Worl Market For Hard Coal-RWE 2007

World Market for Hard Coal
RWE Power
10/2007
Essen • Cologne
RWE Power AG | World Market for Hard Coal
www.rwe.com
2007 Edition
www.derspringendepunkt.info
RWE Power
worldmarkethardcoal_ms1_u1-4.indd 20-1 19.11.2007 14:48:04 Uhr

Dr. Wolfgang Ritschel
Dr. Hans-Wilhelm Schiffer

2007 Edition
rwe broschüre weltmarktsteinkohle uk fin.indd 3 29.11.2007 12:28:39 Uhr


Content

October 2007
Dr. Wolfgang Ritschel

Dr. Hans-Wilhelm Schiffer
Content
6 Summary 50 Coal-exporting countries

50 Australia
9 Markets for hard coal in the 55 Indonesia
world energy mix 61 Russia
9 Definition 65 South Africa
9 Reserves/output 70 China
11 Quality requirements 75 Colombia
12 Consumption, by use 79 USA
13 Consumption, by region 84 Canada
15 Perspectives in consumption developments 88 Vietnam
17 Environmental aspects – Clean coal 91 Poland
technology 95 Venezuela
21 Liquefaction of coal
99 Coal geology and mining techniques
24 World trade 99 Deposits
24 Demand 100 Mining techniques
27 Supply 101 Preparation
30 Developments in sea freights
31 Demand and supply cycles 102 Transportation and handling of hard coal
32 Re-formation of markets
34 Representative costs in the coal chain 106 Literature
37 Price formation
40 Contract forms
43 Influence of electricity markets
43 Risk management
47 Perspectives
49 Upshot
5

Summary
This study describes the still growing impor- use in power plants will increase, whereas volume
tance of hard coal in meeting the world’s ener- sales in the heat market will continue to decline.
gy needs. It deals in particular with the contri- Coking coal consumption will grow in step with
bution to the energy supply made by pig-iron production, and world trade in coking coal
international coal trading, which has been ris- should move forward again after years of stagna-
ing for some years now, and at an especially tion, because the centres of supply and demand are
strong rate in the last few years. It discusses the shifting, whilst demand for high-quality coking coal
structure and functioning of world trade in is rising.
hard coal and examines the chief hard coal
exporting countries with their export potential The Asian region continues to show dynamic
in terms of output and infrastructure as well as growth in consumption and production, whereas
the major players. Europe will in future report falling trends in
consumption and production. The cutbacks in
At present, hard coal accounts for 4.3 billion uneconomic domestic production are being partly
tonnes of coal equivalent (Btce) or 26 % of global replaced by coal imports. Gas and renewable ener-
energy consumption. In the last few years, hard gy will gain further market shares.
coal has been able to steadily increase its share in
the world energy mix, this being due primarily to North, Central and South America are growth mar-
the rapid expansion of coal production in China. kets in both consumption and production terms.
More than 70 % of worldwide hard coal output In the USA, in particular, hard coal is growing in
goes into power generation, covering 36 % of the significance for power generation in view of the
world’s electricity requirements. greater scarcity and declining availability of domes-
tic oil and gas reserves.
All key forecasts assume ongoing growth in coal
production and world trade, though with vary- Thanks to the strong public focus on lowering CO2
ing levels of consumption between sectors and emissions from the use of coal, power plant con-
between world regions. In the case of steam coal, structors and utilities have launched a technology
World energy mix, 2006
Primary energy consumption 16 billion tce Power generation 19 trillion kWh
Hydro + other 6%
6% Oil
Nuclear energy 6% Hydro + other 19 %
20 % Gas
36 % Oil
Hard coal 26 % Nuclear energy 15 %
4 % Lignite
Lignite 2%
24 % Gas Hard coal 36 %
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)

Summary
offensive. CO2 emission levels are to be reduced The strong growth in world coal markets during
by retrofitting existing power plants, building new recent years and, parallel to this, in the iron ore
coal-fired power stations in the short- and medium- market has led for the first time to strains in the
term with higher efficiency, and by developing a international transport chain, with substantial fluc-
zero-CO2 power plant. So far, however, it is mainly tuations in freight rates. Harbour capacities, too,
the EU-27 countries and Japan that have set them- have revealed bottlenecks in the shipping of coal
selves CO2 reduction targets; it is now urgent for and ores. The bulk carrier fleet has been massively
the USA, emerging countries like China, India and enlarged, with the expansion of shipping capaci-
developing countries to be involved in the process ties, and the planning of ship loading optimized in
of restricting CO2 emissions. order to avoid queuing at exporting ports. In this
respect, logistics are adapting flexibly to the new
In meeting the world’s growing demand, interna- market situation, and a return to an efficient, low-
tional hard coal trading has been playing an ever cost and effective coal transportation chain can be
greater role in recent years. Since 1999, the traded expected in the future.
volume has been expanding by a healthy 7 % per
annum or 357 Mt in all. In 2006, cross-border trade Still, it cannot be denied that the present expan-
in hard coal totalled 867 Mt. Of this, 782 Mt was sion measures for pits and, above all, for the infra-
maritime trade, split between 595 Mt of steam coal structure are lagging behind growing demand.
and 187 Mt of coking coal. 85 Mt was traded over- The restrained investment activity in the low-price
land – mainly between neighbouring countries. period through to 2003 is now making itself felt in
In 2006, cross-border trade amounted to 16 % of Australia and elsewhere in the guise of bottlenecks,
the 5.4 Bt worldwide hard coal output. although these will be overcome in the foreseeable
future.
The background of this growth remains the price
advantage that world market coal has as against Besides the traditional Asian and European custom-
domestic hard coal (e.g., in Europe) and alternative ers for imported coal, a growing need for imported
energy sources, such as oil and gas, as well as the coal by coastal regions can be detected in the
growing energy requirements for power generation, world’s two biggest coal producers, China and the
above all in Asian economies. US. These requirements reached a volume of over
60 Mt in 2006 and are expected to go on rising. In
World hard coal output and maritime trade, 2006
5.4 Bt hard coal output
World trade (maritime) 782 Mt = 15 %

of which:
595 Mt steam coal
187 Mt coking coal
Source: German Coal Importers Federation (VDKI), Hamburg 2007
7

Central and South America, too, coal is increasingly ing contribution toward meeting the world’s energy
being used in power plants. and raw material requirements.
On the supply side for steam coal, the greatest In the long term, i.e. by 2030, a rise in coal output
gains are being made in the Pacific area by Austra of just under 1 - 2 % p.a. or more is expected. The
lia and Indonesia, and in the Atlantic area by Rus- world trade in coal is set to grow by 1.5 – 3.0 % p.a.
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-

Markets for hard coal in the world energy mix
Markets for hard coal

in the world energy mix
Definition tice, this study classifies anthracite, bituminous and

Coal, a product of plant substances, is a fuel and the majority of sub-bituminous coals as hard coal.
raw material available in abundant quantities Depending on the use and quality of hard coal, ref-
throughout the world. Its various evolutionary erence is made to metallurgical or coking coal and
stages date back up to 400 million years in places. steam coal.
In earth's history, a wide range of coal types with
differing properties has emerged. Depending on Reserves/output
the degree of carbonization and, hence, on its The appraisal of coal deposits is subject to continu-
energy intensity, this energy source is classified as ous, though uneven and unsystematic updating.
anthracite, bituminous coal, sub-bituminous coal, Whereas oil and gas are systematically updated
and lignite. Anthracite coal is marked by a high year after year, this has not been true of coal hith-
carbon content coupled with very low moisture erto. The reason may be that, in the past, a foresee-
and volatile components. In the case of lignite – able end of the deposits of oil and gas was repeat-
young in earth's history – the converse is the case. edly forecast and then disproved by updated sector
Bituminous and sub-bituminous coals are located estimates.
between the two, with blurred boundaries between
the classifications. In line with international prac-
Worldwide distribution of hard coal reserves (Bt)

111
CIS
North America 167

PR China
19 Europe
1
219 Middle East
India
Africa
95
20
52
11
Other Asia
South America
Australia
41
Reserves
Total: 736 Bt
Source: Federal Institute for Geosciences and Natural Resources (BGR) (2007), 31 December 2006
9

So far, coal has been largely left out of any discus- has improved considerably, compared with the pre-
sion on the remaining life of energy resources. To vious estimate made in 2005 (5:1).
that extent, there has been no need for regular,
annual updating. If such updates were made, how- According to the Energy Information Administra-
ever, it must be assumed that both resources and tion (EIA) of the US Department of Energy (DOE),
reserves would go on rising, since far less effort has the global coal reserves consist of 53 % anthracite
so far gone into exploration for coal than for oil and and bituminous coals, 30 % sub-bituminous coals
gas. and 17 % lignite.
In raw material deposits, including coal, a dis- Unlike oil and natural gas deposits, hard coal
tinction must be made between "resources" and reserves are widely scattered geographically, with a
"reserves". Resources refer to the entire quantity focus on the USA, Russia and China. Of the rest,
of coal in a deposit. Reserves are that part of the India, Australia, South Africa, Ukraine and Kazakh
resources that can be mined according to today's stan, in particular, have significant coal reserves.
technical and economic standards. As coal prices Even the economically mineable hard coal reserves
rise, some deposits are reassigned from resources referred to earlier, i.e. without proven resources of
to reserves, since higher extraction costs can now some 8,817 Bt will last, at current consumption lev-
be shouldered, and mining may become economic. els, for approximately 140–150 years.
Current estimates on the basis of our present
knowledge of economically mineable reserves (see Reserves and mining levels do not always match.
Table) are 736 Bt, equivalent to approx. 640 Btce. This is particularly true of the former Soviet Union,
These most recent estimates have been made by where only limited use is made of mining oppor-
the Federal Institute for Geosciences and Natural tunities owing to the great distances involved
Resources (Bundesanstalt für Geowissenschaft und between the deposits and the consumer centres
Rohstoffe, BGR). and to the ample availability of oil and gas. In Chi-
na, by contrast, coal dominates the energy market
The BGR puts hard coal resources at 8,817 Bt in owing to the still slow mobilization of competing
2007. The ratio of resources to reserves is 12:1 and energy sources. The same is true of the "Far East"
region, where India – likewise with high coal inten-
Hard coal reserves and output by region (status: 2007)
Reserves1)
Position: 2006 Output2), 2006 Range in
Region Bt % Mt % years
Europe 19 2.6 162 3.0 117

CIS 111 15.1 483 9.0 230
Africa 53 7.2 247 4.6 215
North America 219 29.8 1,087 20.3 201
South America 20 2.7 72 1.3 278
PR China 167 22.7 2,326 43.5 72
Other Asia 106 14.4 595 11.1 178
Australia/New Zealand 41 5.5 302 5.6 136
Other 0 0.0 77 1.6 0
Total 736 100.0 5,351 100.0 138
1)
Source: Reserves: Federal Institute for Geosciences and Natural Resources (BGR), Hanover, 2007
2)
Source: Output: VDKI/BP Statistical Review of World Energy 2007
10

sity – is the major hard coal producer, followed by for these of max. 8 % and 1 % respectively. Other
Indonesia. coking properties, too, are called for in the coal,
including both the content of volatile components
Quality requirements (27+ 7 %) and, in particular, its coking behaviour
Coal is a heterogeneous energy source. The quality as measured by the free swelling index of 4 - 7, as
parameters, like calorific value as well as sulphur well as the coke strength (CSR value), which has
and ash content, vary considerably between the continued to gain in importance owing to the fall in
various deposits and even within single coal seams. specific coke consumption. As a general rule, blast
furnace coke is not made from one single type of
The various uses for hard coal require different coking coal, but from a mixture of different origins
qualities and properties. On economic efficiency with an average volatile component content of
grounds, for example, the key quality parameter of approximately 27 %.
imported steam coal for power plants is the highest
possible net calorific value (NCV > 6,000 kcal/kg), But coking coal with a lower swelling index, i.e. 1 -
which is ensured by having low moisture and ash 3, is also used in making coke, so-called soft coking
content (total < 25 %). On top of this come a low coal. By itself, this produces coke of low, i.e. inad-
sulphur content (< 1 %) and specific requirements equate, strength. However, steam pre-treatment or
for the chemical composition of the resulting ash mechanical compaction when the coal is fed into
and its melting behaviour. A low share of volatile the coke oven – along with hard coking coal – ena-
components (< 20 %) is a drawback for combustion bles this coal type, which is also less expensive on
in modern power plants. The imported coal used in the market, to be used on a considerable scale,
power generation is supplied as fine coal, i.e. with above all in Japan, to make high-quality blast fur-
a grain size of 0 - 50 mm. nace coke.
Different quality requirements must be met by the Growing use is now also being made in the met-
steam coal that goes into the industrial area mainly allurgical sector of hard coal for pulverized coal
to produce steam and process heat. The combus- injection (PCI). Intended as substitute fuel in the
tion technology deployed there usually calls for 1980s for the by-then costly heavy oil, pulverized
specific grain sizes (range: 6 - 80 mm) in graded, coal or fine-grain coal, injected into the furnace as
i.e. sized, lump coal. Here, too, low moisture (3 - 6 PCI coal, is now largely ousting blast furnace coke,
%) and ash (3 - 5 %) contents are expected, along- which has become relatively expensive. Here, all
side low sulphur. hard coals with a low sulphur and ash content are
suitable, with the quality spectrum ranging from
Private consumers and households, too, are sup- the increasingly preferred anthracite coal all the
plied with graded coal (smalls, cobbles) of varying way to highly volatile steam and semi-soft coking
grain sizes between 8 - 80 mm and with low mois- coal. It is the latter in particular that is used in
ture, ash and sulphur contents. A significant share Japan as PCI coal. PCI coal’s share of just under
here is accounted for by anthracite coal with vola- 50 Mt/a in global energy consumption is modest.
tile matter of < 14 %.
Consumption, by use
Tighter quality parameters apply to the hard coking Hard coal consumption worldwide grew by some
coal used in coking plants. The resulting product, 1.4 Btce (+ 48 %) from 2.9 Btce in 2001 to 4.3 Btce
coke, is mainly used in the steel industry, but also in 2006. This makes hard coal no. 2 in the list of
in nonferrous metal working. Deployment as blast important energy sources – after oil, but ahead of
furnace coke requires, first of all, a raw material natural gas. Hard coal’s share in worldwide primary
that is low in both ash and sulphur, i.e. the coal energy consumption in 2006 was some 26 %. The
mixture used in coking plants is subject to limits set recorded increase is mainly accounted for by China,
11

although other mining regions, too, have pressed World hard coal consumption, by sector,
1980 and 2006
ahead. However, the dynamic global trend of recent
years does not apply equally to all coal-using sec- 1980 2006
tors and world regions. Bt % Bt %
Total 2.80 5.40
World hard coal output was some 5.4 Bt (equiva- of which
lent to 4.3 Btce) in 2006. This can be subdivided Power plants 1.00 36 4.00 74
between approx. 4.7 Bt (87 %) steam coal and 0.7 Steel industry 0.60 21 0.70 13
Bt (13 %) coking coal. Most of the steam coal goes Heat market 1.20 43 0.70 13
into power generation. The share is about 4.0 Bt or Source: German Coal Importers Federation (VDKI), Hamburg
74 % of world hard coal consumption. Some 36 %
of total power generation worldwide is based on
hard coal. in Russia and was largely satisfied from domestic
output in each case. The blast furnace process for
The heat market – i.e. customers outside the elec- the production of pig iron is the method chiefly
tricity sector and the steel industry – comprises, employed in China, since alternative processes are
e.g., cement works, paper mills and other industrial not feasible owing to a scarcity of scrap. In view of
consumers. Also, there is a domestic fuel segment, the present high prices for coking coal and coke,
which is still significant in Eastern Europe and Tur- work is proceeding on optimizing the blast furnace
key, and in China and North Korea. This market is process, and the technology for injecting pulver-
put at 700 Mt worldwide, although its share con- ized coal has received a new boost in a bid to save
tracted from 43 % in 1980 to about 13 % of world coke.
hard coal consumption in 2006, and further decline
is expected. In view of high oil and gas prices, Consumption, by region
however, the pace of decline could slow down. Most hard coal is used near the extraction site,
i.e. near the deposits. The reason is its low energy
The metallurgical sector, with a share of 13 % content compared with oil and gas. Long and often
(some 700 Mt), has grown by some 120 - 130 Mt costly transportation by land can place an extra
since 2001. The increase in the consumption of cok- burden on the cost-effectiveness of any remote
ing coal was noted, above all, in China and, partly, use. In recent years, ocean freight capacity, despite
Hard coal‘s contribution to power generation, 2005
100% 93 92 Hard coal

79 78 71 Lignite
75% 70 66 64
54 60 59
7 53 50 48 39
50% 93 79
78 71 70 66 21
53 59 53 35
25% 48
38
21 27
2 2 4
0%
Czech Rep.
South Africa
Poland
Australia
China
Israel
Kazakhstan
India
Serbia and
Montenegro
Greece
Taiwan
USA
Germany
World
Source: IEA, Electricity Information 2007, Tables 1.2 and 1.3
12

high growth rates, has become scarcer owing to the The most important hard coal consumer after
strong growth in the maritime trade in iron ore and China is India, where over two thirds of the coal
coal, longer travel routes and bottlenecks at export- consumed is for power generation. Coal needs
ing and importing ports. In the last few years are mostly covered by domestic output, though
(2003 – 2007), this has repeatedly led to hefty price increasingly by imports as well.
hikes. With ongoing high fleet expansion rates,
however, normalization of freight rates can be The situation in "mature" Asia-Pacific markets,
expected, so that, in future, hard coals from mines especially in Australia, Japan, South Korea and
with low extraction costs and logistically favourable Taiwan differs fundamentally from conditions in
locations relative to seaports will definitely remain China and India. Australian coal is mainly exported,
competitive for overseas consumers. although some 25 % of domestic coal production
is used in Australia itself. More than three quarters
In recent years, world maritime trade has grown of power generation in the country is based on
to 782 Mt and, in spite of high sea freight rates domestic coal.
at times in 2006, has increased by 56 Mt. This is
equivalent to a 15 % share for maritime exports in Along with China, the USA, India, Russia and South
world hard coal output; adding overland trade of Africa, Japan is one of the biggest hard coal con-
80 Mt, we obtain a traded share of some 16 %. suming countries, covering practically its entire
The most important market for hard coals is the coal needs with imports, mostly from Australia.
Asia-Pacific economic area. Hard coal consump- Some 44 % of the coal consumed in Japan is used
tion in this region in 2006 was some 2.7 Bt. This is in the steel industry; Japan is the world’s second
equivalent to more than 60 % of worldwide hard largest steel producer (after China). Also, coal in
coal consumption. Especially strong consumption Japan makes a considerable contribution to power
growth was noted in China, where the main driver generation, with more than one quarter of the
behind the growing demand for coal, as in other country’s power supply being based on imported
Asian countries, is the striking rise in electricity hard coal.
needs.
Developments in world energy consumption, by energy source [Btce]
1980 1985 1990 1995 2000 2005 2006
Mineral oil 4.35 4.05 4.48 4.71 5.13 5.79 5.83

Natural gas 1.86 2.15 2.52 2.81 3.18 3.77 3.86
Nuclear energy 0.24 0.50 0.74 0.76 0.85 0.94 0.95
Hydro 0.64 0.67 0.73 0.82 0.39 1.00 1.03
Hard coal 2.50 2.85 2.82 2.90 2.79 4.11 4.31
Lignite 0.42 0.42 0.38 0.34 0.33 0.33 0.33
Totals 10.01 10.64 11.67 12.34 13.17 15.94 16.31
Share of hard coal (%) 25.0 26.8 24.2 23.5 21.2 25.8 26.4
Share of lignite (%) 4.2 3.9 3.3 2.8 2.5 2.1 2.0
Share of coal, total (%) 29.2 30.7 27.4 26.2 23.7 27.9 28.4
Share of mineral oil (%) 43.5 38.1 38.4 38.2 39.0 36.3 35.7
Share of natural gas (%) 18.6 20.2 21.6 22.8 24.1 23.7 23.7
Share of nuclear energy (%) 2.4 4.7 6.3 6.2 6.5 5.9 5.8
Share of hydro (%) 6.3 6.3 6.3 6.6 6.7 6.2 6.4
Totals (%) 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source: BP Statistical Review of World Energy
13

