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RWE Power
World Market for Hard Coal
2007 Edition
RWE Power
Essen • Cologne
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ring
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epun
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2007
RWE
Pow
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Wo
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Mar
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for
Har
d C
oal
worldmarkethardcoal_ms1_u1-4.indd 20-1 19.11.2007 14:48:04 Uhr
World Market for Hard Coal
2007 Edition
Dr. Wolfgang RitschelDr. Hans-Wilhelm Schiffer
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World Market for Hard Coal
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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
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100
101
102
106
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9
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Content
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World Market for Hard Coal
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 %
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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
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8
World Market for Hard Coal
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-
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9
Markets for hard coal in the world energy mix
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
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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
World Market for Hard Coal
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11
Markets for hard coal in the world energy mix
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
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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 %
World Market for Hard Coal
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13
Markets for hard coal in the world energy mix
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
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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
World Market for Hard Coal
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15
Markets for hard coal in the world energy mix
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
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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
World Market for Hard Coal
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17
Markets for hard coal in the world energy mix
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
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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
World Market for Hard Coal
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19
Markets for hard coal in the world energy mix
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
■
■
■
Source: RWE Power AG
rwe broschure weltmarktsteinkohle uk fin.indd 19 29.11.2007 12:28:41 Uhr
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
Source: RWE Power AG
CO2
Coal
CO2 storage site
World Market for Hard Coal
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21
Markets for hard coal in the world energy mix
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.
rwe broschure weltmarktsteinkohle uk fin.indd 21 29.11.2007 12:28:41 Uhr
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
World Market for Hard Coal
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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
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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
Source: VDKI, Hamburg 2007
94
237
Germany
19UK
World Market for Hard Coal
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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]
Source: VDKI, Hamburg 2007
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
Source: VDKI, Hamburg 2007
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
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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]
Source: VDKI, Hamburg 2007
0
20
40
60
80
100
120
140
160
180
200
China
Other
Russia
USA
Canada
Australia
2002 2003 2004 2005 2006
World Market for Hard Coal
rwe broschure weltmarktsteinkohle uk fin.indd 26 29.11.2007 12:28:42 Uhr
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
Source: VDKI, Hamburg 2007
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
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World Market for Hard Coal
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
Source: VDKI, Hamburg 2007
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
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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
Source: German Coal Importers Federation (VDKI), Hamburg
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
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World Market for Hard Coal
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
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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
Source: VDKI, Hamburg 2007
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
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World Market for Hard Coal
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-
rwe broschure weltmarktsteinkohle uk fin.indd 32 29.11.2007 12:28:44 Uhr
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
rwe broschure weltmarktsteinkohle uk fin.indd 33 29.11.2007 12:28:44 Uhr
World Market for Hard Coal
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
rwe broschure weltmarktsteinkohle uk fin.indd 34 29.11.2007 12:28:44 Uhr
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
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World Market for Hard Coal
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
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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
Source: VDKI, Hamburg 2007
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
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World Market for Hard Coal
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
Source: VDKI, Hamburg 2007
USD/t
Mt
fob
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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
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World Market for Hard Coal
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
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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
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World Market for Hard Coal
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
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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
Source: German Coal Importers Federation (VDKI), Hamburg
World trade
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World Market for Hard Coal
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
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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
rwe broschure weltmarktsteinkohle uk fin.indd 45 29.11.2007 12:28:47 Uhr
World Market for Hard Coal
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
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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
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World Market for Hard Coal
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
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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
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World Market for Hard Coal
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
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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
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World Market for Hard Coal
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
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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
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World Market for Hard Coal
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
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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
Coal-exporting countries • Indonesia
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World Market for Hard Coal
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.
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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
Coal-exporting countries • Indonesia
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World Market for Hard Coal
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
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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
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World Market for Hard Coal
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
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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
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World Market for Hard Coal
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
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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
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World Market for Hard Coal
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
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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
Coal-exporting countries • South Africa
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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
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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
Coal-exporting countries • South Africa
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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;
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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
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World Market for Hard Coal
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.
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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%
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World Market for Hard Coal
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.
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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
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World Market for Hard Coal
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
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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
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World Market for Hard Coal
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
Hard coal exports 51 55 61
Export rate, in % 88 92 96
Chief importantcountries/regions
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
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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
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World Market for Hard Coal
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
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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*
Coal-exporting countries • USA
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
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World Market for Hard Coal
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
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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.
Coal-exporting countries • USA
2004 2005 2006 Mt Mt Mt
Coal output 1,020 1,029 1,053
Hard coal exports 43 45 46
Steam coal 19 19 20
Coking coal 24 26 26
Export rate, in % 4 4 4
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
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World Market for Hard Coal
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
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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.
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World Market for Hard Coal
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
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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
Hard coal output 29 31 34
Hard coal exports 26 28 28
Steam coal 2 2 3
Coking coal 24 26 25
Export rate, in % 90 90 82
Chief importantcountries/regions
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
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World Market for Hard Coal
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.
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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.
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World Market for Hard Coal
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
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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
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World Market for Hard Coal
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
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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
Hard coal output 99 97 94
Hard coal exports 21 19 16
Steam coal 18 16 13
Coking coal 3 3 3
Coking exports 5 4.5 6.3
Export rate, in % 28 25 26
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.
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World Market for Hard Coal
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.
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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-
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World Market for Hard Coal
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
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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
Hard coal output 8 8 8
Hard coal exports 8 8 8
Export rate, in % 100 100 100
Chief importantcountries/regions
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
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World Market for Hard Coal
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 geology and mining techniques
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
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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
Coal geology and mining techniques
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World Market for Hard Coal
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
rwe broschure weltmarktsteinkohle uk fin.indd 98 29.11.2007 12:29:04 Uhr
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
Transportation and handling of hard coal
Transportation and handling of hard coal
rwe broschure weltmarktsteinkohle uk fin.indd 99 29.11.2007 12:29:04 Uhr
World Market for Hard Coal
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
rwe broschure weltmarktsteinkohle uk fin.indd 100 29.11.2007 12:29:04 Uhr
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.
Transportation and handling of hard coal
rwe broschure weltmarktsteinkohle uk fin.indd 101 29.11.2007 12:29:05 Uhr
World Market for Hard Coal
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 broschure weltmarktsteinkohle uk fin.indd 102 29.11.2007 12:29:05 Uhr
RWE Power
World Market for Hard Coal
2007 Edition
RWE Power
Essen • Cologne
www.rwe.com
ww
w.d
ersp
ring
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nfo
10/
2007
RWE
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er A
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rld
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for
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d C
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