technologies to the level of pilot production entails high levels of investment that are currently not available to the business. The payback period is the key to the future. In any event, the future of the Russian economy is closely associated with coal mining: the coal industry now employs 148 000 Russians and another 500 000 Russians are employed in related sectors. Coal companies are crucial enterprises in 31 Russian industrial towns that have the total population of 1.5 million people.
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