Other important hard coal consumers in the Asia- market conditions. Some of the fall in output is
Pacific economic area are South Korea, Taiwan, offset by imports. The chief consumer countries in
Indonesia and Thailand. Whereas Indonesia is in this region are Germany, Poland, UK, Spain, Turkey,
a situation comparable with that of Australia (net Italy and France.
exporter in the case of hard coal), the other coun-
tries named mainly depend on supplies from the Perspectives in consumption developments
world market. According to the International Energy Outlook
2007, which the Energy Information Administration
The second largest hard coal consumer region (EIA) of the US Department of Energy (DOE) pub-
– after the Asia-Pacific economic area – is North lished in May 2007, the following perspectives are
America. Over 90 % of hard coal consumption in indicated until 2030.
North America totalling some 1 Bt is accounted for
by the USA. World coal consumption will grow until 2030 at an
average annual rate of 2.2 % compared with 2004.
In Central and South America, coal in the past This would be equivalent to an absolute increase
was not counted among the central pillars of the of more than 70 % in that period. Even relative to
energy supply, and coal’s share in the region’s total the significantly higher level of 2006, there would
energy consumption is a mere 4 %. More than 60 % still be an arithmetic rise of nearly 50 %. In this
of coal consumption in Central and South America forecast, coal's share in world energy consumption
is accounted for by Brazil, the country with the would remain largely unchanged.
world’s tenth largest steel industry. The other main
coal consumers, accounting for small amounts, are For the strongly growing Asian economies, the
Colombia, Chile, Argentina, Peru and Venezuela. DOE/EIA reference case suggests a doubling of
coal consumption by 2030, with more than three
Africa has a 3 % share in coal consumption world- quarters of the expected increase in the world con-
wide. The major market there is South Africa, which sumption of hard coals being accounted for by new-
accounts for over 90 % of coal consumed by the ly industrialized countries in Asia. The main driver
entire continent. Demand is covered by domestic behind this development is to be found in the elec-
output. South Africa is also one of the world’s key tricity markets of China and India, for which future
exporters of hard coal. growth of 3.3 % p.a. (China) and 2.4 % p.a. (India)
is expected. Behind this is the assumption of aver-
Consumption and mining in the former Soviet age annual economic growth (real) of 6.5 % (China)
Union are concentrated on Russia, Ukraine and and 5.7 % (India).
Kazakhstan. Coal needs in each case are covered
by domestic output. In all of these countries, coal China's required net growth in coal-fired power
makes a significant contribution toward power plant capacities (balance of new-builds and age-
generation. Rising consumption over the last ten related decommissioning of plants) is put at 497
years – after falls in consumption owing to eco- GW in the period 2004 to 2030. This enormous rise
nomic restructuring – are accompanied by industry is regarded as being necessary to cover the demand
consolidation. for electricity. By way of comparison: at year-end
2004, China's coal-based power plant capacity
In Western and Central Europe, the requirements of stood at 307 GW, and of 2006 at 484 GW. Some
environmental and, specifically, climate protection of the expected increase in China's demand is also
are increasingly acting as a damper on the use of due to the development of a large-scale coal-to-
coal in its chief deployment area, power genera- liquid (CTL) industry.
tion. Also, wide sections of Europe’s hard coal
mining industry are unable to compete with world
14

In India, nearly 70 % of the estimated rise in coal the period until 2015, the DOE/EIA are assuming
consumption is accounted for by its electricity sec- that in the period after 2015, with gas prices then
tor. According to the DOE/EIA forecast, coal-based rising, the focus will again be on coal in electricity
power plant capacity in India will grow by 104 GW generation. The estimate for the new-build of coal
from 82 GW in 2004 to 186 GW in 2030. power plant capacity in the period 2015 to 2030 is
140 GW. However, this assumption comes with the
Future developments in energy consumption and qualification that a change in the present legal situ-
its coverage in China and India is the focus of ation and in underlying political conditions would
the 2007 World Energy Outlook drawn up by the have serious implications for the projections.
International Energy Agency. This analysis, which
likewise extends to 2030, will be published in In Western and Central Europe, a decline in coal
November 2007. consumption by 0.5 % p.a. is forecast for the
period 2004 to 2030. All the same, OECD-Europe
Significant growth in coal input for power genera- remains an important coal market in the DOE/EIA's
tion is also expected for Taiwan, Vietnam, Indo- view. The chief coal-consuming countries in this
nesia and Malaysia. This is where new coal power region are Germany, Poland, the UK, Spain, Turkey
plant capacity is now being built or planned on a and the Czech Republic. The most important fac-
major scale. tors dampening coal consumption in Europe are
said to be the relatively slow increase in electricity
The world's biggest coal consumer after China demand, growing use of natural gas in the power
is the USA. In its reference case, the DOE/EIA plant sector and in industry, as well as promotion
expects US coal consumption to grow by 50 % in of renewable energies coupled with a dismantling
the period 2004 - 2030. In the USA, 50 % of power of remaining subsidies for hard coal.
generation is based on coal. While an expansion
of gas-based power generation is expected over
World coal consumption, by region

Btce
7.5
es
countri
5 Other
Africa
India
China
2.5
Russia
OECD Asia/Australia
OECD Europe
North America
0
2004 2010 2015 2020 2025 2030

Source: DOE/EIA, International Energy Outlook 2007, Washington 2007, Reference Scenario
15

Russia is the world's fourth-largest coal consumer sumption is expected in Japan (-0.1 % per year in
after China, the USA and India, with 20 % of the the period 2004 - 2030).
country's power generation being coal-based. Rus-
sia's long-term energy strategy is geared to the The results presented for the reference case of the
construction of new, and the replacement of old 2007 International Energy Outlook of the DOE/EIA
power plant capacities, based specifically on nucle- apply to a scenario in which current laws and poli-
ar energy, gas and coal. The focus of new coal-fired cies remain unchanged in the forecast horizon. To
power plant capacity with advanced technology is that extent, they cannot be regarded as a forecast
to be on the coal-rich Siberian region (central Rus- proper. A more realistic forecast would assume
sia). Efficient commercial-scale power plants are changes in the energy policy framework over the
to be built in the west and in the far east of the next 25 years – with corresponding implications for
country. the level and structure of energy consumption.
The World Energy Outlook of the International
More than ninety per cent of coal consumption on Energy Agency (IEA), too, is assuming unchanged
the African continent is accounted for by South government policies in its reference scenario. So,
Africa. There, the strong rise in electricity demand the IEA in this scenario, which is comparable with
has led to a decision at Eskom, the state-run the reference case at DOE/EIA, arrives at virtually
power-supply company, to recommission three identical worldwide developments in coal consump-
large – previously closed – coal-fired power plants tion – marked by an average annual increase of
(Camden, Grootvlei and Komati). The plants, with a 2 % or so until 2030. There are marked differences,
total capacity of 3.8 GW, are to go back on stream between DOE and IEA analyses, however, in the
as early as 2007. Moreover, the construction of new assessment of trends in coal demand by continent
coal power stations is planned, not only in South and by individual country.
Africa, but also in Mozambique, Zimbabwe, Tanza-
nia and Botswana. In addition to the reference scenario, the IEA,
within the scope of an alternative policy scenario,
In South America, future developments will be is investigating the implications of a bundle of
marked in particular by the situation in Brazil. Chile, political measures by governments that are being
Colombia, Puerto Rico, Peru and Argentina are the considered worldwide to improve security of supply
next most important coal consumers. In view of the and, specifically, measures for stepping up the pre-
expected capacity expansion in the steel sector and vention of climate change. In this alternative-policy
the planned construction of new coal-fired power scenario, the increase in global energy consump-
plants, a disproportionately strong increase in coal tion is lower than in the reference scenario. This is
consumption is expected there. Hence, the DOE/ true above all of coal consumption. So this scenario
EIA puts the average annual increase for Brazil in puts the growth rate for global coal consumption
the period 2004 to 2030 at 3.3 % compared with a at less than half the figure in the IEA's reference
forecast mean value for Central and South America scenario.
of 2.8 %.
Environmental aspects – Clean coal technology
For Asia's OECD countries (Japan and South Korea) For years now, the environmental debate has cen-
and for Australia and New Zealand, average growth tred on worldwide preventive climate protection.
in coal consumption in the period 2004 - 2030 is
quantified at 0.9 % p.a., although the estimates It is assumed that emissions of greenhouse gases
vary quite significantly from country to country. For (GHGs) are increasing the temperature of the
Australia/New Zealand and, specifically, for South Earth’s atmosphere and, in this way, could give rise
Korea, growth in demand by more than 1 % p.a. is to climate change. At the World Climate Summit
still expected. By contrast, a slight fall in coal con- in Kyoto (the third conference of the treaty states
16

on this subject) specific obligations for reducing climate protection, while heeding the principles
GHG emissions were defined for the first time. For of proportionality and sustainability. It has been
the initial commitment period from 2008 to 2012, actively pursuing such measures itself.
38 industrialized countries agreed to reduce such In coal mining, environmental aspects are increas-
emissions by 5.2 % compared with 1990 (EU: -8 %; ingly being heeded in developing countries as well;
US: -7 %; Japan: -6 %). Developing countries have this includes measures for recultivating depleted
not yet given any specific undertakings to reduce mines. According to the definition of the Interna-
emissions, but are integrated by way of the clean tional Maritime Organization, coal – unlike oil and
development mechanism (CDM). The Kyoto Protocol gas – is not among the environmentally hazardous
targets the following gases: carbon dioxide (CO2), goods transported by sea. A further contribution
methane (CH4), nitrous oxide (N2O), hydrofluorocar- toward preventive climate protection is the use of
bons (HFCs), perfluorocarbons (PFCs) and sulphur coal mine methane, which is drawn off continuously
hexafluoride (SF6). from mines on safety grounds. This drainage gas,
which in the past was discharged unused into the
The meeting in Japan was followed by further talks atmosphere or flared, is increasingly being used
on the practical implementation of the various today for power generation at small, mine-mouth
commitments and measures resolved in Kyoto. With power plants.
the compromises obtained, the way was paved for
ratification of the Agreement by the treaty states. On the coal-use side, the strategy for CO2 reduction
has three horizons. Horizon 1 concerns the world-
Although the USA and Australia had declared that wide use of state-of-the-art technologies in replac-
they would not ratify the Kyoto Protocol, Russia’s ing old or building additional new power plants. In
ratification has helped meet the requirements for horizon 2 the very latest in power plant technolo-
the Protocol to come into force, as it did on 16 Feb- gies is further developed. Both horizons back CO2
ruary 2005, when the Protocol became binding in reduction by enhancing efficiency. This primary
international law. measure combines efficient use of resources and
preventive climate protection.
The coal industry advocates measures designed to
reduce environmental impact as part of preventive
Strategy to limit CO2 emissions from coal-based power generation
2010 2015 < 2020
Horizon 1 Horizon 2 Horizon 3
Use of
state-of-the-art technologies
Efficiency increase
(primary measure for CO2
reduction)
Further development of
latest power plant technologies
CO capture and
²
Implementation of zero-CO2 power plant storge
(secondary measure)
Source: RWE Power AG
17

CO² emission reduction thanks to efficiency increases in hard coal-based power generation
1.8
1.6 CO² emissions in t per MWhel

Coal input in tce per MWhel
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
20 25 30 35 40 45 50 55
Efficiency in %
Source: Central Association of German Hard Coal Producers
Virtually zero-CO2 power generation on the basis atures and pressures). The developments under way
of fossil energy sources, which is not obtainable in this area suggest that, in commercial use, the
by increases in efficiency alone, is only possible 50 % efficiency limit for coal-fired power plants can
using the secondary measure of CO2 capture and be exceeded (horizon 2) by 2020.
climate-neutral CO2 storage. The appeal lies, above
all, in the fact that, for coal, which has the largest Although the integrated gasification combined
reserves by far and is of the greatest importance cycle (IGCC) power plant technology will not, in
for world power generation, horizon 3 paves the the medium term, offer a commercial alternative to
way for virtual zero-CO2 power generation. The steam power plants, this technology will be of inter-
technologies required for this largely build on exist- est in the longer term, not only because of its effi-
ing developments. Long-term safe CO2 storage with ciency potential of 52 to 55 %, but also on account
public acceptance will be the basic precondition for of its suitability for CO2 capture, above all for power
use of this technology. plant concepts featuring CO2 capture using tech-
nologies that have been proven at scale (horizon 3).
The successive renewal of the oldest coal-fired pow-
er plants, with average efficiencies of 29 % using In principle, there are three technical options for
state-of-the-art technology with an efficiency of 44 CO2 capture:
to 45 % (horizon 1) yields a specific CO2 reduction
of more than one third. ■ Flue-gas scrubbing in conventional power
plants:
The focus in the further development of steam For conventional steam power plants, only CO2
power plant technology on the basis of hard coal is capture downstream of combustion is feasible.
to further increase process parameters (i.e. temper- In this process, the dedusted and desulphurized
18

Most important technology options for CO2 capture at power plants
Three technologies 1 Post-combustion CO² capture (steam power plant)

seem to be capable of
meeting the target by Conventional power plant incl. CO2 scrubbing
2020 1,000 m³/s, 13 vol - % CO²
■ All are based mainly Coal Conv. steam Flue gas de-
on known technolo- Air power plant sulphurization CO² capture CO²
gies and components
2 Oxyfuel process
■ All require optimiza-
tion, extension and Coal Flue gas
Boiler Condensation CO²
process integration O² cleaning
CO² / H²O
■ Enhancing generation
process efficiency is
always a supporting 3 Pre-combustion CO² capture (IGCC power plant)
activity
IGCC process
10 m³/s, 45 vol - % CO²
Coal Gas proces- CO² CCGT

Gasification
O² sing – CO shift capture incl. H² turbine
CO²
flue gas has its CO2 separated in an additional ■ Integrated gasification combined cycle
scrubbing stage at atmospheric pressure. (IGCC) process:
Although old plants can be refitted in principle Here, CO2 capture is possible upstream of com-
using this technology, the space requirements bustion. The fuel gas, which is as a rule under
set narrow limits to the implementation of this pressure, has a 100-fold lower volume, and suit-
concept at existing power plants. Also, the able capture technologies are widely employed
enormous flue gas volumes and the low CO2 in the chemical industry. One new development
content make this process very costly. Finally, is the gas turbine with a combustion chamber
the considerable energy needs translate into a for H2-rich fuel gas. The "zero"-CO2 combined
drastic lowering of power plant efficiency. In cycle power plant technology can be imple-
order to limit the costs of any later retrofitting, mented both for coal (IGCC) and for natural gas
some power plant operators today already pro- (IRCC, with a natural gas reformer).
vide sufficient space for flue gas scrubbing in
new-builds. One disadvantage of all the technologies described
is lower efficiency and, hence, higher fuel consump-
■ Oxyfuel process: tion than in the case of technologies without CO2
In the concept for the oxyfuel process, combus- capture. The technologies differ in this respect:
tion is with a mix of oxygen and recirculated whereas conventional power plants with CO2 cap-
CO2. The flue gas, consisting mainly of CO2 and ture in the flue gas scrubbing system reach only
steam, is cooled after scrubbing to remove SO2, 28 % efficiency, the figure is 37 % in the case of
so that, following condensation of the steam oxyfuel and as much as 40 % in the case of the
portion, CO2 is obtained without an additional IGCC process with CO2 capture, putting it close to
CO2 scrubbing stage. the efficiency level of today’s power plants. CO2
capture using the IGCC process is also, relatively,
19

Schematic diagram of a climate-friendly coal-fired power plant with CCS
Underground mine Electricity Oil platform
Coal CO2
CO2 storage site
Opencast mine
Power plant
Depleted
oil and gas
fields
Deep saline aquifers
the lowest-cost method, even if specific investment Liquefaction of coal

costs are still 80 % above those for a conventional The liquefaction of coal is one option for improving
power plant. Hence, this process has the greatest the security of energy supply and for dampening
potential among the options for CO2 capture. Also, the rise and volatility of crude oil prices.
it has already been widely explored in both techni-
cal and operational terms. Decades ago, two CTL processes were being devel-
oped and deployed in Germany. These were the
Industrial-scale CO2 storage today is found mainly direct hydration of coal (patented by Fritz Bergius
in the USA as a result of its use in enhanced oil in 1913) and indirect liquefaction by gasifying the
recovery. In Europe, in-depth work is underway to coal with subsequent (indirect) hydration of the
implement CO2 capture and storage (CCS) on the synthetic gas (filed for patenting by Fischer and
energy market. Tropsch in 1925).
With a time horizon from 2020 onwards, CO2 cap- Drastic price hikes, coupled with concerns about
ture and storage can make substantial contribu- security of supply in the case of oil and natural gas,
tions toward obtaining a zero-CO2 energy supply. have revived the interest in CTL worldwide. In a
The CO2 avoidance costs in such a concept are number of countries, projects are being planned
some €35/t CO2, based on current assessments. to implement CTL. This is particularly true of coun-
Further technical developments offer cost-cutting tries that have large – economically mineable – coal
potential, making ambitious climate-protection deposits and are increasingly dependent on oil
goals economically achievable. imports. These include – in addition to Germany –
20

the USA and Australia, as well as, specifically, China In Australia, Monash Energy has launched a
and South Africa. project with the aim of producing some 3 Mt diesel
and other liquid products from coal. A demonstra-
On the basis of the Fischer-Tropsch process, an tion plant is to be commissioned by 2010. The plant
industrial CTL plant has been in operation at Sasol- is to be built in the south-east of Australia based
burg in South Africa ever since 1955. In addition, on lignite from the Latrobe Valley. Participation by
Sasol has been operating two more CTL plants in Shell and support from the Australian government
Secunda since the early 1980s. In all, the company are viewed as important factors for implementing
produces about 7.5 Mt of fuel at these locations the project.
from 28 Mt of coal. In terms of process efficiency, it
is reported that 1 t of hard coal can yield – depend- The USA, the world's biggest oil consumer and
ing on the coal quality – some 2 barrels of oil prod- importer, is currently producing feasibility studies
ucts (1 barrel is equivalent to 159 litres), divided on a range of projects for coal liquefaction. These
into 70 % diesel and 30 % naphtha. include the Medicine Bow project in Wyoming, the
Waste Management and Processors Inc (WMPI)
China has been a net oil importer since 1993. Since project in Pennsylvania and the Rentech project
then, oil imports have risen strongly. The country in Illinois. Also proposed are projects in Arizona,
also has large coal reserves. Against this back- Montana and North Dakota. The DKRW Energy
ground, CTL is accorded high importance. The Chi- project in Medicine Bow is initially set to produce
nese energy group Shenhua is building an indus- an annual 0.75 Mt (15,000 barrels per day, bpd) of
trial plant for direct coal hydration at Erdos to the various fuels, specifically diesel. In the long term,
south of Inner Mongolia. Operations are scheduled capacity is to be expanded to some 2 Mt annu-
to commence in 2007 with an annual output of ally. This project includes the erection of an IGCC
1 Mt of oil products. After completion of a second plant which uses the synthetic gas and the steam
project phase, an annual 5 Mt of oil are due to be produced in the CTL system to generate electric-
produced from coal. Shenhua is planning to build ity. The capacity of the power-generation plant is
further systems, some of them as joint ventures put at 45 MW in the first phase. Plans call for CO2
together with Sasol and Shell. The goal of the ener- capture and its sub-surface injection to boost oil
gy group Shenhua is to produce 10 Mt of oil from extraction. The legal measures and financial incen-
coal by 2010 and 30 Mt by 2020. In this respect, tive mechanisms required for implementing the CTL
it can rely on coal that can be mined at costs of project are being considered. This is true of both
between USD 8 to 10/t. Coupled with relatively low the local states and the national administration
labour costs (about USD 10,000 p.a. for an engi- in Washington. The chief considerations behind
neer), CTL in China would still be an economically promotion of the technology are a lowering of the
efficient proposition even if the world market price dependence on oil imports and the creation of
of oil were to fall below USD 40 per barrel. Besides additional jobs at home associated with the con-
reducing the dependence on oil imports, CTL close struction of the CTL plants concerned. Besides this,
to the deposits offers the option of replacing trans- the US defence department is very interested in
portation by rail to demand centres with pipeline these developments for military purposes. Accord-
transportation. At the same time, China views CTL ing to an estimate of the US Department of Energy,
as an important path toward implementing a clean America could expand the extraction of oil prod-
coal strategy. Although China still does not regard ucts from coal to 3 - 5 mill. barrels per day by 2030
the limitation of CO2 emissions as a priority envi- (equivalent to 150 - 250 Mt/a).
ronmental-policy concern, this, in the assessment of
a representative of the Chinese Shenhua group, will In Germany, the most important project is the
be the case in six to seven years' time. commercial-scale IGCC system planned by RWE
Power with integrated CO2 capture and storage.
21

