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Coal Market in Poland

Coal is the primary fuel used for power generation in Poland. As evidenced by PSE’s data, total electricity output was 165,214 GWh in 2018, of which 82,375 GWh (50%) were produced by hard coal-fired power plants and 49,072 GWh (30%) by lignite power plants. The remaining 33,478 GWh (20%) were contributed by commercial power plants, wind farms, gas fired power plants and hydropower plants.
 

The structure of fuels used in electrical energy production in Poland in 2018 [GWh]

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Source: PSE SA, www.pse.pl

 

In 2018 domestic power plants generated 0.38% less electricity versus the same period in 2017. The highest increase in electricity output (33.7%) was achieved by gas-fired power plants. Production also rose for hard coal power plants, by about 3.1%. The deepest decline, by 20.6%, was suffered by water power plants.

 

Year-over-year change in fuel consumption for electricity generation in Poland in 2018

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Source: PSE SA, www.pse.pl

 

The dynamics of energy production in 2018 reached a negative result for the first time since 2014 (-0.4%), the demand for energy from hard coal increased by approximately (3.1%).


Average price of BASE contracts on TGE S.A. 2015 - 2018 [PLN/MWh]

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Source: TGE SA

 

In 2018 the foreign trade balance was dominated by imports of electricity, totalling 5.72 TWh. Higher imports lead to a lower domestic production of electricity.

 

Production and Sale of Thermal Coal in Poland

 

Poland is a major producer of hard coal globally and the largest one in the European Union. However, a steep fall has been observed for several years. The declining trend of thermal coal production in Poland was triggered by the restructuring of the hard coal sector in 1998-2006. The objectives of that programme were to reduce the capacity of mines, to restructure their debts and to reduce the employment level in mining companies. The programme led to a decline in production and, over a longer time horizon, also in the demand for thermal coal, as a result of partial switch of the economy to other energy sources.
We have been observing the declining trend of coal sales since 2015. Also since 2015 the sales of thermal coal in Poland have exceeded its production. This was reflected in the increase of coal prices on the market.
In 2018, the production of thermal coal amounted to about 51.3 million tonnes, which represents a decline of 3.2% y/y.
Sales in 2018 amounted to about 50.4 million tonnes, including about 32.4 million tonnes of thermal fine coal sold to commercial power plants. Sales of thermal coal decreased by about 6.8% in comparison to 2017.
As at the end of 2018, coal inventories were 2.0 million tonnes, which represents an increase in comparison to the level recorded in December 2017 – 1.2 million tonnes.


Production, sales and inventories of thermal coal 2015-2018 [‘000 tonnes]

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Source: ARP SA

 

Thermal Coal Prices


In 2018, the average annual price of fine thermal coal for commercial power plants was PLN 10.50 per GJ, the change dynamics was ca. 15.2% y/y
In Q4 2018, the average price of fine thermal coal for commercial power plants was PLN 10.66 per GJ, comparing to Q3 2018 the price increased by 0.1%; the change dynamics in respect of average prices in Q4 2018 vs. Q4 2017 was ca. 14.5%
Another significant factor contributing to the growth in thermal coal prices in Poland since the beginning of 2016 has been an increase in international coal prices.
In October 2014 the Katowice Branch of the Industry Development Agency (Agencja Rozwoju Przemysłu) created Polish Steam Coal Market Index 1 (PSCMI 1). This index combines a group of model price rates for thermal coal produced by domestic producers and sold in Poland’s power generation market (PSCMI 1).It reflects the level of ex-mine prices of 20-23 MJ thermal coal dusts offered to commercial and industrial power plants. The index is calculated as the weighted average of monthly supplies which meet the qualitative criterion of the index, i.e. total sulphur content below 1%. The price of a monthly product is determined as weighted average price from transactions executed in Poland’s thermal coal market, invoiced in a given calendar month. Source data used for rate calculations include data provided by domestic producers of hard coal to the Katowice Branch of ARP S.A. in the course of the Public Statistics Programme “Hard and Lignite Coal Mining,” which is administered by the minister in charge of economy.
In 2018, the average price based on the PSCMI index was approx. PLN 10.95 per GJ, which compared to the average price in 2017 (PLN 9.22 per GJ) represents an increase by approx. 18.7%.

 

Average thermal coal price in Poland and PSCMI in 2015-2018 [PLN/GJ]

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Source: ARP SA



Thermal Coal Imports and Exports


Imports of coal are the main source of that fuel for EU Member States. By 2008 Poland was one of the largest coal exporters to Europe. However, since 2008, it has become a net importer, as a result of changes taking place in the coal market. The key reason was the restructuring of Poland’s coal mining sector, which resulted in a significant reduction of coal production, while internal demand remained stable. Coal is imported to Poland mainly from Russia (65% of total coal imports). Coal is mostly delivered by rail via terminals in Braniewo, Terespol, and Małaszewicze. In 2018 the largest importer of Polish coal were the Czech Republic, receiving nearly 55% of Polish coal exports.


Hard coal imports and exports in 2015-2018 [million tonnes]

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Source: ARP SA