Direct coal conversion to liquid fuels
H2S, NH3, CO2
Make-up Recycled H2 Gas recovery Methane & ethane

H2 treatment
LPG
Coal+ Coal Hydrotreating Gasoline

Refining
Catalyst conversion unit Diesel fuel
H-donor
Slurry
Slurry Fractionation Heavy vacuum
gas oil
Deashed oil Solvent Gasifier Ash reject

deashing
Unconverted coal
Source: CIAB, Coal to Liquids, Workshop Report, 2007
The plant, including the envisaged CO2 transporta- Energy Agency in Paris on 2 November 2006 (www.
tion and storage, has an investment requirement iea.org/ciab).
of significantly more than € 1 bn and is to go on
stream with a gross capacity of 450 MW in 2014. Coal can play a comprehensive role in the solution
As an alternative or supplement to power genera- of future energy problems through a combination
tion, the IGCC technology deployed here offers the of technologies for upgrading coal (like liquefaction
flexibility of making the following products per ton and gasification) with CO2 capture and storage. For
of lignite: 580 cbm hydrogen, 180 cbm synthetic this, the underlying regulatory conditions must be
gas, 270 kg methanol or 140 l engine fuels. The full created and market incentives created.
costs of producing one ton of diesel on the basis of
Rhenish lignite are put at € 430. This is equivalent A workshop of the IEA Coal Industry Advisory
to a crude-oil price of about USD 65/barrel. Board on all aspects of relevance for the subject of
CCS will be held in Paris on 7 November 2007.
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
22

World trade
Developments in total maritime world trade in hard coals
Mt
1000
900 Overland trade
Maritime trade
800
Steam coals
700 Coking coals
600
500
400
300
200
100
0
1980 1985 1990 1995 2000 2004 2005 2006
Source: VDKI, Hamburg 2007
The beginnings of the world hard coal trade date average for the last 7 years, the world market has
back to the middle of the 19th century, when – with expanded by 50 – 52 Mt/a. Growth mainly took
the beginning of steamship navigation – depots place in the seaborne trade of steam coal.
had to be built in all world ports to store bunker
coal. Since supplies from a nearby mine were not Demand
always possible, some coal had to be fetched World trade currently comprises 867 Mt. The world
across oceans by sailing ship, e.g. from England to market can be broken down into
Cape Town and Suez, or from Australia to Dhaka in
what is now Bangladesh. Coal gained world mar- ■ Maritime trade 782 Mt
ket maturity for the supply of overseas consumers ■ Overland trade 85 Mt
when the efficiency of ocean shipping grew after
the switchover to oil between the two world wars, Cross-border, overland trade is relatively stable
although sustained expansion of international hard and is based mainly on traditional supply relations
coal trade only came after the second oil crisis in between neighbouring countries. This brochure
1979/80. deals primarily with maritime coal trading, because
this is where most of the growth in world trade
In the period 1976–1999, the world hard coal takes place.
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
23

Output and exports of hard coal, 2006 [Mt]
China 2,326 63
USA 1,053 28
India 390
Russia 309 77
Australia 302 237
South Africa 247 69
Indonesia 205 171
Output
Poland 94 8
Maritime exports
Kazakhstan 94
Ukraine 80 3
Colombia 64 61
Vietnam 44 22
Canada 34 28
Germany 24
UK 19
24

World trade
World overland trade in hard coal, 2006 to supply more distant customers at competitive
prices.
Mt
USA - Canada 18.0
The coking coal market, by contrast, is a unitary
USA - Mexico 0.5
world market. A few suppliers serve a dispersed cli-
Canada - USA 1.7
entele worldwide.
Mongolia - China 2.3
North Korea - China 2.5
The vigorous expansion of international trade has
Vietnam - China 6.0
two main causes
Poland - EU countries 7.0
CR - EU countries 6.5
■ Covering the growing demand for raw mate-
Russia - CIS countries (Ukraine) 6.5
rial and energy
Russia - outside CIS 6.0
■ Substitution of indigenous coal in countries
Kazakhstan - Russia 24.0
with uneconomic mines.
Other (EU-internal) 4.0
Total 85.0
Most of the expansion is in steam coal, whereas the
Source: VDKI, Hamburg 2007 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 maritime hard coal world market is broken the increase in global steel and pig-iron production
down into the following submarkets, viz. could herald a new growth phase, and mean that
the 200-Mt threshold is exceeded as early as 2007.
■ Steam coal market, total 595 Mt
■ Atlantic steam coal market 242 Mt As for the submarkets, the following applies. In
■ Pacific steam coal market 353 Mt the Pacific market for steam coal imports (some
■ Coking coal market 187 Mt 60 % of total steam coal trading), the chief growth
■ Maritime world trade, total 782 Mt engine is the rising electricity needs in nearly all
economies, above all in China. Growing populations
The breakdown into two steam coal markets is in South-East Asia and high rates of increase in the
determined by the supply side in the markets. A gross national product mean that the Pacific steam
key determining factor is the level of freight rates, coal market will continue to prosper.
which may enable Atlantic or Pacific producers
Overseas trade in steam coal, 2006 – Supplier structure [in Mt]
Other 12
24 Vietnam
4 Australia Russia 12
Venezuela 8
110 Australia
Poland 7
65 South Africa
Indonesia 140
Russia 55
31 Indonesia
59 China
Colombia 60 Other 8
Atlantic: 242 Mt Pacific: 353 Mt
25

The Atlantic steam coal market (some 40 % of the Shares in coking coal market –
Overseas trade, 2002 - 2006
total steam coal market) deserves a disaggregated [in Mt]
examination to understand growth prospects. 200 Other
In Western Europe, the growth in imported coal
180 China
mainly offsets falling domestic production, chiefly
Russia
in Germany and the UK. In the Mediterranean area, 160
by contrast, there are countries, like Italy, Turkey, USA
Morocco and Israel, where the market for coal is 140 Canada
growing. 120
Australia
In South and Central America, it is primarily rising 100
electricity needs that are boosting demand. The 80

USA, too, has in recent years evolved into an impor-
tant importer on the Atlantic market, primarily for 60
its coastal or near-coastal power plants. The US 40

share of the Atlantic market amounts to 12 %.
20
The world coking coal market is basically powered 0

by crude steel and pig-iron production. In 2006, 2002 2003 2004 2005 2006
crude steel output reached some 1,220 Mt, and Source: VDKI, Hamburg 2007
pig-iron output, on which coke consumption largely

depends, 868 Mt. In this respect, it must be borne fob prices, mining capacity and infrastructure for
in mind that, in China, due to a lack of scrap metal, export coal have been expanded at only a moder-
the growth of crude-steel production is under- ate pace. This is especially true in the supply of
pinned mainly with blast-furnace pig iron. Until steam coal. According to recent studies (Kopal,
2003, China was largely able to cover the growth 2007), utilization of steam coal capacities rose from
in its pig iron production with its own coking coals; 84 % in 2000 to over 94 % in 2006.
since 2004, however, China has had to import
smaller additional quantities and, at the same time, In the Pacific import steam coal market, totalling
reduce its own exports. This has led to tensions on 353 Mt in 2006, the situation continues to be domi-
the market, since the pattern of supply has shifted nated by Australia and Indonesia. Indonesia now
further in Australia’s favour. Overall, the grow- plays the leading role there, achieving a 40 % mar-
ing steel production forecast for Asia and South ket share. China reduced its steam coal exports on
America will outpace stagnating demand in North account of domestic demand from a peak of 81 Mt
America and Europe, such that higher growth in the in 2003 to 55 Mt in 2006. A further fall to 40 - 45
world coking coal trade can be expected. Mt appears likely in 2007. Greater volumes are now
being supplied by Russia and Vietnam, and small
Supply tonnages by South Africa and Colombia.
The strong growth in the world hard coal market
during recent years poses serious challenges for Pacific export-oriented production in 2006 exceed-
export-oriented hard coal pits and their associated ed demand in this region and so supplied the
infrastructure. So far, however, the world market Atlantic market with 35 Mt in the same year. Thanks
has been able to cover the extra demand in quan- to a low sulphur content and favourable prices,
tity terms, although temporary bottlenecks in the Indonesian coal in particular enjoyed increasing
last few years have led to significant price swings acceptance, mainly in Europe, but also in smaller
for coking and steam coal and for sea freights. amounts in North and South America – 31 Mt in
Following many years of excess supply with low total.
26

World trade
Australia has long-term expansion potential, Russia is extending its Far Eastern ports and pro-
although it has a considerable backlog of domestic poses to exploit its market opportunities there. It
transportation and port enlargement projects. At is likely to be an interesting partner thanks to the
present, however, efforts are being made in both short sea routes above all for Japan and Korea, but
areas to increase exports by implementing expan- also for China.
sion measures and improved logistics management.
In recent years, Indonesia has always surpassed Vietnam, too, has strongly increased its exports in
export forecasts. It has increased its exports from very little time and mainly supplies south-west Chi-
58 Mt in 2000 to over 171 Mt in 2006; growth in na. The rapid expansion of production and exports
the last year alone was 42 Mt. However, exports is based on opencast mines, however, whose capac-
increasingly consist of low calorific value coals. In ity and reserves are limited. Vietnam must switch
the long term (after 2012), growing domestic needs to more underground production in future to main-
must be anticipated. Nevertheless, Indonesia is tain extraction volumes, although there are signs of
likely to be able to further expand its exports in the further export increases in 2007. In view of growing
coming years.
Hard coal maritime trade by export and import country/region, 2006 (in Mt)
Export country Coking coal Steam coal Total

Australia 123 114 237
Indonesia 0 171 171
PR China 4 59 63
South Africa 1 68 69
Russia 9 68 77
Colombia 0 61 61
USA 22 6 28
Canada 25 3 28
Poland 1 7 8
Venezuela 0 8 8
Other 2 30 32
Exports 187 595 782
Import country/region Coking coal Steam coal Total

Europe 56 191 247
EU-25 47 177 224
Asia 117 353 470
Japan 63 114 177
South Korea 13 61 74
Taiwan 9 54 63
Hongkong 0 12 12
India 25 28 53
Latin America 11 11 22
Other 3 40 43
Imports 187 595 782
27

domestic demand, the Vietnamese government is from 72 Mt to 91 Mt capacity in the medium term.
concerned about export levels. At the moment, a restructuring process is under-
way in South Africa in which large mining compa-
In the Atlantic steam coal market, totalling 242 Mt nies are surrendering sub-areas of their hard coal
in 2006, South Africa, Colombia and Russia play production within the scope of the Black Economic
leading roles and supply 78 % of the market. Empowerment programme (BBE), and a number
Besides Pacific supplies of 35 Mt, Poland, Ven- of new firms with mining rights are being set up,
ezuela, the US and smaller suppliers like, e.g., Spits- although they have yet to commence production.
bergen serve the Atlantic market, too. The expan- To that extent, South Africa's export potential
sion potential in Atlantic suppliers mainly lies with should increase further in the medium term. How-
Colombia, South Africa und Russia. ever, it is notable that the big mining companies
Amcoal, BHP Billiton and Xstrata are currently more
Colombia has been expanding its output year after focussed on expanding pits in Colombia.
year and is now making further extensions to its
infrastructure. If domestic demand is low, Colom- Russia, too, raised its steam coal exports from
bia could become the biggest steam coal provider 10 Mt in 2000 to 58 Mt in 2006 and is planning fur-
in the Atlantic region in the medium term. ther expansion. Its infrastructure is being planned
accordingly.
South African exports are stagnating, although its
export terminal, Richards Bay, is being extended
Main trade flows in hard coal traffic by sea, 2006 [in Mt]
Canada 8 59
28 Russia
20 77 18 from Canada
19 20
Poland
USA 8
towards 28
Far east 4 2 China 62
37 4 from USA
25 63
27 20*
20
69 120
5 3
Columbia/ 64
Venezuela Indonesia
South Africa 3 171
5 69 179
4** 1
Australia
32
237
Global hard coal production: 5.4 Bt

Maritime trade: 782 Mt
Incl. 595 Mt steam coal * from Vietnam to China
187 Mt coking coal ** incl. 3 from Indonesia and 1 from South Africa
28

World trade
Poland’s exports continue to fall, particularly sea- even higher shares have been observed due to
borne exports, due to rising costs. Exports from extreme upward swings in freight rates.
Spitsbergen are stable at 3 Mt, as are those from
Venezuela at around 8 Mt. The USA, with relatively The freight costs for coal are determined by the
high costs for export coals and a strong domestic overall market for bulk goods, which grew by 30 %
market, is an Atlantic swing supplier to a small from 2000 – 2006.
extent only, and when the market situation is
favourable, sells spot tonnages.
Developments in the bulk market from 2000 – 2006

Given today's high global demand, Russia's export
2000 2006 Increase
supply is indispensable. With an 11 % world market Mt Mt %
share and nearly 25 % market share in the Atlantic Iron ore 449 721 61
region, Russia has grown to be an important player. Coal 524 782 49
Grain 264 281 6
The global market volume for coking coals currently Other 874 1,008 15
stands at 187 Mt, having stagnated in 2005/06. Total 2,111 2,792 32
Despite considerable growth in crude steel and
Source: German Coal Importers Federation (VDKI), Hamburg
pig iron production, this has had little impact on
the world market for coking coals in 2005/06. The Freight rates were at a low level for many years,
reason is that China, on the one hand, the biggest such that bulk carrier capacities expanded at only a
steel producer, is to a large extent self-sufficient moderate pace. China's iron ore imports have shot
in coking coal, and that, on the other, consumers up since 2003, leading to a dramatic rise in freight
had built up high stockpiles in the boom years rates. Despite high new-build rates for bulk carriers
2003/04. In 2007, however, stronger growth of the in recent years, no relief has been noted as yet on
coking coal market can be expected again. the freight market. Extensions to the fleet are cur-
rently lagging behind bulk shipping demand.
The main suppliers are Australia, Canada, the
USA and Russia. Incentivized by the higher world
market prices for coking coal, Mozambique, Indo- Increase of bulk carrier fleet, in M dwt, 2006 - 2008
nesia and Colombia are investigating coking coal
projects, with significant investment now being End- Additions End-
2006 2007 2008 2008
made by the Brazilian company CVRD in Mozam-
Capesize 121 10 10 141
bique.
Panamax 102 8 7 117
Handysize 145 10 10 165
Owing to the decline in China's coking coal Scrapped,
imports, capacity expansions have stalled in Can- lump sum -3 -3 -6
ada. Without the bottlenecks in Australia's infra- Total 368 25 24 417
structure, there would be excess supply, and since
Source: Clarkson, Shipping Intelligence Weekly
export capacity tends to grow faster than demand,
investors in new coking coal projects remain hesi-
tant. The main reasons for this are queues off coal and
iron-ore exporting and importing ports as well as
Developments in sea freights longer average sea routes per transported tonne,
In addition to the supply of and demand for steam which are making transport capacities scarcer.
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,
29

Freight rates for hard coal

USD/t
50
45
40 South Africa
Australia
35
Colombia
30
25
20
15
10
5
0
Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul
2002 2003 2004 2005 2006 2007

Source: Frachtcontor Junge & Co.
Demand and supply cycles resources that are geologically less favourable or,
Supply prospects for world market production due to their geographical situation, more difficult
depends crucially on the geological formation of to develop. Here, the drawbacks of having to switch
the deposits and on productivity in mining opera- to poorer deposits can be more than compensated
tions. In principle, it may be assumed that the by productivity gains. This has been the case in
most favourably located deposits are used up first. recent years, although it cannot be expected to the
Once they are depleted, recourse must be made to same extent in the future.
Price developments for imported energies

free German border
€/tce
300
250 Crude oil

Natural gas
Hard coal
200 (steam coal)
150
100
50
1973 1978 1983 1988 1993 1998 2003 2007*
* Average 1Q 2007
Source: BAFA
30

World trade
Accordingly, in a buyers’ market, the long-term result was a rise in hard coal prices, which, in turn,
marginal cost of mining is the key determinant for triggered a mobilization of existing, and the devel-
the price trend in ex-mine hard coal. Prices fluctu- opment of new, export capacities.
ate in cycles around a trend defined by long-term
marginal costs. Here, price swings depend crucially, There then followed further market cycles with
inter alia, on the course of demand, which is, in prices first rising and then falling again, between
turn, determined by the utilization of existing 1973 and 1987, 1988 and 1993, 1994 and 1999.
export capacities and – to a lesser extent – by price Prices peaked in 2000/2001 at USD 42/t cif ARA,
movements in the crude oil market. and dipped again to USD 28/t cif ARA in 2002.
With a simultaneous weaker dollar, these prices
In a sellers’ market, on the other hand, the full were barely viable for steam coal mines in South
costs and margins of the most expensive supplier Africa. In 2003/2004, however, the special factors
required to cover the demand determine the world identified triggered leaps in demand, which led to
market price. peak prices of USD 78/t cif ARA. Prices then fell
again to USD 52 – 55/t. Since the start of 2006,
Close interdependencies exist between these fac- they have tended to rebound. In this respect, fob
tors. The second oil crisis in 1979/80, for example, prices for South Africa's coal held steady for a long
led to an increase in the demand for hard coal and, time within a USD 48 – 58/t price band, although
hence, to full utilization of supply capacities. The on a cif basis they were driven up by rising freight
World's largest hard coal producers, 2006

Companies in: Shareholder Output Exports
Mt Mt
Coal India state-run 343 0
Peabody Energy Corp.* 57 % Lehmann Merchant 232 22

USA Banking Partners**
Shenhua listed
203 26
Rio Tinto Plc. listed 154 35

Australia, Indonesia, USA
Arch Coal, Inc. listed 127 -

USA
Anglo Coal listed 98 40

South Africa, Australia,
Venezuela, Colombia
China Coal state-run

91 27
SUEK listed 90 15
Russia
BHP - Billiton Plc. listed 86 81

South Africa, Australia, Indone-
sia, USA, Colombia
Xstrata Plc. listed 77 59

Australia, South Africa,
Colombia
31

rates. In mid-2007, fob prices then began to rise eventual 6 Mt in Mozambique and has bought its
further, thanks to higher demand from the Pacific way into Australia.
region, so that in September 2007 we have cif ARA
prices of over USD 100/t. At this level, extremely The world hard coal market is now served by an
high freight rates have combined with high fob estimated 400 export mines, with some 120 pro-
prices. Today’s prices reflect unusually high capac- ducers operating in this sector in 2006. The ten
ity utilization, both at export steam coal mines and biggest hard coal companies accounted for a 28 %
among bulk carriers. share of global output in 2006. Seven of these
operators even have a 35 % share in the maritime
Re-formation of markets hard coal trade.
The international hard coal market has seen pro-
found structural change in recent years, marked, Where only a few years ago the activities of produc-
first, by ongoing supplier consolidation in Western ers were largely focussed on their home countries,
exporting countries and, second, by a rise in the they now extend from Australia via South Africa
importance of the former centrally-planned econo- and Indonesia all the way to North and South
mies and transition economies as world market America and, recently, to China as well.
suppliers. With their structural adjustments and the
modernization of their coal industries, the latter are What has also changed are the contractual relations
increasingly assuming the role of traditional export- in international coal business. To a growing extent,
ers in balancing markets. hard coal trading is being handled between produc-
ers and consumers directly. The big producers, like
At the same time, in line with the trend toward glo- BHP Billiton, Anglo and Glencore/Xstrata have set
balization, cross-country mergers and acquisitions up their own sales companies and are distributing
among coal companies have accelerated, whilst steam coal and coking coal – partly from different
oil firms like Exxon Mobil and Shell have retreated countries – on a one-stop-shop basis. This example
from coal business. is also being followed by the biggest privatized
Russian producers, meaning that dealers are los-
The only oil company operating coal mines in South ing their once-important position as contractually
Africa has been Total. The big four - BHP Billiton, involved intermediaries between producers and
Anglo, Rio Tinto, Glencore/Xstrata – have opened consumers. In view of this trend, their remit is
new mines or bought interests, e.g., Anglo’s inter- changing and is increasingly focussing on more
est in Paso Diablo, or Glencore/Xstrata’s further opaque niche markets and on handling/distribu-
mining rights in Colombia. In Russia, four large, pri- tion. Also, more dealers are acting as agents for big
vate sector companies have formed and now largely producers, providing assistance in arranging con-
control the Russian coal sector. A similar pattern is tracts and customer care. In Europe, a number of
emerging in China where the government is aiming trading houses are increasingly performing agency
to create 8 – 10 large companies with 50 – 100 Mt functions. Specific mention must be made of the
or more production volume, and whilst these com- following companies:
panies are likely to be privatized in the long run,
they behave increasingly as private concerns. Chi- ■ RAG Trading
na’s WTO accession in 2001 will tend to make the ■ RWE Trading
country more attractive to foreign companies and ■ Constellation
investors. India and China are increasingly showing ■ EDF-Trading
an interest in coal and iron ore interests overseas ■ Coeclerici
in order to secure their raw material needs. CVRD
– the biggest Brazilian iron ore producer – is plan- A strong position in the Far-Eastern coal trade is
ning the development of a coking coal mine for an occupied by more than ten Japanese trading com-
32

World trade
panies that mainly handle the supply contracts Investment

concluded between the steel industry or the power One important component in mining costs is the
sector and the exporters. Some have consider- expenditure on developing the deposits. In the
able stakes in a number of export mines. The most case of new mining capacities for export coal, i.e.
important here are: for prospecting and exploration as well as the
development of new mines, these costs currently
■ Mitsubishi amount worldwide to USD 45 – 50 /t p.a. of min-
■ Mitsui ing capacity. This figure also includes the costs of
■ Itochu extending already operating mines (World Energy
■ Nichimen Investment Outlook 2003). For new mines that
■ Nobel cannot be linked to existing infrastructure (e.g.
transport links, water and energy supplies, accom-
In China, coal exports are mainly handled by the modation for workers and families, and local com-
state-run company Chinese National Coal Import munity facilities), specific investment costs can rise
and Export Corp. (CNCIEC) and by three further substantially, by 100 % or more. It is remarkable
firms. In Poland, WEGLOKOKS, which is likewise that average specific investment has fallen slightly
state-run, deals with exports. In Russia, SUEK and in nominal terms since 1998 and that a slight trend
KRUTRADE are by far the most important trading reversal has been noted only since 2004. This is
companies. Nearly 90 % of Vietnam's transactions due to the strong demand for coal-mining equip-
are handled by Vinacoal. ment, coupled with demand from iron ore and non-
ferrous metals mining projects, and to the associ-
Representative costs in the coal chain ated price inflation in recent years. Compared with
In the competition between primary energies, it is gas and oil, coal is the least capital-intensive. The
the costs in the coal supply chain, i.e. in the vari- World Energy Investment Outlook from the IEA, for
ous stages from export mine to consumer, that are example, has identified the following order (con-
crucial. verted into tce):
Specific investment in export-oriented hard-coal mining
USD/t/a
350
300 Average in nominal USD/tpa

Average in (real) 2005 USD/tpa
250
200
150
100
50
1962 1968 1974 1980 1986 1992 1998 2004
Source: Kopal, Christoph: Zeitschrift für Energiewirtschaft, No 1, 2007
33

operations, plus infrastructure, in remote and

■ Coal USD 3.4/tce undeveloped areas (greenfield projects), which
■ Oil USD 15.4/tce may require amounts of up to USD 160/t p.a. By
■ Gas USD 19.6/tce contrast, where new mines are being developed or
existing mines extended in areas with an already
The figures are based on the accumulated invest- developed infrastructure (brownfield projects), the
ments throughout the entire supply chain of each specific investment can be as little as USD 30 - 60/t
energy source in the period 2001 – 2030, divided p.a. of mining capacity. In this respect, there are
by the accumulated production growth in each substantial differences between deposits lying
case. Hence, coal has less significant investment near to the coast and those lying inland, between
risks than gas and oil. opencast and underground mining, and between
the extraction of coking and steam coal. Assuming
The highest specific outlays for the creation of an average mine life of some 20 years, depreciation
mining capacities are involved in the develop- is approx. USD 2.5 – 3.0 per mined tonne, and debt
ment of completely new coalfields or large-scale
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
34

World trade
service USD 3.5 - 4.0/t on the basis of a 10 % rate Moreover, a number of other factors exist. All of
of return, i.e. a total of USD 6 – 7 US/t. this goes to explain the large cost range, which can
be seen even within one producer country.
Operating costs
The total costs in the coal chain, with a breakdown In operational logistics, particularly from the mine
by the various interacting links, are specified for to the ocean-going ship, conditions differ, depend-
the various exporting countries in the following ing on the country. For example, significant cost
Table. The reported cost bands are representative differences exist between operations where coal
and are based on our own investigations, on an is transported from the mine directly to an export
analysis of conference talks and on IEA studies. terminal for loading onto capesize ships, and those
where coal is barged out to vessels lying at anchor
For the ex-pit costs, the range reported is large in the roads.
because it depends on the following, project-specif-
ic features: In recent years, costs have risen significantly owing
to the boom in the iron ore and coal industries.
■ type of mining operation– opencast or Higher prices for mining equipment, materials,
underground, explosives, fuels and wages have led to a consider-
■ coal type – steam coal or coking coal able rise in costs; as has falling productivity, above
■ labour costs – e.g. low-cost developing all in Australia and the USA. However, potential
country or developed economy, exists for further rationalization which is likely to
■ productivity – high or low output per shift, improve the cost and productivity situation, at least
per man and per year. 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
800
700 Supply = mining capacity [in Mt]

Proj. supply [in Mt]
Demand = world trade [overseas, in Mt]
600 Proj. demand [in Mt]
Capacity utilization [%]
Proj. capacity utilization [%]
500 MCIS price (USD/t cif ARA = 6,000 Kcal/kg,
as received)
400
300
200
100
0
1987 1990 1993 1996 1999 2002 2005 2008 2011
Source: Kopal, Christoph, Zeitschrift für Energiewirtschaft, No. 1, 2007
35

Profit margins are impaired in some countries by ply was able to satisfy steadily growing demand,
a weak dollar. The Australian dollar, for example, but has tended to run ahead of demand since then.
South Africa's rand and the Canadian dollar have With hindsight, it is now clear (see Diagram) that
risen in value compared with the US currency. The a hefty excess supply emerged for the first time
cost and productivity situation in selected export- between 1990 - 1992 which, with demand rising,
ing countries is described in the country reports. did not contract again until 1995 when a further
In calculating cif ARA costs, average sea freight investment cycle began to create renewed excess
rates for the year 2006 have been used and so supply. It was not until 2003/2004 that the moder-
these do not reflect the high volatility seen during ate investment activity of previous years was fol-
the year. lowed by steadily rising capacity utilization and,
hence, price peaks. This volatile situation has con-
Price formation tinued since then.
The world’s hard coal market for steam coal has
been expanding since the 1980s, although the mar- The successive phases of excess supply followed by
ket initially lacked maturity. Price competition is shortages are triggering intense price competition.
governed by supply and demand. Until 1990, sup- One main - and leading - indicator of price develop-
Mechanisms of price formation for steam coal (Total market 2006: 595 Mt)
Atlantic market (242 Mt) Pacific market (353 Mt)
Market structure
Demand Supply Supply Demand

242 Mt 211 Mt 384 Mt 353 Mt
EU-25 207 Mt Colombia Australia 394 Mt Japan
Eastern Europe South Africa Indonesia South Korea
Mediterranean Russia China Taiwan
area Poland Russia India
North, Central and Venezuela Vietnam China
South America USA etc.
etc.
35 Mt
4 Mt
Price formation
Market leaders: fob prices Market leaders:

South Africa Australia
Colombia Indonesia
Freight rates
Russia
Marginal suppliers: Marginal suppliers:
Poland Currency relations South Africa
USA Russia
Australia Buyer‘s market China
Indonesia Seller‘s market
Source: VDKI. Hamburg 2007
36

World trade
ments in this respect has proved to be the utiliza- As mentioned earlier, the world market for the
tion of the mining capacities available for exports. ocean-going hard coal trade in steam coals involves
The degree of capacity utilization in export mines is two segments. These are the Atlantic market com-
in sync with steam coal price rises and falls. prising Europe, including the neighbouring Medi-
terranean countries, and North, Central and South
This is also true of the recent past, when demand America, and the Pacific market, which also extends
for both steam coal and coking coal has come up to the Asian coastal countries bordering the Indian
against capacity limits with corresponding price Ocean, although it mainly serves Far Asian consum-
fluctuations in an upward direction. Whereas in ers. This division is mainly a matter of different
the case of steam coal it has still been possible to transport costs, but also involves different pricing
mobilize certain capacity reserves, which led to a mechanisms. Nevertheless, deliveries may occur
moderate dip in prices, coking coal prices rose by from one market segment to the other, provided
over 100 % to USD 125/t fob shipping port in 2004 that the cif prices are competitive and, of course,
due to a lack of elasticity in the supply. Although profitable for the supplier. The extra transportation
coking coal prices have now fallen again by a good costs (e.g. Australian coal to ARA) are borne by the
20 % owing to higher supply and more subdued supplier. Such exports are often contracted on a cif
demand, they have persisted at a historically high basis.
level in 2006/07 compared with previous years.
Order of suppliers of steam coal, by production costs on the

Atlantic market incl. ocean transport, 2006
USD/t
cif ARA
80
242 Mt
60
40
20
65
South Africa
Colombia/
Venezuela
Indonesia
Poland
Russia
Other
0
Mt
100 200
37

The competitiveness of more distant suppliers Atlantic market and Australia and Indonesia for the
tends to rise when freight rates are low and to fall Pacific market.
when they are high. Some interdependencies exist
with the coking coal market. Hence, more highly However, since considerable quantities are now
volatile coking coals are also used in places as being traded on a spot basis, the market leaders
steam coal, and certain steam coal qualities can be have to include in their thinking the prices offered
marketed, after better preparation, as more highly by their competitors (e.g., Colombia and Russia in
volatile coking coals. Producers decide according to Europe or Indonesia and China in East Asia), if they
the price situation which variant earns the highest are not to lose market share. The crucial factor in
“net-back“ price, free mine. this respect is the cif price at the destination port.
The price level formed in this way is the benchmark
The volume of coal exchanged between the Atlantic for the negotiation of long-term prices.
and Pacific markets in 2006 was 35 Mt or just under
6 % of the entire steam coal market of 595 Mt. A new element in the evolution of coal prices, at
Largely synchronous price trends can be observed least in the European section of the Atlantic mar-
on both markets, which is also reflected in the ket, is CO2 certificate trading. This affects primarily
MCIS (McCloskey Coal Industry Services) price indi- the use of gas or coal in power plants. When gas
ces for NW Europe and East Asia. prices are low, the cost of CO2 certificates curbs the
demand for coal; when they are high, coal can be
In view of their high market shares, the price lead- competitive in spite of the impact of the CO2 emis-
ers are generally South Africa and Colombia for the 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
USD/t
fob
50
353 Mt
40
30
20
10
Indonesia
Australia
Vietnam
Russia
China
0 Mt
100 200 300
38

World trade
Synchronous price developments for steam coals in the Atlantic and Pacific
in USD/t cif*
80
60
40
MCIS NWE
MCIS Pacific
20
0
1/03 7/03 1/04 7/04 1/05 7/05 1/06 7/06 1/07
* 6000 Kcal/kg NCV

Source: McCloskey Coal Information Services
by referring to the margins that they achieve with ■ procuring "small" quantities under
a given electricity price by deploying gas or coal, favourable terms, and
with the cost of CO2 factored into their decision. ■ cover for unplanned consumption peaks.
In the first CO2 trading period, coal use was virtu- Also, it is now virtually the rule that medium-term
ally unaffected. CO2 certificate prices peaked at requirements are covered on the spot market at
€ 30/t CO2. Once actual CO2 certificate use was the expense of longer-term contracts. One variant
announced in 2005, the price nosedived to nearly of spot purchases is the growing number of ten-
zero toward the end of the trading period. In the der deals, i.e. purchases which are preceded by a
new trading period (2008 – 2012), CO2 certificates bidding procedure, with the best bid winning the
are currently being traded in a price band of € 15 – contract. Deliveries agreed in this way generally
25/t CO2 for 2008. involve larger volumes than single deals, and the
time frame mostly extends across several quarters.
Contract forms in international coal trade In short-term business, option quantities can be
On the world hard coal market, both long-term sup- traded if the intention is to secure additional quan-
ply contracts and spot transactions are usual. By tities, while wishing to wait and see how markets
concluding spot contracts, consumers seek to main- and prices develop.
tain a particularly close alignment to the current
market situation. In such deals, buyers are guided One feature of spot transactions is that, when the
by the following considerations: market situation is tight, mark-ups are charged
on long-term contract prices. Conversely, when
■ close linkage to the electricity market the market situation eases, price reductions are
■ exploiting price changes wherever possible, allowed. Hence, the spot prices in buyers' markets,
such as those that existed in the early 90s and after
39

CO² price developments in der EU
/t CO 2
35
30
EUA 2008
EUA 2007
25
20
15
10
0
Nov. Mar. Jul. Nov. Mar. Jul. Nov. Mar. Jul. Nov. Mar. Jul.
03 04 04 04 05 05 05 06 06 06 07 07
Source: RWE Trading
the mid-90s, were generally below long-term con- markets, e.g. for supplies to near-mine power plants
tract prices. Another characteristic of spot prices is or steel mills, or where long-term mutual depen
that they have an impact on the contract prices of dencies exist between producer and consumer.
future deliveries, for which they perform a marker
function. On the world market, by contrast, the character
of long-term contracts has changed considerably
Spot deals are no longer arranged and handled under the growing pressure of spot transactions,
exclusively between producers or dealers and con- especially for steam coal. Today, their terms rarely
sumers in the traditional manner. In the case of go beyond five years, and they are merely used to
steam coal, these functions are increasingly being underpin long-term cooperation between the con-
performed by well-established trading platforms, tracting parties, with selling or purchasing rights
commodity markets and the brokers who work for specific contract quantities (including buyer
around them. options), assuming a purchase price is agreed. On
the basis of the current spot price, the contract-
Long-term contracts were once concluded for peri- ing partners submit their offers for a quarter and,
ods of up to 10 years directly between producer where no agreement comes about, the supply
and final consumer. They defined the annual quan- envisaged for that quarter ceases to apply. In East
tities to be purchased, including buyer and seller Asia, it is true, there are still annual contract or
options, as well as the fixed prices for the current marker prices, but with a steep fall in the number
year. The annual price negotiation had to consider of deals, above all for steam coals.
any cost rises that had occurred in the meantime
– a practice that had mostly discontinued by the One new variant for long-term pricing is that
1980s. The contract year, in this respect, was the futures are now being offered by trading platforms
calendar year or, in East Asia, often the Japanese and commodity markets for spot quantities. These
fiscal year (1 April to 31 March). Today, long-term prices can be agreed in advance.
contracts are encountered, if at all, only in domestic
40

World trade
Lead times in coal logistics for imports to Germany (in weeks)
Reporting period Loading time window Sea trip Domestic transport Total
Australia 4 2 6 1 13
Indonesia/
China 4 2 6 1 13
South Africa 4 2 3 1 10
Colombia 4 2 2 1 9
Poland/
Russia 4 2 1 1 8
Source: Kopal, Christoph; Zeitschrift für Energiewirtschaft, No 1, 2007
innovation or new requirements, e.g., in environ-

In physical procurements, account must be taken of mental protection, put a premature end to these
the lead times between contracting and delivery of plants. Otherwise, service lives of 35 - 40 years or
coal to the power plant. The Table shows some lead more are nothing unusual.
times for the German market.
By contrast, gas-fired power plants can be erected
Influence of electricity markets more quickly than coal-based plants and require
As of late, electricity markets in Europe, the USA only half the investment needed for a hard coal-
and the Far East have undergone radical change. fired unit. Coal can be competitive only if operat-
Liberalization, deregulation and the associated ing costs are low, hence fuel costs must be low. So
abandoning of monopoly supply regions have seen overseas coal producers must quote export prices
the collapse of traditional market structures and that offset the handling and combustion advan-
the launch of free competition among power pro- tages of natural gas and its lower CO2 cost in terms
ducers. What matters for the power suppliers now of certificates required. On the other hand, it must
is that they offer competitive electricity prices by not be forgotten that, outside EU-27, the world
making optimal use of their own power plant fleet steam coal market need not bear any CO2 certificate
or purchase electricity from elsewhere to underpin costs at all. In the case of a seller’s market, interna-
or extend their market share. This is forcing power tional coal producers will channel their products to
plant operators to reduce their fuel costs, which is those markets where they obtain the best net-back
true especially for plants today whose primary fuel price, free mine, which may be markets outside the
supply is imported coal with its high transport costs. EU-27. What is more, a decision on the erection of
They try to pass these competitive pressures on a hard coal-fired power plant presumes electricity
to coal suppliers. This pressure exists in particular prices that permit long-term full cost coverage. This
when it is the marginal costs of power production in demands, especially in Germany, a stable framework
the mid-merit load that determine power prices. for the use of coal-fired power plants. Besides the
prices of gas, coal and CO2 certificates, the long-
Decisions to build new hard coal-fired power plants term availability and security of supply of coal and
are much riskier in liberalized and, hence, short-term gas play a big part in investment decisions.
energy markets than in the case of demarcated sup-
ply regions with statutory supply duties. Coal-fired Pinpointed subsidies for renewables-based and dis-
power plants are investment goods that are only tributed generation are disrupting the development
able to earn their capital costs across very long of a market economy-oriented electricity supply
amortization periods: 20 or more years are needed and, hence, the emergence of an optimized power
to obtain a reasonable ROI. Thereafter, it is true, plant fleet, including hard coal plants.
they usually have a "golden end", unless technical
41

Decisions to construct coal-fired power plants and actions to be entered into in the first place and
the conditions for using coal are less complex in help safeguard them. Here, the players involved
East Asian industrialized countries. There, imported think less in physical than in paper terms. Since
coal still enjoys a considerable price advantage rela- volatility in both coal trade and the freight busi-
tive to imported liquefied natural gas. Moreover, ness has risen significantly, the prerequisites have
the preconditions are not in place there – as they now been created, not only to strike additional
are in Europe, say – for the creation of a joint and deals using speculative tools like swaps, futures
integrated gas grid, since Japan, Taiwan and South or options, but also to handle a growing number
Korea will remain stand-alone markets for the fore- of transactions that previously would have been
seeable future. agreed under the terms of negotiated contracts.
The biggest obstacle to an innovative coal trade in
Risk management the past was the heterogeneous quality of coal as
In view of the more complex conditions applying a commodity. Unlike other raw materials markets
to hard coal trading, increasing use is being made where risk management methods, standardized
in coal procurement, in securing sea freight, and contract forms and forward trading are already the
in exchanging currencies, of the risk management rule, such activities are still hampered in the coal
techniques that have been used for some time now sector by the existence of a large number of mea
in other commodity markets. surable quality parameters and the different ways
these are assessed by customers, especially in the
Hedging deals designed to avoid the financial case of coking coal.
losses associated with supply and charter contracts
now help underpin the traditional coal and ocean Despite this, steam coal is now well on track to
freight trade. In fact, they often enable such trans- become an accepted and heavily traded commod-
Hard coal prices for the next tradable calendar year each
USD/t
2004 2005 2006 2007
Source: RWE Trading
42

World trade
Hard-coal trade
Physical trade Coal derivates
Options Swaps Futures Options
Source: German Coal Importers Federation (VDKI), Hamburg
ity worldwide, both on commodity markets and Unlike conventional ”physical“ coal trade with con-
international trading platforms. The physical pre- tracts and options at fixed prices, the coal indices
conditions for this have been created recently by a now permit trade on commodity markets and trad-
number of ”coal indices“ that precisely define and ing platforms involving coal derivatives, i.e. paper
standardize provenance, quality, place of delivery transactions with real-time, over-the-counter (OTC),
and conditions; they are replacing the subjective bid-offer prices. Here, deals on a swap, futures and
assessments and interpretations of market partici- options basis are possible.
pants that were usual in the past. Among these
coal indices we currently find the following:
The volume of the paper trade has increased expo-
TFS API #2 nentially since 2000 and is now about 2.5 times
NAR CIF ARA greater than the physical world trade in steam coal.
Basis: South African coal ex Richards Bay, capesize The focus of the paper trade is on the Atlantic
freight to ARA ports, with a net calorific value of region. It is only a question of time, however,
6,000 kcal. before the Pacific market moves in the same direc-
tion.
TFS API #4
NAR FOB RBCT The OTC prices on the Atlantic market, which are
published at least on a weekly or monthly basis,
Basis: South African coal fob Richards Bay, with a have created an unheard-of transparency on the
net calorific value of 6,000 kcal. world hard coal market, and now largely determine
the spot trade in steam coal and its price trends
Mc Closkey publishes two price indices, on the Atlantic and, increasingly, on the Pacific
market. For medium-term deliveries the price to
■ Northwest European ”steam coal marker“ be paid is increasingly established on the basis of
■ Asian ”marker price“ specific indices, with price determinants fixed upon
contracting. Also, market players have the option
which are based on fob prices Richards Bay (South of hedging their coal purchases to manage future
Africa) or Newcastle (Australia), likewise for stan price risks.
dard quality 6,000 kcal/kg, and are partly employed
as a basis for price estimates. Recently, the EU has Such deals are handled by broker firms (e.g. TFS)
also been publishing average import prices again or trading platforms like the digital platform glo-
for steam coal and coking coal. Besides these indi- balCOAL set up in 2000 by coal producers and
ces, there are also special quotations for US coal at consumers. As an ideal medium, Internet trade
the NYMEX and for the Powder River Basin. offers ready access to updated market data with
43

World Market for Hard Coal World trade
Steam coal trade volume
Maritime derivative, 2000 - 2006
Mt
1400
fob Newcastle
1200 API#4
API#2
1000
800
600
400
200
2000 2001 2002 2003 2004 2005 2006
Source: Perret Associates
fast response times. It has certainly speeded up ■ raw-material companies/traders

commodity trade in coal and ensured a quick accep ■ banks
tance by traders. The number of companies in the
coal business has risen in recent years. The most important are set forth in the following
overview.
On the coal-derivatives market, a number of compa-
nies are active, and they can be broken down into While coal derivatives were traded mainly on the
three groups: OTC market from 2000 – 2005, EEX (Leipzig) and
■ power producers ICE-Futures (Atlanta) have been offering a stock
Overview of broker companies in coal business
Main registered Other coal Number of Paper Physical Year-Start of

office offices persons trade trade coal activities
GFI London Singapore 5-10 yes yes 2000
ICAP London Singapore 5-10 yes no 2001
Spectron London Singapore <5 yes no 1999
TFS London Singapore <5 yes no 1999
Tullet Prebon London Singapore 5 yes no 2007
globalCOAL London Singapore 5-10 yes yes 2001
London Commodity Brokers London Singapore <5 no yes 2005
Source: Perret Associates
44

Important companies on the coal-derivates market
certificates in the Pacific region, it is mainly coal-
Suppliers Providers/traders Banks
based power plants that are being built for growing
Constellation BHP Billiton Barcap
domestic electricity needs. Large sections of Asia's
EDF Cargill BNP Paribas
populations do not yet have access to electricity.
E.ON Glencore Deutsche Bank
Essent Koch Metals Goldman Sachs
In the Atlantic region, a moderate consumption
Nuon Louis Dreyfus Macquarie Bank
trend may be expected. The weak growth rates in
RWE Noble Merrill Lynch
gross national product, along with higher energy
Sempra Peabody Morgan Stanley
efficiency, especially in the EU-27 region, mean
Vattenfall Société Générale
that only slight growth in coal consumption should
Standard Bank
be expected. In the long term, South America and
Africa will grow, since here too, large sections of
Source: Perret Associates, Brokers, Principals the population have no access to electricity.
In Europe, the demand for coal from the world coal

market-based trading platform since 2006. This market will rise because of declining domestic hard
trade is in its infancy and in 2006, both exchanges coal production. In addition, conversion from natu-
reached a mere 1 % of the total market for coal ral gas to coal is underway in places, e.g. in Italy.
derivatives or 1.4 Bt.
In the USA, a trend toward increased imports must
Perspectives be expected for the coastal regions, since output
Developments in the world coal market in recent from the Appalachian mining areas is in decline.
years exceeded all forecasts, and the first six Beyond that, many Central and South American
months of 2007 show above-average growth. countries are increasing their steam coal imports,
although from a low base.
Demand
The steam coal market grew in the last two years After a consolidation phase, the coking coal market
(2004 - 2006) by 90 Mt or 18 %. This high growth is likely to return to growth. So far, China has been
was the result of dynamic expansion in the Pacific largely self-sufficient in coking coal, so that the
region and economy- and weather-related growth in demand for coking coal on the world market has
the Atlantic area. High gas prices, too, favoured the been mainly defined by the economic situation of
consumption of world-market coal. steel producers in North and South America, the
Asian industrialized countries and Europe. If China,
The main driver for growth in the coming years is too, were to rely more heavily on the world market,
still expected to be the Asian region. While Japan, growth could accelerate, although the country is
South Korea and Taiwan now report moderate currently increasing its coke exports.
growth, China's and India's demand and that of
the other Asian emerging markets show a stronger Overall, the preconditions for further growth on
increase. Specifically, developments in China, with the world coal market, viewed against the back-
growing imports, coupled with falling exports, are ground of a prospering world economy, must be
a challenge to the international market. China's described as very good. If the 6 – 8 % growth rates
steam coal imports exceeded its exports for the of recent years continue, demand could top 1 Bt
first time in 1H07. in the seaborne world hard coal market as early as
2010 – 2012. Relevant forecasts, like the IEA World
Since coal continues to be a cheaper source of Energy Outlook 2006 and the 2007 International
energy – even at today’s higher price level – than Energy Outlook from the DOE/EIA, are assuming
LNG, and since no account need be taken of CO2 more subdued growth rates, although the IEA will
45

World trade in hard coals [in Mtce] 953
795
283
661
238 Coking coal

Steam coal
202
670
557
459
2005 2015 2030
Source: DOE/EIA, International Energy Outlook 2007, Washington 2007, Reference Scenario
consider a high-growth scenario in the 2007 edition interest for the market in China's south-west. South
of its outlook. Africa has been a swing supplier for India in recent
years.
Supply
Capacity utilization in the export mines for steam In addition to supplying the Pacific market, Pacific
coal has increased in recent years, and this trend is producers – above all Indonesia – are delivering
continuing in 2007. This has tended to be accompa- larger amounts of low-sulphur coal to the Atlan-
nied by price swings that have been observed more tic region. The latter is supplied by South Africa,
frequently of late. Colombia and Russia. Smaller exporters are Poland,
Venezuela, the USA and Spitsbergen. Russia was
The Pacific steam coal market is mainly supplied able to increase its exports in recent years by
by Indonesia and Australia. Smaller suppliers are 6 – 8 Mt each year and is likely to go on doing so.
Vietnam, Russia and China. Between them, Indone- Colombia is increasing its output and could, from
sia and Vietnam alone expanded their exports by a 2010 – 2012 on, reach an export volume of
good 80 Mt in 2005/06. 100 Mt/a. South Africa is currently extending its
Richards Bay export terminal from 72 Mt/a to
Australia and Indonesia have further expansion po- 91 Mt/a. After a phase of stagnation, South Africa's
tential. Australia in particular is likely to extend its exports ought to rise again. The smaller exporting
position again after overcoming its infrastructure countries contribute about 20 – 25 Mt/a of supplies
problems in domestic transport and port handling. to the Atlantic market. In this respect, decreases
Russia, too, is planning an expansion of its Far-East and increases balance out and their aggregate vol-
activities. To date, Vietnam has been increasing its ume is unlikely to change in the medium term.
exports year after year, although this is mainly of
46

World trade
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.
47

Coal-exporting countries
Australia
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General deposits. The Department of Industry, Tourism and

Australia is a democratically governed federa- Resources anticipates much higher exports of coal,
tion within the Commonwealth of Nations with iron ore, gold, aluminium and nickel. Coal is already
firmly established legal structures. It is among the country’s leading export by tonnage and by
the world‘s most important producers and export- value.
ers of minerals and energy raw materials. In view
of the vast undeveloped reserves of this sparsely Reserves/qualities
populated continent and the strong rise in demand According to figures supplied by BGR, Australia has
among emerging Asian markets, the Australian hard coal resources of 153 Bt and hard coal reserves
government is promoting the development of of 41 Bt, i.e. a total potential of 194 Bt. t. The most
mining activities and the exploration of further important coal reserves at present are located in
48

Coal-exporting countries • Australia
New South Wales (NSW) and Queensland (QLD). to growing needs at home in the medium to long
The proven reserves in NSW total some 19 Bt that term.
can be extracted by opencast and underground It remains to be seen whether coal-to-liquid (CTL)
mining in roughly equal proportions. The proven projects will be developed in the medium to long
reserves in QLD total some 33 Bt, with approxi- term. However, these would use lignite or other
mately 55 % accessible by opencast mining, and coal deposits not destined for the export market.
45 % by underground mining. Australia at present Export-oriented mining capacities were further
puts a higher figure on them. expanded in 2006.
Altogether, the reserves in these two states are

Export-oriented mining capacities
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 2005 2006 Increase
Mt Mt Mt
years.
Coking coal 151 162 +11
Steam coal 130 135 +5
Chief mining areas in New South Wales include
Total 281 297 +16
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 With an export volume of 237 Mt, 79 % of capacity
low-volatile (22 - 25 %) coking and the western was utilized in 2006. Hence, there is a total capac-
and Gunnedah coalfields with highly volatile steam ity reserve of 61 Mt/a in hard coal production.
coal. In Queensland, the Bowen Basin with low- to
medium-volatile (18 - 28 %) coking and steam coal, For steam coal alone, however, capacity utilization
but also anthracitic (12 - 18 %) and semi-soft coking is 84 % and the capacity reserve is 21 Mt/a.
coal, is of outstanding importance. On top of this
come the Moreton and Tarong basins with highly As for further developments, a number of projects
volatile steam coal. Australian hard coal is mainly have been reported. The extent and speed of any
high in ash and requires washing. It is usually low increase in output is said to be less a question of
in sulphur (< 1.0 %). identifying low-cost reserves and financing mines,
than of extensions to the existing rail and port
Mining development infrastructure. The Australian government in Can-
Scaleable hard coal output in Australia reached berra has made it clear that any extensions to the
some 314 Mt in 2006, little changed from 2005. infrastructure are largely a matter for the country's
The two main extraction regions are situated on the coal sector and of the regions if they wish to exploit
east coast of Australia. In 2006, Queensland mined the opportunities offered by the world market.
177 Mt, and New South-Wales 128 Mt. Besides The capacity of currently planned projects for
the East-australian coal production in the state of steam coal could bring total capacity to about 172
Victoria around 70 Mt/a of lignite were produced Mt/a over the next five years . Of this total, only a
(Murray Basin). 9 mt/a of bituminous coal were pro- part is likely to be implemented, however.
duced in West-Australia and in Tasmania.
Of the total production, 24 % is extracted in under-
Of the hard coal output, 237 Mt was exported; ground mining operations and 76 % in opencast
about 54 Mt is consumed domestically. mines. In all, some 100 large and small hard coal
Future growth in domestic consumption is likely mines are operated, including 51 in NSW, 42 in
to be moderate owing to the high lignite output, QLD and six in South Australia, Western Australia
so Australia's export potential should not fall due and Tasmania. Of the mines, 37 are underground
49

and 62 opencast. The share of opencast mines has panies, too, are increasingly interested in Australian
steadily increased in recent years. coking coal pits and are acquiring smaller holdings.
Productivity in Australia‘s pits, measured in market-
In underground operations, the share mined using able tonnes per man-year, is very high, although
longwalls fell 10 % from 77 Mt to 70 Mt between showing a decline in recent years. The following
2001/02 and 2005/06, despite the productivity values are for 2006:
benefits of longwall mining.
Opencast Underground
In opencast pits, with depths down to 70 m, New South Wales 14,000 t 8,000 t
both draglines (one to two seams) and trucks and Queensland 10,000 t 5,000 t
shovels (several seams) are used. In underground
mines, which can reach depths of 200 m, high-
performance longwalling is preferred over bord and Cost developments
pillar mining, but both methods are employed. Australia is home to some of the lowest-cost hard
At end-2006, Australia‘s hard coal-mining opera- coal producers and exporters in the world. In gen-
tions employed a workforce of 34,000, i.e. having eral, the seams are in relatively undisturbed depos-
risen by some 10,000 employees from 24,000 at its in geological terms, and most can be mined in
the end of 2004. This also has an adverse impact opencast or relatively shallow underground opera-
on productivity. tions. The distance to ports is 80 – 280 km in New
South Wales, and 130 – 380 km in Queensland. To
Consolidation in Australia‘s mining sector is ongo- that extent, Australia has the prerequisites for hold-
ing. The four biggest coal producers mine and ing and extending its export position in the long
export over 80 % of Australia‘s hard coal. The Table term.
shows the four major Australian producers and
exporters: Despite this favourable position, costs will rise in
future owing to
Australia's biggest hard coal producers
■ longer distances to the ports,
No. of Output1) Exports ■ more unfavourable overburden-to-coal ratios
Company mines 2006 2006
Mt Mt at opencast mines,
BHP-Billiton Ltd. 16 45 40 ■ a higher ash content, and
Rio Tinto Ltd. 8 37 31 ■ higher royalties if prices rise since these are
Xstrata PLC 21 54 40 now levied as a percentage of sales value.

Anglo Coal Australia 7 31 20
Pty Ltd In some locations, higher costs for water supplies
Total 167 131 must also be factored in.
% of 53 55
total output,
Since 2004, substantial cost hikes have been noted.
Australia 2006 314 237
Costs for fuels, lubricants, explosives and spare
1) Output pro rata
Source: Australian Coal Report parts, especially for opencast mines, have risen
significantly. Besides the strong growth in world
coal trade, iron-ore production and trade are also
These four companies produce 167 Mt of Australia‘s booming, so plant manufacturers and suppliers,
entire hard coal. In 2006, Peabody acquired Excel- especially of trucks and shovels, are working to
Coal for AUD 2 bn, while Curd bought the mining capacity and can push through price increases. At
activities of AMCI for AUD 838 mill. Chinese com- the same time, the bargaining power of unions has
50

Coal-exporting countries • Australia
led to higher labour costs. The costs of steam coal Australia has a number of coal exporting ports in
are assessed as follows (fob loading port): NSW and QLD. In 2006, exports of 237 Mt were
handled by the following ports:
Fob costs
2004/05 2006/07
USD/t USD/t
Export ports in Australia
Steam coals 22-38 30-54
Exports 2005 Exports 2006
1,000 t 1,000 t
NWS-ports
The costs differ between underground and open- Newcastle 80,327 79,826
cast mining and between coking coals and steam Port Kembla 9,208 10,169
coals, and can only be given in broad ranges. Total NWS 89,535 89,995
Queensland ports
Dalrymple Bay 50,665 51.170
Opencast Underground
Hay Point 33,496 31,953
Steam coals USD/t USD/t
Gladstone 42,745 49,508
Queensland 14-42 23-35 Abbot Point 12,968 11,208
New South Wales 12-38 25-40 Brisbane 4,296 3,931
Coking coal Total Queensland 144,170 147,770
Queensland 26-36 29-43 Total 233,705 237,765
New South Wales 29-35 26-52
Due to the weakening US dollar, Australia‘s mining Throughout 2005, 2006 and 2007 queues have
operations came under considerable pressure dur- been witnessed off Australia's ports. At peak times
ing 2005 and 2006, since fewer Australian dollars in 2007, up to 200 waiting ships have incurred sig-
were earned for constant US dollar export values. nificant demurrage charges.
Transport costs, depending on distance, range However, a massive capacity extension programme
between USD 4/t and USD 14/t; port handling is underway at nearly all ports, and this should
costs are between USD 2/t and USD 3/t. bring some relief in 2008/09, as should better port
management.
Infrastructure
The recent strong growth in the world coal market Extension plans for Australian ports [Mt]
and the special demands on Australia as a coking

Current Short-term Medium-term
coal exporter have led to bottlenecks at Australia's Port capacity (2006) increase extensions
ports, and its railway system is increasingly choked. Newcastle 89.0 105.0 130.0
There is a lack of wagons and locomotives. Port Kembla 14.0 14.0 14.0
Dalrymple Bay 60.0 68.0 85.0
Queensland‘s hard coal mining operations are Hay Point 40.0 44.0 57.0
connected via a 2,000 km long railway network to Gladstone 45.0 68.0 88.0
the export seaports. Five special lines connect 40 Abbot Point 15.0 21.0 50.0
mines to the ports. New South Wales has two coal Brisbane 5.0 5.0 5.0
lines, totalling 1,050 km and with 26 loading sta- Other - - 30.0
tions. Total 268.0 325.0 459.0
51

Australia‘s state-owned railways are also supporting tralia will be the leading hard coal exporting nation
growth of the coal supply chain. Queensland Rail, and could expand its exports to 400 Mt/a.
which operates the coal railways in Queensland,
has announced a major programme of extensions
Export developments, Australia, 2004 - 2006
that provides for new connecting lines, a doubling
of the tracks in certain sections, and the purchase 2004 2005 2006
of more powerful locomotives in order to increase Mt Mt Mt
transport efficiency and flexibility. Hard coal output 297 306 314
Hard coal exports 225 234 237
Exports Steam coal 108 110 114
Coking coal 117 124 123
Australia has steadily expanded its exports in recent
Export rate, in % 76 76 75
years to the present 237 Mt/a. Steam coal exports
Chief import
rose to 114 Mt/a, and coking coal exports to
countries/regions
123 Mt/a. Specifically in the case of coking coal, Aus-
EU-15/after 2004: EU-25 27.2 26.3 26.7
tralia, with a market share of 66 %, has achieved an
Other Europ. countries* 1.9 1.2 3.1
outstanding position and will be able to maintain this
Japan 101.9 104.8 103.3
in the long term thanks to favourable mining costs
South Korea 30.1 30.2 23.6
and large reserves. For quality reasons, Australia‘s
Taiwan 18.8 21.9 22.7
coking coals are exported to all countries around the
India 16.6 19.0 18.9
world that produce pig iron.
*incl neighbouring Mediterranean countries
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-
52

Coal-exporting countries • Indonesia
Indonesia
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General Coal mining has evolved on “greenfield” sites

The most dynamic player on the international coal under the control of what used to be the Ministry
stage is Indonesia. This, the world‘s fourth most of Mining and Energy or its Directorate-General for
populous nation is among the growth regions, even Mining. By 1999, state-owned coal reserves had
if its pace of growth has significantly slackened. been offered in three tranches for international
Due to inadequate mining law reforms, and ques- development under a bidding procedure, the first
tionable privatization measures (“Indonesianiza- tranche in 1981 with 11 “Coal Contracts of Work”
tion” of inward investment), foreign investors cur- (CCOWs), the second in 1993 with 18, and the third
rently favour China. To that extent, Indonesia suf- in 1997 with 114. The “contractors” undertake to
fers from a lack of capital for long-term investment prospect for and explore the coal deposits located
in particular. Nevertheless, Indonesia's Mining Act in their concession area, possibly to engage in
is shortly to come into force and is expected to give mining development and, in return, are granted
future investors more certainty. So far, however, exclusive rights for a term of 30 years subject to
there have been repeated postponements. a royalty (free mine) of 13.5 % of proceeds. The
contractors are also obligated to offer Indonesian
The start of coal mining in Indonesia dates back investors at least 51 % of the mining stock after a
to the early 20th century, when most of the output 10 - year operating period. In 2001, this provision
was used by the steam vessels operated in coastal affected two foreign investors (Rio Tinto/BP and
shipping. Modern coal mining did not get under- BHP-Billiton).
way until the 1980s, since when it has been stead-
ily expanded and increasingly directed into exports. Most of the companies are based on generation-I
CCOWs, representing over 140 Mt, generation-
53

II CCOWs with about 50 Mt, and generation-III amount to 7 Bt and are mostly located in the fol-
CCOWs with a mere 10 Mt. lowing provinces:
The contracts have been implemented as follows so Resources Reserves

Province Bt Bt
far (Department of Energy and Mineral Resources):
South Sumatra 22 2.6
East Kalimantan 20 2.4
Active Completed Total
11 South Kalimantan 9 1.8
CCOW 1 10 1
18 Other 7 0.2
CCOW 2 12 6
114 Total 58 7
CCOW 3 60 54
Total 82 61 143
The qualities of the resources can be broken down

Indonesia‘s coal policy, for the time being at least, into
prevents the international move towards consolida-
tion from spreading to Indonesia. To that extent, ■ anthracite 2.0 %
Indonesia‘s hard coal mining sector is an impor- ■ hard coal 49.6 %
tant element for healthy competition on the world ■ lignite 48.4 %
steam coal market.
It is especially the hard coal deposits that can be
Besides foreign and local investors, the state- considered for exports, though most these coals
owned P.T. Tambang Batubara Bukit Asam has are classified as sub-bituminous coals.
developed production on Sumatra, mostly for
domestic consumption. This company is to be pri- In quality terms, Indonesian coals are generally
vatized in the long term. low in ash and sulphur, but, on account of their low
rank, they are high in volatiles and moisture. All
A fourth group of companies has recently been the same, the raw coal does not generally require
granted so-called mining rights (MRs). These are preparation, and simple crushing and screening suf-
no longer issued by the mining ministry or its fice to make a marketable product. The coal has no,
directorate-general, but by the provincial authori- or only minimal, coking properties, so that – with
ties, which have been given the authority to do so. few exceptions – it can only be used as steam coal.
They are in charge of mining supervision over the Only some higher ranking types are also suitable
MR operating units and collect royalties. These are as PCI coal. The qualities for export generally have
smaller Indonesian companies who receive MRs in a 37 - 47 % volatile content, with 1 - 10 % ash and
what are sometimes as-yet undeveloped regions. typically 15 - 22 % moisture. The sulphur content is
A total of some 442 MRs have been granted. Of below 1 % and, in extreme cases, as low as 0.1 %.
these, 169 firms have production status, and 273 The high moisture translates into a relatively low
enterprises have not yet made use of their MRs. calorific value, often below 6,000 kcal/kg (as
Some of these smaller producers sell their output received). Impediment to the coal‘s use in power
to the big export players. A total of 525 companies plants are its high grinding hardness of 40 - 50 HGI
are actively or inactively involved in coal mining. and a certain propensity for spontaneous ignition.
Reserves/qualities Mining development

According to the most recent official Indonesian Indonesia's coal mining – despite many pessimistic
data , resources amount to some 58 Bt, so that assessments – expanded again in 2006 and, accord-
they are estimated to be 20 Bt higher than the fig- ing to official data, reached some 180 Mt (+ 37 Mt
ures given in the last issue of this study. Reserves compared with the previous year). To this must be
54

added output of 20 - 30 Mt not officially recorded; Indonesia is also building its first plant to upgrade
some of this is bought by the big companies. This low-calorific value coal. The partners White Energy
is likely to put total output at 200 to 210 Mt, such and Bayan Group are planning a 5-Mt/a project.
that output grew by 40 - 45 Mt or 25 % within the The calorific values of the briquettes produced are
space of one year. raised from 4,100 – 4,750 kcal/kg to 5,500 – 6,100
kcal/kg by the process.
Of the output, 171 Mt was exported and 42 Mt
went to domestic consumption, mainly for power Announcements suggest that the total output from
generation (30 Mt), the cement industry (6 Mt) new steam coal projects could reach 38 Mt/a within
and other needs (6 Mt). Other unofficial estimates the next 5 years. In addition to the expansion of
speak of an export rate of between 155 and 165 steam coal production, a number of coking coal
Mt, and even 184 Mt in 2006. projects are being vetted in east and central Kali-
mantan.
Indonesia's output and, hence, exports, will tend
toward lower calorific values in the medium to long Six major companies produce 122 Mt, i.e. some 59
term. Of Indonesia's total production of 200 to % of the total output of 205 Mt.
210 Mt,
Indonesia's biggest hard coal producers
■ 185 - 190 Mt is mined in Kalimantan and
Output Exports
■ 15 - 20 Mt in Sumatra. 2006 2006
Mt Mt
Sumatra's output mainly meets domestic consump- PT Adaro 33.7 34.3
tion, since the deposits are located close to the PT Kaltim Prima 34.1 25.1
populations centres of Java. PT Kideco Jaya Agung 18.1 18.9
PT Arutmin 15.8 15.6
Exports now total 87 % of production. In princi- PT Berau Coal (KKS) 10.6 10.6
ple, all of Indonesia's coal deposits are favourably PT Indomico Mandiri 9.2 10.6
located. An increase in production to 300 Mt is Total 121.5 115.1
planned for the medium term. % of 59 67
Total ouput, Indonesia 205.0 171.0
Since Indonesia's oil and gas reserves are declin-
ing, efforts are being directed toward making more In the Indonesian
Source: development of Indonesian coal mining, two
Coal Report
use of coal in electricity generation; on the one different concepts are pursued by the contractors.
hand, by building new coal-fired power plants and, The conventional approach – as in the case of Kal-
on the other, by switching oil- and gas-fired power tim Prima – involves all investment being borne by
stations to coal. To that extent, higher domestic the mining firm with production conducted under
demand is expected in the medium to long term. its own management. An alternative approach – as
While most exports have come from Kalimantan adopted by BHP-Billiton/Arutmin – provides for
to date, little use has been made until now of investment only in the mine‘s infrastructure, e.g.,
Sumatra's coal reserves, which are located close road access, power supply, crushing and screen-
to Indonesia's consumption centres and were ing plant and loading equipment, whereas actual
mostly developed to meet Indonesia's own needs. extraction, including waste removal and restoration
Kalimantan coal will continue to be available for of the terrain as well as coal transportation (by road
exports in the long term since Indonesia's own or inland waterway) is outsourced to companies
requirements are unlikely to restrict exports over with their own personnel under a contracted price
the next 5 – 10 years. per tonne of coal or cubic metre of waste. Coal is
almost entirely extracted in opencast operations
55

and in mine sizes of 2 - 15 Mt annually. However, larly hard. What is more, fuel costs were subsidized
there are also numerous smaller mines and coop- by the government until recently. Together with the
eratives with an annual output of 0.5 - 1.0 Mt cessation of subsidies and the worldwide rise in
which sell to the big producers or exporters. Waste fuel costs, the latter increased by up to 250 %.
removal and coal extraction are mainly by truck and
shovel operations. Against this backdrop of material cost inflation,
labour costs have risen year after year, although the
There are no official productivity figures, although impact has not been so serious thanks to the low
estimates can be made using the data from several share of labour costs in the cost structure.
leading producers. Most of the extraction at the
exporting mines is by efficient opencast methods, The Indonesian currency is subject to a strong
and productivity per man-year is likely to be in the inflation of 15 % year-to-year and is tending to
range of 6,000 - 12,000 t. The bigger opencast weaken against the US dollar. Although this pushed
mines probably achieve even higher productivity. up income in rupees, operating costs grew strongly
and pushed down profits. Similarly, imports of pit
Cost developments equipment in USD became correspondingly more
Indonesia is among the lowest-cost exporting expensive. The mining costs for Indonesian coal
countries, since the coal is extracted in opencast range from USD 16/t to USD 33/t, free pit. While
mines only. domestic transport at USD 2.0 - 7.0/t is much lower
than in South Africa, expenditure for port handling
The distances to the coast are 50 – 100 km. To date, at USD 2.0 - 4.5/t is slightly higher. A significant
only easily accessible deposits have been mined, reason for low mining costs comes from the low
the coal being transported by river using barges or specific investment in the export capacities devel-
by truck to the coastal loading points. oped in the past decade, which, at USD 20 - 25/t
annual output, are among the lowest in the world,
Higher output from the reserves located further being half those in South Africa, for instance.
inland will require the build-up of a railway infra-
structure in the medium to long term, some of Fob costs
which is in fact already being planned. 2004/2005 2006/2007
USD/t USD/t
Steam coal 18 - 37.5 20 - 44.5
As in almost all hard coal producing regions, Indo-
nesia has tackled the best and most accessible
reserves first.
In the medium to long term, Indonesia's coal min-
Cost inflation has hit Indonesia's coal producers, as ing industry will be confronted with deteriorating
elsewhere, and in the medium to long term, costs extraction conditions and a high dependence on
will continue to rise because of: burgeoning fuel costs. On the other hand, there is
also considerable potential to rationalise the indus-
■ longer distances to the coast, try. Especially among the big producers, expanding
■ worsening overburden-to-coal ratio, production has led to falling costs per tonne.
■ poorer qualities (lower calorific value),
■ thinner seams. In the long term, costs are likely to go on rising.
However, thanks to the favourable deposit condi-
In recent years (2001 – 2006), costs in Indone- tions, Indonesia should be able to hold its present
sia's pits soared 50 %. Since Indonesian mining is position on the world market for steam coal, and
largely based on the truck-and-shovel method, the perhaps even to extend it.
strong rise in fuel and tyre costs has hit it particu-
56

Infrastructure ing countries in East Asia only have smaller ports

On Kalimantan, Indonesia at present has six major that cannot receive capesize or panamax ships.
deep-water ports with an annual handling capac-
ity of 100 Mt, which allow the loading of 60,000 In contrast, only capesize or panamax ships can
- 180,000 DWT vessels. In addition, there are ten be considered for exports to Europe at competitive
further coal terminals nation-wide (inter alia, Sama- freight rates. Overall, it should be possible to man-
rinda and Palikpapan) with a total annual capacity age rising exports using the existing and gradually
of 60 - 70 Mt and a depth that is usually suitable expanding loading facilities.
for panamax sizes. Ports on Sumatra, also have
the capacity to handle coal. In addition, there are Exports
a large number of offshore loading facilities for Indonesia further extended its leading world mar-
smaller vessels. ket position as an exporter of steam coal in 2006,
more than compensating for the decline in China's
Where there is a convenient river available, domes- exports. The focus of Indonesia's exports is on the
tic transport is by barge, ranging in size between Asia Pacific market, but the quantities supplied
3,000 DWT and 12,000 DWT. to European and American countries are steadily
growing.
The range of loading facilities has encouraged the
strong development of exports. In the long term,
Coal exports by markets
further growth will depend on developing local
2004 2005 2006
infrastructure, railways in particular, since the only Mt Mt Mt
coal reserves that have been exploited so far are Pacific 91 110 141
those that are either located close to the coast or Europe 12 15 25
have good fresh-water links to the coast. USA 3 4 5
Total 106 129 171
Export and port capacities, Indonesia
2004 2005 2006
Mt Mt Mt The biggest single buyers are in Asia and, in 2006,
Adang Bay 12 12 12 China showed high growth, importing 6 Mt. Of
Banjarmasin 10 6 7 Indonesia's output, an estimated 2 - 3 Mt reaches
Kotabaru 10 14 15 the market as PCI coal.
Pulau Laut 10 22 30
Tanjung Bara 20 28 34 Exports will thus go on evolving in an upward direc-
Tarahan 14 2 3 tion from the centre of export production in Kali-
Total 76 84 102 mantan. Domestic demand, by contrast, is growing
10 further only slowly since many power plant projects are
coal-loading ports 50 50 75
delayed.
20 offshore
loading facilities
1) 1) Outlook
Capacity, total1) 126 134 177
Indonesia's coal mining sector has continued its
1)
estimate dynamic development in recent years, exceed-
ing all forecasts, and has become established as
In Indonesia, there are no official plans for infra- the world's most important steam coal exporter,
structure expansion, although Indonesian compa- well ahead of Australia. In the medium term, an
nies were flexible enough in 2006 to ship an extra increase in output to 280 Mt is planned, and to
40 Mt. Indonesia's customer structure favours the 370 Mt by 2023. For domestic demand, use of low-
use of smaller ships (handysize), since many import- calorific value coals is to be prioritized, so that, in
57

the medium and long term, Indonesia is likely to

remain an important exporter.
Export developments, Indonesia, 2004 - 2006

2004 2005 2006
Mt Mt Mt
Hard coal output 135 153 205
Steam coal exports 105 129 171
Chief import
countries/regions
EU-15/after 2004: EU-25 12.4 15.2 24.7
Japan 22.7 27.3 32.8
South Korea 11.7 14.4 20.8
Taiwan 17.7 17.9 24.4
India 10.7 16.3 19.8
Hongkong 7.4 9.4 10.5
58

Coal-exporting countries • Russia
Russia
Murmansk
Zyryanka Basin
Taymyr Basin
Ust Luga
Petchora
Tingussky
Moscow Basin
South Yakutia Basin
Urals (Far East)
Donetsk
Vanino
Kuznetsk Irkutsk
Basin
Vostochny
Port of shipment
Coalfield
2,000 km
General an ash content of 17 – 25 % and a sulphur content

Russia‘s coal mining sector has undergone pro- of 0.9 - 1.1 %. No details are available on the state
found structural change in recent years. In the peri- of the deposits, seam thicknesses or extraction con-
od from 1993 to 2001, capacities of 173 Mt/a were ditions in the coal-fields
shut down, while new capacities of 57 Mt/a were
developed. The number of coal mining employees Mining development
fell during this period from around 800,000 to Russia was able to further increase its production in
250,000 today. This restructuring was underpinned 2006 and reached about 309 Mt. Opencast extrac-
by a USD 1 bn loan from the World Bank. After a tion grew by 5 Mt to 200 Mt, and underground
significant drop in output, Russia‘s mining sector is production from 106 Mt to 109 Mt. Output can be
now back on a steady growth track. broken down as follows:
Reserves/qualities Output, Russia
BGR puts Russia's hard coal resources at 2,662 Bt,

2005 2006
and its hard coal reserves at 70 Bt. This gives Rus- Mt Mt
sia, at 2,732 Bt, the biggest hard coal potential in
Coking coal 70 70
the world. Large sections of the deposits, located
Steam coal 230 239
in the Asian region, are yet to be explored (e.g.
• highly volatile coal 96 103
Tunguska basin). Resources are distributed across
• low volatile coal 50 52
a total of six hard coal regions: Pechora/North,
• anthracite 9 9
Donetsk, Kuznetsk, Kansk Achinsk, the Far East and
• lignite 75 75
the northeast. Their raw coals have average calo-
Total 300 309
rific values of 4,900 - 5,700 kcal/kg (as received),
59

The focus of Russian hard coal mining is in the Coking coals, by contrast, exhibit a wide volatile
Kemorovo region (Kuzbass), with output totalling range of 19 - 42 %, but with good coking proper-
174 Mt in 2006, including 94 Mt from opencast ties (7 - 9 FSI). Their ash content varies between 8
mines and 80 Mt from underground operations. and 11 %, with 6 - 10 % moisture and 0.5 - 0.8 %
At the start of 2007, Gazprom acquired an interest sulphur.
in the biggest producer SUEK, a strategic move
focussed on cooperation in power generation. The The six biggest coal producers mine 55 % of Rus-
extent to which this deal has been approved and sia's coal.
finalized under company law is not known.
Productivity in the opencast mines per man-year is
Of the output, some 90 Mt or 29 % goes into between 1,000 – 3,000 t and, in the underground
exports, and 219 Mt is consumed by Russia itself. pits, between 500 – 2,000 t. Some opencast mines
achieve productivities of up to 8,000 t/man-year.
Average extraction depth at underground mines Russia's mining sector still has considerable ration-
is between 500 - 550 m. The chief mining method alization potential and, thanks to a combination
since 1980 has been longwalling, accounting of low wages and improved technology, can go on
for 85 %. The rest has involved block caving and reporting favourable ex-pit costs.
hydromechanical extraction. Lignite mining is by
bucket wheel excavator and hard coal mining by Cost developments
shovel and truck at opencast sites. Owing to the The pits suitable for exporting steam coal, mainly
high degree of mechanization, the raw hard coal from Kemorovo, are mostly opencast operations.
output contains much mineral matter that must be The opencast mines' production costs generally
removed prior to sale, so roughly two thirds of the fall in the range of USD 5 – 26/t, making them the
raw output is washed in coal preparation plants. world’s lowest-cost pits.
This is true of all coking coals and most steam
coals. Preparation is largely by jigs (50 %), followed The great distances of the main extraction regions
by heavy media processes (30 %). The resulting from export ports – e.g. some 4,000 km from
products, which are suitable for export, are of the Kemorovo to both the Baltic Sea and to the Far East
following qualities. Steam coals have medium to ports – are a serious handicap. Actual transport
high, 27 - 34 % volatility, 11 - 15 % ash and 8 - 15 % costs remain unknown. The freight rates charged to
moisture; their calorific value is 6,000 - 6,200 kcal/ the coal industry rose from about USD 10/t in 2000
kg; the 0.3 - 0.6 % sulphur content is favourable, as to USD 25/t in 2007. Compared with Canadian and
is the grinding hardness of 55 - 67 HGI. American railway costs, however, they are still low.
Russia's biggest hard coal producers Exports are also partially burdened by high trans-
port fees and port handling costs in non-Russian
Output 2006 countries, which can total between USD 7 - 11/t.
Mt
SUEK 89.4 In the long term, no special factors are discernible
Kuzbassrazrezugol 41.4 that could have a particularly adverse impact on
Yuzhkuzbassugol 16.1 the ex-pit costs. The evolution of transport costs is
Yakutugol 9.5 likely to remain crucial for the export potential of
Vorkutaugol 6.8 Russian coal. In any market fluctuations, Russian
LuTEK 5.5 railways have always proved to be flexible in their
Total 168.7 pricing in order to retain transport volumes. How-
% of 55 ever, the fleet of rolling stock is in urgent need of
Total output, Russia 309
renewal.
Source: McCloskey's Coal Report
60

Coal-exporting countries • Russia
Fob costs in recent years are likely to have risen increasingly for exports in order to satisfy growing
with transport costs, and are estimated as follows: demand.
Fob costs Even with the bottlenecks resulting from rolling

2004/2005 2006/2007 stock shortages, Russia's seaborne coal exports rose
USD/t USD/t
by 33 Mt over the last four years. Looking to the
Steam coal 21-45 40-60 future, various efforts are being made to address
the bottlenecks.
Infrastructure
Russian ports
The infrastructure that serves coal mining is relative-
ly well developed and dependable. Still, the indus- 2004 2005 2006
Mt Mt Mt
try is marked by, and bears the burdens of, long
Baitic Sea ports
rail distances to the consumer centres in Western and Northern Russia
Russia or to the exporting ports. These distances Murmansk 8.9 11.0 11.1
are between 2,000 and 2,400 km (Pechora) and Vysotsk 3.1 3.5 4.0
3,500/4,500 km (Kuznetsk) or 3,000 km to the Pacif- Riga 9.4 10.8 10.7
ic ports. After the dissolution of the Soviet Union, Ventspils 3.9 4.6 3.9
Russia lost its traditional coal exporting ports in Tallin (Muuga) 2.3 4.4 7.5
the Baltic and the Black Sea to the Baltic states and St. Petersburg 2.5 2.5 1.9
Ukraine, so that exports are increasingly redirected Ust-Luga 0.5 0.5 3.5
to other ports. In the Atlantic area, the changes can Other 0.6 0.6 0.7
be seen in the extensions to Murmansk (6 Mt/a) Total 31.2 37.9 43.3
to enable that port to handle coal exports, and 2.6 2.0 1.8
South Russia
in the new port Ust Luga near St. Petersburg, still and Ukraine 3.1 3.0 3.1
unfinished, with an annual coal handling capacity Mariupol 5.0 4.7 4.8
of 8 Mt and handling options for panamax freight- Tuapse 3.1 4.1 5.5
ers. Similarly, in the Far East the handling capacity Yuzhny 13.8 13.8 15.2
of the capesize port of Vostochny is planned to be Other 14-4 14.1 15.4
extended from currently 16 Mt to 25 Mt while, in - 0.3
Total 0.5
the northern Sea of Japan, 2001 saw the start of 0-8 2.1
Russia/Far East 2.4
construction on the coal port Vanino with sched- Vostochny
uled handling capacity of 10 Mt/a. Vanino
Other
At present, both the Baltic ports and the Russian Total 15.2 16.5 18.3
ports are planning a series of expansions to keep Grand total 60.2 68.2 76.8
pace with growing exports. Increasingly, producers
or their trading houses (e.g. Krutrade) are becoming
involved in investment projects at ports. Exports
Coal exports again increased in 2006 to 89,9 Mt,
Due to the high transit fees and handling rates at including 6.7 Mt across the land border to the CIS.
Baltic ports, Russia is increasingly using Murmansk Exports to other countries amounted to 83.2 Mt, of
for its exports. More use has also been made of the which 76.8 Mt was seaborne and 6.4 Mt overland.
Baltic Sea port Ust-Luga, although ice can close this Total exports of 89.9 Mt can be broken down into
port in the winter. Despite these developments, the some 14 Mt of coking and PCI coals and 76 Mt of
port of Tallin (Muuga) in Estonia has had to be used steam coal and anthracite. Seaborne exports of 76.8
Mt can be broken down into 9 Mt of coking and
61

PCI coals and about 68 Mt of steam coal. In the Far expand its coal exporting capacities in the coun-
East, 18.3 Mt of coal was shipped, including approx- try's ports from 44 Mt in 2006 to 155 Mt in 2020.
imately 5 Mt of coking coal; leaving 59 Mt that went
to the European region, of which about 5 Mt was Russia's coal production is set to rise from today's
coking and PCI coals. 310 Mt or so to 440 – 460 Mt by 2020, including
357 – 377 Mt of steam coal and 83 Mt of coking
In Europe, it was above all the UK that increased its coal. Such expansion plans are likely to cover both
imports of Russian coal, thus making a crucial con- an increase in domestic demand and additional
tribution to Russia’s export growth. Germany also exports.
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
62

Coal-exporting countries • South Africa
South Africa
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General on a new mining law, whereby all of the country‘s

South Africa‘s economy continues to thrive and is natural resources were transferred to state owner-
benefiting from strong demand for raw materials ship. Present and future mining companies must
worldwide. Nevertheless, there are still huge struc- reapply for their mining rights, subject to statutory
tural problems like unemployment and a housing stipulations. Deposits which are not exploited at
shortage. AIDS continues to be a problem. The present or whose short-term exploitation has not
rand has stabilized and appreciated against the dol- been applied for by the landowner can now be
lar, though the flipside is less local currency income granted to other interested parties. The idea is to
from South African raw-material exports. However, remove the often decade-old backlog of unused
since most commodity prices have risen even more natural resources on the part of landowners, and
strongly than the increase in the currency value, the to give mining and employment fresh impetus by
margins for raw material and coal producers have encouraging small- and medium-sized businesses.
improved. Together with the policy of Black Economic Empow-
erment (BEE), this should lead to a strong participa-
Until recently, the extraction of natural resources tion of the African people in South Africa's mining
in South Africa had been by land-owner mining, i.e. sector. A number of new companies have been
mining rights lay with the owners of the land. State able to acquire mining rights and large enterprises
control merely took the form of a statutory approval are surrendering some of their properties to BEE
procedure and mining supervision, so that no roy- companies or offering holdings in subsidiaries or
alty had to be paid to the state. Wide areas of land divisions.
were owned by big mining companies, and this was
also true of the country‘s coal deposits. In 2002, However, there is a lack of know-how and financial
the government and the mining companies agreed resources above all among the small new compa-
63

nies, so that the much hoped-for increase in output Bureau. Of this, 90 Mt will then be exported and
by BEE shareholders has failed to materialize to 200 Mt go into the domestic market.
date, although this is likely to change once the
teething difficulties are overcome. In 2006, the Spanish utility Fenosa acquired 70 %
of the shares in Kangra. Kangra produces 3 Mt/a
Reserves/qualities and has export rights of 1.65 Mt at RBCT. In the
According to BGR data, South Africa's hard coal neighbouring countries Botswana, Mozambique
resources are put at 115 Bt, while reserves amount and Zimbabwe interest in an expansion of coal min-
to 49 Bt, making a total potential of 164 Bt. If ing is growing.
extraction goes on rising beyond the current level,
some of the best-quality deposits, like the Witbank, The domestic markets in South Africa consumed
Highveld, Ermelo and KwaZulu/Natal mining areas, the following quantities in 2006:
will be depleted in 30 - 40 years. The reserve min-
ing area Waterbank has been classified by more
Consumption of domestic markets
recent estimates as being less copious.
2005 2006
With future output of 330 Mt and reserves of 45 Bt, Mt Mt
we nevertheless estimate a total reserve life of Power generation 106.0 108.6
some 150 years. Synthetic fuels
(Sasol) 41.5 43.8
There are eleven coalfields in all, extending from Industry/household 18.0 18.2
the border with Botswana in the Northern Province, Metallurgic industry 6.5 5.1
via the provinces of Gauteng, Mpumalanga, and Total 172.0 175.7
Freestate, to KwaZulu/Natal in the southeast, with
83 % of the reserves being concentrated in the
mining areas of Witbank, Highveld, Vereeneging/ Domestic demand in South Africa will rise in
Sasolburg, Ermelo and Waterberg. While the first future, since coal-based power generation is to be
four mining areas are relatively close to the coast expanded, although there are also plans to make
of the Indian Ocean, just under 600 km by rail, the increasing use of nuclear energy. To cover electric-
distance from the Waterberg area, located at the ity needs, there are plans for the construction of a
Botswana border, doubles to 1,120 km. large-scale coal-fired power plant and associated
pits in Botswana to supply both countries with elec-
South Africa‘s hard coal is classified as so-called tricity.
Gondwana coal dating from the Permian geologi-
cal period and deposited in a moderate climate, A further increase in domestic demand could come
so that it is comparatively rich in ash and must be from further expansion of the coal-to-liquids indus-
treated, at least for exporting. The coal has only try. Given high oil prices, the probability is high
limited – if any – coking properties and, to that that a further plant will be built.
extent, is low- to medium - volatile (16 - 29 %). It
is attractive as a relatively low-sulphur steam coal In recent years, output has remained stable,
(<1 %). although a further production push is now expect-
ed. At present, there are projects in the pipeline
Mining development with a volume of 40 Mt/a over the next 5 years.
Marketable coal output rose by some 2 Mt to The Richards Bay export terminal is being expanded
247 Mt in 2006 and is set to grow to 290 Mt by from 72 Mt to 91 Mt. Demand for additional export
2010, according to the South African Minerals capacities at the terminal has been high and over-
subscribed. Overall, it should be possible, with the
64

planned output, to cover both growing domestic faults. In bord and pillar operations, coal extraction
needs and higher exports. At the moment, how- is dominated by the continuous miner, but mecha-
ever, Anglo Coal, BHP/Biliton and Xstrata-Coal are nized drilling and blasting are still used occasion-
increasing their outputs more strongly in Colombia ally. Opencast mining accounts for some 65 % of
than in South Africa. output, with the remainder coming from the under-
ground mines.
In South Africa, a new important company has
formed in the shape of EXXARCO within the frame- Productivity averages about 5,000 t/man-year,
work of BEE. It comprises the activities of former although larger companies reach 7,000 t/man-year
Eyesizwe Coal and Kumba Coal and, reporting at times. Certain operations can achieve up to
24 Mt/a of production in 2006, has joined the ranks 10,000 -13,000 t/man-year.
of the big South African producers.
Cost developments
South Africa, too, has to cope with rising costs.
South Africa's biggest hard coal producers
Wage costs in recent years (2005 – 2007), for exam-
ple, have grown at 7 - 8 % per year. Material costs,
Company Output Exports
such as fuels and lubricants, are now more expen-
2006 2006 2006
Mt Mt sive, and the country has had to come to terms with
Anglo Coal 59 19 a much less favourable overburden-to-coal ratio.
BHP-Billiton Plc. 52 21 The costs range between USD 16 and 28/t.
SASOL 47 4 Transport costs (USD 6 – 10/t), by contrast, have
Exxaro 24 2 risen only moderately, as have handling costs
Xstrata Plc. 21 13
(some USD 2/t). Since the overburden in South
Total 203 59
Africa's opencast mines is mainly removed by drag
% of 82 86 lines, the increase in diesel prices does not have
South Africa 247 69 such a strong impact as in overburden removal by
truck and shovel. Costs are likely to have developed
as follows:
Among the chief mining regions are Witbank,
Highveld, Vereeneging/Sasolburg, Ermelo and Fob costs
Waterberg – areas with a 98 % share of current 2004/2005 2006/2007
USD/t USD/t
production. The coal is mined both in underground
Steam coal 24-36 26-40
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 Thanks to the advancing extraction of these
of opencast pit output. Truck and shovel mining, reserves, costs are not expected to rise sharply
by contrast, is mainly used in the multi-seam min- for any reason in the long term. However, if the
ing area of Waterberg. Sections of the deposit reserves of the more distant Waterberg deposit are
where opencast mining is uneconomical are often included among exports, higher transport costs
exploited by underground mining. The flat seams must be expected.
lend themselves to extraction at depths of rarely
more than 200 m. The mining technique deployed The rand has strengthened against the dollar from
here is bord and pillar, which accounts for over 12 rand per dollar in 2001/02 to the current 7 rand
90 % of underground mine production, with long- per dollar in June 2007. This places considerable
walling being used only in exceptional cases due to margin pressure on the rand-based results of South
the prevalence of dolerite intrusions and geological African producers.
65

Infrastructure addition to the existing partners, the South Dunes

Some two thirds of coal output is used as untreated Coal Terminal project will include participation by
raw coal or middlings in nearby power stations or the so-called common users who are pressing for
liquefaction plants at mine-mouth operations, such coal exports within the scope of the Black Economic
that infrastructure needs are reduced, at least, as Empowerment efforts.
far as coal transport is concerned. This is not the
case for coal exports. Driven by the knowledge that The extensions to the Richards Bay export terminal
South Africa has coal reserves capable of cover- mean that the state-run railway company Spoornet
ing more than just domestic demand for decades must expand capacities from the current 72 Mt to
to come, the government and mining companies 91 Mt/a in the medium term (by 2010).
decided in the 1970s to embrace the long-term
development of coal exports and build up a modern Export rights at Richards Bay Coal Terminal
infrastructure. after extensions
Mt %
As a result, three railway corridors exist today to RBCT = Richards Bay Coal Terminal 72.00 79.13
the export ports located on the Indian Ocean at Ingwe 26.95 29.62
Richards Bay, Durban and Maputo (Mozambique). Anglo Coal 19.78 21.74
The most important link is the 600-km long, state- Xstrata-Coal 15.06 16.54
run standard-gauge COALlink line from the Witbank Total 4.09 4.49
mining area to Richards Bay, which has already Sasol 3.60 3.96
transported 1.5 Bt of coal between its commission- Kangra 1.65 1.82
ing in 1976 and year-end 2006. The electrified rail- Eyesizwe 0.87 0.96
way has a current capacity of 72 Mt/a, with twelve SDCT = South Dunes Coal Terminal 6.00 6.59
unit trains a day, each with a loading capacity of up Other exporters (inc. BEE) 9.00 9.89
to 16,800 t. Of minor importance, by contrast, are Common Users (inc. BEE) 4.00 4.39
the narrow-gauge rail links to Durban and Maputo. Total 91.00 100.0
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 The originally planned capacity of 92 Mt was re
special types, like anthracite or screened lumps for duced slightly by 1 Mt to 91 Mt in 2006, with the
use in industry and households. The government is former owners having 79 % of the export alloca-
planning medium-term privatization of rail traffic. tions.
The coal ports have always been operated by the The auctioning of 5 Mt of export rights met with
private sector. They have a current total handling inquiries totalling 26.85 Mt/a from South African
capacity of 78 Mt/a The most important is the Rich- BEE companies.
ards Bay Coal Terminal with a handling capacity of
72 Mt/a where capesize ships can be loaded. Own- Exports via South African ports
ership and operation comes under a joint venture 2004 2005 2006
Mt Mt Mt
of the seven largest South African coal producers.
RBCT 65.9 69.2 66.5
The ports of Durban and Maputo, by contrast, can
Durban 1.1 0.8 1.4
only load panamax and handysize ships.
Maputo 0.9 1.1 1.1
Total 67.9 71.1 69.0
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
66

Some 69 Mt was exported via the ports of Richards Export developments, South Africa, 2004 - 2006
Bay (RBCT), Durban and Maputo in 2006.
2004 2005 2006
Mt Mt Mt
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
Steam coal 66 70 68
facilities – was able to slightly improve on its poor Coking coal 2 1 1
performance of just 0.8 Mt in 2005 to reach 1.4 Mt Export rate, in % 28 29 28
in 2006. Chief import
countries/regions
Exports EU-15/after 2004: EU-25 52.6 54.3 52.3
South Africa was again unable to exploit its export Israel 6.9 5.2 4.8
potential in 2006. Seaborne exports fell by 2 Mt to Morocco 1.8 2.1 0.0
69 Mt, and overland exports to Mozambique were Turkey 1.6 1.6 1.9
also down. Taiwan 1.4 1.6 0.1
Structure of oversea exports in 2006
Total Europe¹ Asia Other

Steam coal 67.0 58.4 4.1 4.5
Anthracite 0.8 0.4 - 0.4
Coking coal 1.2 0.9 - 0.3
Total 69.0 59.7 4.1 5.2
¹) inc. neighbouring Mediterranean countries
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.
67

China
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General ket and led to rising energy and commodity prices

In the years 2003/2004, the “China factor” made across the board.
itself felt on the world markets for raw materials,
energy and transport services. Against a backdrop Primary energy consumption reached 2.6 Btce in
of high demand in China and GDP growth averag- 2006, with 70 % or 1.8 Btce being accounted for by
ing 9 %, crude steel production rose from 127 Mt coal.
in 2000 to 422 Mt in 2006, while iron-ore imports
were up from 70 Mt to 362 Mt over the same peri- Power plant capacity rose to 622 GW in 2006, with
od. With increasing electrification and power needs the majority, 78 %, being accounted for by coal-
growing at a rate of 10 - 15 % per year, the demand fired plants. By 2020, capacity is set to double to
for coal, copper and aluminium strengthened. This 1,500 GW. With a population of 1.3 bn, China’s per
demand clashed with scarcities on the world mar- capita electricity consumption of 2,200 kWh is low;
68

Coal-exporting countries • China
in Germany, the figure is 6,400 kWh per capita. Chi- At present, projects with a volume of 800 Mt/a
na‘s coal activities are coordinated by the Energy are being pursued as replacement and additional
Bureau of the National Development and Reform capacities. By 2010, output of 2.6 Bt is to be
Commission. reached in official forecasts, a level that is likely to
be exceeded. Some estimates are assuming up to 3
Reserves/qualities Bt in 2010.
China‘s coal resources are vast with considerable
variation in type and quality. In 2006 already, 705 Mt of the total output of
2,371 Mt (according to Chinese figures), were
BGR quotes hard coal resources of 4,200 Bt and based on 100 % mechanization. Output per man
reserves of 167 Bt, i.e. a total potential of 4,367 Bt. and year moves within a range of 200 – 20.000 t.
The latest information from official Chinese repre-
sentatives speaks of over 5,500 Bt of resources, of
Hard coal production, China
which some 1,000 Bt are economically mineable
today. Of these reserves, 200 Bt are said to be 2005 2006
proven. Mt Mt %
State-owned mines 1,070 1,126 +5.1

The deposits mainly date from the Jurassic (60 %) Provincial mines 305 308 +1.0
or Carboniferous (25 %) periods, i.e. they sediment- Small operators 815 892 +9.4
ed 140 - 205 and 290 - 360 million years ago and Total 2,190 2,326 +6.2
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, The consolidation processes in China's coal indus-
such that the reserves mineable in opencast pits try are ongoing.
are relatively small and most mining takes place For example, the 11th Five-Year Plan (2006 -2010)
underground. Coal qualities range from anthracite, includes the following:
through low-volatile, to highly volatile hard coals.
Only 12 % of the hard coal resources are medium to ■ formation of 5 – 7 large coal companies,
highly volatile coking coals, while most of the rest each producing over 100 Mt/a
(63 %) comprises highly volatile steam coal. Geo- ■ reducing the number of small pits to less
graphically, the coal resources are concentrated in than 10,000
North China, with 48 % being located in the prov- ■ closure of 7,000 small pits by 2007
inces of Hebei, Shanxi and Inner Mongolia. ■ creation of 13 coal logistics centres to which
38 large pits are linked.
Mining development
Against a background of rapid economic growth, In 2006, eight of the biggest coal companies pro-
coal output has had to be further increased and duced 590 Mt or some 25 % of total output, and
rose by 135 Mt/a to 2,326 Mt in 2006. the 32 biggest companies 1,023 Mt or 44 % of total
output. In 2010, the planned 13 coal centres are to
Coking capacity is put at 320 Mt/a (2006) and is handle 2,240 Mt or 86 % of the scheduled 2,600 Mt
to be further expanded in 2007/2008 (by 30 to 40 annual production. Altogether, these measures
Mt), although coking capacity is poorly utilized. gave a considerable boost to consolidation in the
In places, coking times are too long in outmoded Chinese coal sector.
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.
69

China's biggest hard coal producers, 2006 Fob costs

2004/05 2006/07
Output
USD/t USD/t
Mt
Shenhua 137 Steam coal 16-48 18-52
Datang 62
China National Coal 91
Yanzhou 38 In the medium to long term, costs will rise further.
Pingdingshan 33 At the pits suitable for export production, costs are
Luàn Mining 32 likely to evolve in a similar manner to those of the
Total 393 leading export nations.
% of 17
China 2,326 Infrastructure
China‘s coal industry now benefits from an infra-
structure that has recently been extended and
China consumes most of its own coal production become more efficient. To start with, this includes
and domestic demand is growing strongly. Since the railways, which transported a total of some
2003, exports have declined sharply. In 1Q07, 1.1 Bt across an average distance of 550 km in
China for the first time imported more coal than it 2006.
exported.
China‘s coal seaports handle both domestic sup-
plies, via coastal shipping, and coal exports. To this
2004 2005 2006
Mt Mt Mt must be added numerous river ports which handle
unknown quantities. The demand of south China's
Power plants 970 1,127 1,274
coastal regions is estimated at 460 Mt most of
Steel industry 257 350 404
which is served by north China’s mines. At present,
Construction/
cemment industry 306 332 365 China's infrastructure is being massively and swiftly
Other 291 323 328 extended.
Total 1,824 2,132 2,371
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
Cost developments be raised to 300 Mt in 2010. The capacity of the
Representative costs for China cannot be stated Shenshuahuang line (Shanxi-Huanghua port) is
in practice. The methods of coal mining extend to be increased from the present 95 Mt/a to 200
from manually operated coal galleries all the way Mt/a. Infrastructure projects are being rigorously
to highly efficient underground pits and opencast implemented in China. In 2006, the railways moved
mines which compare very favourably with the best 1,102 Mt in China.
Australian and Indonesian operations. It may be
assumed that export coal only stems from efficient Port handling in China of coal alone amounted to
pits. 407 Mt in 2006. This can be broken down into:

Like elsewhere, wage costs are rising in China. ■ 78 Mt coal/coke exports
Average wages increased by 24 % in Shanxi ■ 38 Mt coal imports
between 2005 and 2006. On average, a miner ■ 291 Mt handling for inland supplies trans-
earned USD 2,800 per year or USD 234 per month. ported along the coast
Fob costs of export-oriented mines are within a The breakdown of the 2006 figures by port is not
wide range. yet available.
70

Coal-exporting countries • China
Coal-loading ports, China, 2005 Coal imports by type
Total handling inc. hard coal 2005 2006 Change

Mt Mt Mt Mt %
Quinhuangdao 169 145 Steam coal 6.2 10.8 +4.6

Tianjin (Xingang) 241 69 Coking coal 7.2 4.8 -2.4
Qingdao (Tsingtao) 187 8 Anthracite 12.8 22.6 +9.8
Rizhao (Shijuso) 56 20 Total 26.2 38.2 +12.0
Lianyungang 61 12
Huanghua 68 67
Other 38 50 power generation – was up by a total of some
Total 820 371 14.4 Mt.
The export licences for 2006, amounting to 80 Mt,

were not used in full and in 2007, China may
No export bottlenecks in the ports have occurred to emerge as a net importer.
date in China. Should China export more strongly
again in the future, then the infrastructure for this The quotas for the companies licensed to export
would be in place. have evolved as follows:
Exports Companies licensed to export coal

Exports in 2006 again declined, falling to some
2004 2005 2006
63 Mt. and affecting all qualities, i.e. steam coal, Mt Mt Mt
coking coal and anthracite.
CNCIEC 42.2 34.0 27.2
Shenhua 27.6 25.6 25.5
The biggest buyers of steam coal were Japan, tak-
Shanxi 12.4 7.6 5.3
ing 17 Mt, South Korea, taking 15 Mt, and Taiwan,
Minmetals 3.8 3.9 3.9
taking 13 Mt. Practically none was shipped to
Total 86.0 71.1 61.9
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 The number of coke exporters is said to have been
(Japan: 1.9 Mt, South Korea: 2.6 Mt). reduced from 70 to 40 companies. Other informa-
tion speaks of 60 licensed exporters. Rebates for
Coal imports were up by some 12 Mt, but two quite value-added tax on exports were completely abol-
different underlying trends can be noted. In cok- ished in 2006 and import tariffs were reduced.
ing coal – unlike iron ore and other metals – China Since 01/11/2006, export tariffs of 5 % have even
is largely self-sufficient and reported declining been introduced for coking coal and coke.
imports, mainly at Canada’s expense. Imported
steam coal – mostly Vietnamese anthracite used in
Balance of exports/imports
2003 2004 2005 2006 2007¹)

Mt Mt Mt Mt Mt
Exports 94 87 72 63 53
Imports 11 19 26 38 50
Balance 83 68 46 25 3
¹) estimate
71

There is also talk of raising a tax on use of the easily by domestic coal. The introduction of market-
domestic infrastructure from production site to economy principles and rising domestic prices
export seaport. Levies are also being debated on could dampen consumption in the coming years.
steam coal exports. In the power sector and in the steel and cement
industries, for example, inefficient operations are
The government’s aim is to make exports dearer to be shut down as part of a process of consolida-
and imports cheaper. Perhaps more importantly, tion. Viewed from the perspective of costs and
the steadily rising domestic prices for coking coal logistics, China also has the potential at any time
and steam coal make exports less attractive. to return to a higher export level if world market
prices were to exceed domestic prices.
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 important
countries/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
72

Coal-exporting countries • Colombia
Colombia
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General largest steam coal supplier to the Atlantic market

Colombia is one of the richest Latin American after South Africa and ahead of Russia.
countries in raw material terms. Its hard coal
reserves are the largest in South America. Even so, Raw materials in Colombia are in public ownership,
the country has only recently joined the group of and the state decides on their exploitation. Super-
coal exporting countries. Although its coal depos- vision of the coal industry has lain with ECOCAR-
its have been known for decades and are located BON, which reports to the Ministry of Mining and
near the coast, they long remained undeveloped Energy. It explores the country‘s coal resources to
because of poor infrastructure. Development was check their development potential, draws up initial
started finally in the wake of the second oil crisis development plans and, in an international bidding
of 1979/1980, which caused a shortage of steam process, offers deposits for tendering by private
coals on world markets. The American mineral oil companies. It issues 30-year extraction licences.
group EXXON and the Colombian state - owned An 8 % royalty is levied on the proceeds from all
company CARBOCOL then resolved to jointly devel- extracted coal.
op the El Cerrejón North deposit on the Guajira
peninsula where, by the standards of the time, a Reserves/qualities
mega export project with a planned annual output Hard coal resources are put by BGR at 56 Bt, and
of 15 Mt started extracting coal in 1985. This exam- reserves at some 8 Bt. Geologically, these are
ple was followed by several new developments, so young coal formations dating from the more recent
that Colombia has grown to become the second Cretaceous and early Tertiary periods (approximate-
73

ly 70 mill. years ago). They are located in seven coal Almost all of the output destined for export came
basins in all, the Guajira and Cesar coalfields being from opencast mines. Seam formations are usually
closest to the coast and most interesting in com- level (0 - 15°) and reach thicknesses of up to 150 m;
mercial terms. they comprise up to 27 workable seams with thick-
nesses of 1 - 15 m. Extraction is normally by truck
The quality of Colombian hard coals varies, extend- and shovel with occasional support from draglines
ing from the highly volatile range all the way to to remove the overlying strata. Just one – as far as
anthracite. The coals located in the Cordillera Occi- is known – export pit is engaged in underground
dental (Cesar) and its foothills (Guajira) are of low mining; its operations are only partly mechanized
rank and, hence, highly volatile (30 - 39 %) or rich using the bord and pillar method with drilling and
in moisture (7 - 16 %). By contrast, ash (4 - 10 %) blasting. Much more widespread, by contrast, are
and sulphur content (0.4 - 1.0 %) are low, so that underground operations in small and very small
high net calorific values of 6,500 - 7,000 kcal/kg are mines, which produce for the local market and are
reached. This being so, the coal needs no prepara- not included in the statistics.
tion except crushing and screening and is excellent-
ly suitable as steam coal and, in some cases, even The coal industry experienced another wave of con-
as PCI coal. The drawbacks include a proneness solidation in recent years. The owner consortium
to self-ignition, but also a relatively high grinding of Carbones del Cerrejón (BHP-Billiton, Anglo Coal,
hardness of 40 - 45 HGI. The seams of the deposits Xstrata each holding 1/3) has now been renamed
located in the Cordillera Central (e.g. Cundinamar- Cerrejón Coal Co.; it also owns 100 % of the Cerre-
ca/Boyacá, Santander, Norte de Santander) are usu- jón Zona Norte pit.
ally of a higher rank and also bear coking coals.
The output of Cerrejón Coal Co. is marketed via
Mining development CMC in Dublin, and is organizationally separate
Colombia's hard coal output rose in 2006 by some from the distribution of BHP/Amcoal/Xstrata. This
4 Mt to 63.7 Mt. A stronger increase was thwarted being so, most of Colombia's output is marketed by
by difficult weather conditions and industrial action the consortium. Beyond this, Glencore has secured
at Drummond Coal, the country’s second-largest further mining shares in the Prodeco/Caribe pit.
producer. Colombia's output is to reach about In 2007, Glencore acquired the Carboandes com-
76 Mt in 2010, 69 Mt of which is to be exported. pany, so that it now controls the La Jagua deposit.
Drummond especially is planning a strong increase Plans have been announced to raise output to
in its output, up to 50 Mt. Other estimates are 17 Mt.
assuming a greater total output of 84 - 85 Mt in
2008 and of up to 102 Mt/a in 2010.
Colombia's biggest hard coal producers

In addition to incumbents, newcomers have been
granted coal licences. The Spanish power plant Company, 2006
Exports, 2006
company Union Fenosa is considering buying coal Mt
reserves in Colombia to supply its power stations. Cerrejon 27.5

Colombia’s production capacity rose by some 7 Mt/a Drummond Ltda. 20.8
from 2005 to 2006. For the medium term, 27 Mt/a Prodeco (Glencore) 8.2
of new capacity is planned; much of this is to be Carbones del Caribe 0.3
implemented as early as 2007 and 2008. Other 4.0
Colombia's own needs amount to a mere 5 – 6 Mt Total 60.8
and are covered by smaller, inland deposits. It is % of 95.0
Total output, Colombia 63.7
unlikely that domestic demand will impair exports
in the medium or long term.
Source: Coal Americas
74

Coal-exporting countries • Colombia
In 2007, BHP/Billiton likewise developed its posi- costs, while rationalization potentials may offset
tion in Colombia and concluded a cooperation this.
agreement with Canadian Coalcorp to develop the
pits Caypa and La Francia. The Canadians have min- The free-pit costs of mines with little mechaniza-
ing rights, but lack the financial resources for any tion and of only medium size in the Cordilleras are
further expansion. It is planned to increase output lower, but they are burdened with truck-transport
to 8 Mt in 2010. costs to the port of some USD 12 – 14/t, so that
any competitiveness they may have, compared with
Besides steam coal projects, investors, among them major operations, is only marginal.
CVRD, now also have an eye on smaller coking coal
deposits. Infrastructure
Colombia's infrastructure is to be greatly expanded
The productivity of Colombia's output is character- to meet the planned growth in coal exports. The
ized by large-scale opencast mines. Cerrejon, with country's government bought back the railway com-
a headcount of approx. 5,000 and 25 Mt/a, reaches pany Atlantic-Rail with a view to handing it over
a productivity of 7,000 – 8,000 t/man-year. The to an international consortium (including Glencore
smaller mines have lower productivity, but also low and Drummond) which is to extend and maintain
infrastructure costs in mine development. They are the system. In this way, plans call for the capac-
partially dependent on transport by truck. ity of the La Loma/Santa Marta line (200 km) to
be increased from the current 25 Mt/a or so to an
Cost development annual capacity of 45 Mt. The ports of Cartagena,
The representative costs in Colombia reflect the Bolivar, Santa Marta and Barranquilla are also to be
large-scale opencast mines that extract most of the enlarged. In regions that are difficult to access by
export tonnage. rail, the government has pledged the construction
of feeder roads.
Since most of the coal is extracted using the truck-
and-shovel method, the opencast mines have been
Port capacities, Colombia
affected by rising fuel and tyre costs. Wage costs,
too, are steadily rising. Compared with Australia
2005 2006
and Indonesia, productivity is lower. However, Mt Mt
since the important mines have steadily increased Puerto Bolivar 32.0 32.0
their production, the specific costs for infrastruc- Santa Marta Cienaga 24.0 24.0
ture and overheads have fallen. Prodeco Puerto 5.0 6.5
Carbosam 6.0 6.0
As regards rail transport, USD 2 - 3/t must be antic- Rio Cordoba 4.0 4.0
ipated; handling costs are in the range of Barranquilla 1.5 1.5
USD 3 - 5/t. Fob costs are estimated as follows: Cartagena 2.0 2.0
Total 74.5 76.0
Fob costs
2004/2005 2006/2007 Some of the ports on the Caribbean Sea are to be
USD/t USD/t
extended as follows:
Steam coal 26-32 27-34
■ Puerto Bolivar from 32 Mt/a to 40 Mt/a

■ Santa Marta ports from 35 Mt/a to 45 Mt/a
In the long term, a higher overburden-to-coal ratio ■ Cartagena from 2.0 Mt to 10 – 12 Mt/a
and ash-richer qualities will place a burden on ■ Barranqilla from 1.5 Mt to 8 -12 Mt/a
75

Exports Export developments, Colombia, 2004 - 2006

Most of Colombia's coal is delivered to the Atlantic
market. Of total exports amounting to 60.8 Mt, 2004 2005 2006
Mt Mt Mt
a mere 1.2 Mt or so went to Chile and Peru and,
Hard coal output 58 60 63.7
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
Chief important
countries also bought about 1 Mt more coal. countries/regions
EU-15/after 2004: EU-25 25.6 23.4 25.0
Big importers included Germany (4.0 Mt), France Other Europ. countries* 2.9 2.7 2.9
(3.3 Mt), Portugal (2.9 Mt) and Israel (3.3 Mt). USA 13.3 17.6 22.4
Exports will go on rising in 2007. The precondition Canada 1.7 2.1 1.9
for this is the realization of infrastructure measures, *incl. neighbouring Mediterranean countries
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 structure, Colombia
2005 2006
Mt Mt
America 23.8 29.5

of which North America 19.8 24.3
of which South and Central America 4.0 5.2
Europe 30.8 31.3
of which Mediterranean area 10.4 6.3
of which northwest Europe 20.4 25.0
Total 54.6 60.8
76

Coal-exporting countries • USA
USA
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General ing to include the newly industrialized countries in

In future, the USA will continue to rely on coal as emission-control efforts after 2012. These efforts
an important energy source to cover its energy are to be concluded in 2008 and incorporated in
needs. Today accounting for 24 % of the country‘s the UN strategy.
total energy consumption and 51 % of its power
generation, coal will remain an indispensable pri- Coal has a strong competitive position in the USA,
mary energy source for some time to come. Against since natural gas prices have steadily risen over
this background, the government is making efforts recent years. Yet, since it is mainly gas-fired power
to simplify the approval procedure for the develop- plants that have been commissioned recently, gas
ment and exploitation of coal deposits. The USA demand is set to rise.
is not a signatory to the Kyoto Protocol on climate
protection to reduce GHG emissions, although it With the strong economy, electricity generation
is trying to make a contribution toward protecting rose and coal-fired generation, at 1,966 TWh in
the climate by improving coal combustion through 2006, made a 51 % contribution toward total elec-
its initiatives to develop clean coal technologies, tricity supplies. A further rise can be expected.
including those where CO2 is captured and stored.
The high dependence on oil imports and soaring oil
The President of the USA again confirmed this prices have triggered interest in the USA on coal-to-
stance at the G8 summit in Russia in June 2006. liquid projects.
The US government supports massive technology
programmes to reduce CO2 emissions and is seek-
77

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

BGR puts US hard coal resources at some 719 Bt, (50 - 90 HGI). The sulphur content (0.5 - 3.0 %) is
and reserves at 213 Bt, i.e. a total potential of 932 much higher in places. These coals are used both in
Bt. Hence, unlike crude oil and natural gas, the USA power generation and as coking coal. In the latter
sits on a huge coal asset. To this must be added a case, however, only coals with a low ash (6 - 8 %),
potential of around 430 Bt of lignite. moisture (8 %), sulphur (0.7 - 0.9 %) and volatile
matter (18 - 33 %) content are suitable. Among
Deposits are located in the Appalachian coalfield Asian consumers, US coking coals are classified as
near the country‘s east coast. These contain bitumi- hard coking coal and were once very popular as ad-
nous coal and anthracite, and are followed by the ditives in view of their reactivity and fluidity.
Illinois basin, east of the Mississippi, in which high
sulphur, bituminous coal is found. In the West, Mining development
there are the sub-bituminous coals of the Powder US output rose slightly in 2006 (+2.3 %) and stood
River, Green River, Uinta and San Juan basins, typi- just over 1 Bt. Extraction from the Appalachian
cally low in sulphur. Extensive lignite reserves can mining areas continued to decline, while output
be found in the southern Gulf region and in the from the Interior and Western coalfields remained
northern lignite basin on the Canadian border. largely stable.
In the Midwest and West, coal reserves are owned Demand for hard coal in the electricity sector was
by the respective states. They are auctioned to down slightly. However, half of the electricity pro-
the highest bidder by the Departments of Mines duction in the USA is based on coal, a share that
for exploration and investigation and released for has followed a rising trend in recent years.
long-term mining against payment of royalties. In
the country's east, by contrast, landowner mining There has been an ongoing trend for several years
still applies, stemming from the time when only the now toward mining west of the Mississipi at the
owners of land had control over any natural resourc- expense of the mining areas located to its east.
es lying beneath. Since then, mining rights have This shift is due above all to the provisions in force
often been traded separately from land ownership since 1995 under the Clean Air Act which con-
and can be assigned to mining companies in return siderably restricts the admissible sulphur dioxide
for payment of a royalty, typically 4 - 7 % of pro- emissions from coal-fired power plants. In order to
ceeds per t and freely negotiated with the owners. minimize the investment in flue gas desulphuriza-
tion associated with this, utilities have increasingly
The coals have a wide quality spectrum. Whereas turned to low sulphur coals from the Powder River
the sub-bituminous coals in the Western coalfields basin, despite higher transport costs. This move
require no further preparation, other than crushing comes at the expense of the more sulphurous coals,
and screening, raw coals in the Eastern coalfields mainly displacing those from the Illinois basin, but
generally have to be washed. This is particularly also some Appalachian coal.
true of coking coal. The sub-bituminous coals in the
Western coalfields are high in moisture (26 %) and The pollution control equipment at US coal-fired
volatile matter (> 30 %) with a high grinding hard- power plants, now improved by order of statute,
ness (< 50 HGI), while their ash (5 %) and sulphur particularly desulphurization systems, increases the
(0.3 %) content is low, as are the calorific values of attractiveness of coal from the Illinois basin.
4,800 - 5,050 kcal/kg (as received). Such coals are
used exclusively in power generation. By contrast, US coal mining is entirely a private-sector activ-
the hard coals of the Appalachians have less mois- ity. In 2006, some 1,400 mines were operational,
ture (5 - 12 %) and volatile matter (17 - 39 %), but including 800 opencast pits and 600 underground
higher ash values (5 - 15 %), calorific values (6,000 mines. The number of coal mining operations has
78

Distribution of production, USA
2003 2004 2005 2006

Mt* Mt* Mt* Mt*
Appalachian¹ 353 366 367 355

Interior 132 132 132 137
Western 498 522 530 561
Total 983 1,020 1,029 1,053
East of Mississippi 436 451 454 444
West of Mississippi 547 569 575 609
Total 983 1,020 1,029 1,053
¹) includes coal from stockpile treatment

*) metric tonnes
shrunk by 200 over the last eight years. Output draglines are used rarely, only where there are huge
largely stagnated during this period. In the wake of amounts of waste above the coal seams as in moun-
a trend towards consolidation, ten producers now tain top removal. The coal seams, which are mostly
account for 67 % of total US coal output. thinner, and the interburden are then removed by
truck and shovel. Underground or deep mining,
Coal mining in the USA is highly mechanized, and accounting for 33 % of output, is more economic
some 67 % takes place in opencast mines with than opencast mining in the Appalachians, and also
depths of approximately 60 m. This extraction in the Western coalfields, wherever the overburden-
method is particularly widespread in the Western to-coal ratio exceeds 8 cubic metres per tonne of
coalfields. There, one or two seams, mostly over coal. Deep mining mainly involves driving tunnels
5 m thick, are cleared of waste using draglines to to create bord and pillar workings using continu-
permit subsequent coal extraction by truck and ous miners and shuttle cars. Increasingly, longwall
shovel. In the Appalachian coalfield, by contrast, operations are being adopted at the most efficient
mines.
Biggest US coal producers, 2006

The US coal mining workforce has risen by 13,000
or 18 % since 2003. In 2006, the hard coal mining
Company Output Exports
2006 2006 industry employed a workforce of 84,000. With an
Mt Mt output of 1,053 Mt, this translates into average
Peabody Energy Corp. 195 18 productivity of 12,500 t/man-year. In contrast
Rio Tinto America (Kennecott) 125 - to this average, productivities as high as 22,000
Arch Coal Inc. 114 - t/man-year are reported in some opencast pits,
Foundation Coal Corp. 65 - notably in the large operations of the Powder River
CONSOL Energy Inc. 61 10 basin, while underground mines, located mainly in
Massey Energy Co. 35 6 the Appalachian coalfield, only manage 8,300 t/
North American Coal Corp. 32 - man-year. Due to the strong rise in the workforce,
Kiewit Mining Group, Inc. 29 - average productivity has fallen.
Westmoreland Coal Company 27 -
Alpha Natural Resources 23 7 Coal consumption in 2006 totalled 1,010 Mt, with
Total 706 41 934 Mt (92 %) being accounted for by power gen-
% of 67 89 eration and 55 Mt (6 %) by industry. A mere 21 Mt
USA, 2006 1,053 46
(2 %) was delivered to coking plants for the supply
Source: National Coal Mining Association of steel mills.
79

According to an EIA forecast, coal output in the Infrastructure

USA is set to rise to some 1.6 Bt by 2030; its share US coal mining has a well developed and efficient
in power generation would then be 57 %. infrastructure which moves more than 969 Mt of
coal p.a. to domestic consumers or to the export-
Cost developments ing ports. This involves both the railroad network
Mining costs have continued to rise in recent years, and inland shipping, which transport 64 % and 8 %
partially due to government regulations which respectively. Following several mergers of railroad
compelled companies to maintain higher provisions companies in the last three years, coal transporta-
for social commitments, as well as environmental tion from the Western coalfields of over 400 Mt/a
regulations. Across the USA, there are huge differ- is now concentrated on Burlington Northern and
ences in mining costs. In the Appalachian coalfield, Union Pacific, while CSX and Norfolk Southern
ex-mine costs have the following spread: mainly serve the Appalachian coalfield, handling
a good 200 Mt/a between them. For export coals
■ Steam coal USD 35 - 65/t from the Appalachian coalfield to the seaports, the
■ Coking coal USD 40 - 80/t rail distances range between 600 and 1,000 km
and, for inland shipping to Gulf ports , between
As regards coking coal, it must be borne in mind 700 and 2,500 km. There are few capacity bottle-
that it has to be better processed and, frequently, necks in coal transportation.
that it is extracted from thinner seams involving
higher costs. At present, the USA has some 19 coal ports with
more than 20 terminals and an annual handling
By contrast, costs in the Powder River basin, with capacity of 269 t. Chief among these are Baltimore
its large-scale opencast mines and thick seams, lie and Hampton Roads on the East coast followed by
in the USD 4 - 6/t range. Davant and Mobile on the Gulf coast. As steam coal
imports grow, the Gulf ports in particular are gain-
Rail transportation to the exporting ports costs ing in importance, and are being reequipped to
USD 20 - 30/t for Appalachian coal, with port han- improve efficiency.
dling adding a further USD 3 - 4/t.
Fob costs Transport routes, 2006
2004/2005 2006/2007 Mt %
USD/t USD/t Rail 640 64
Steam coal 43-65 53-77 Inland shipping 80 8
Truck 120 12
Conveyor belt 120 12
The cessation of the synfuel tax credit in 2007
Great Lakes 10 1
could lead to further cost increases in the future.
Other 30 3
Total 1,000 100
Balance of imports and exports, USA

2000 2000 2005 2006
Mt Mt Mt Mt
Exports (maritime) 33 21 27 26
Imports (maritime) 11 15 27 30
Balance -22 -6 0 +4
80

Exports from Indonesia and Russia also reached the US

2006 exports of some 46 Mt were little changed market.
from 2005:
Outlook
Exports 2006 The prospects for US coal mining are still very good.
Coking coal Steam coal Total Due to increasing oil and natural gas prices in the
Mt Mt Mt USA, the share of coal in power generation will go
Seaborne 20.5 5.8 26.3 on rising. The trend toward higher world market
Overland 5.5 14.2 19.7 prices may underpin a revival in exports, above all
(Canada/Mexico) of coking coal.
Total 26.0 20.0 46.0
In 2006, seaborne imports and exports, from and

to the world market, were again virtually in balance.
It must be assumed that some of the amounts Production from the Appalachian coalfield, which is
declared as steam coal were used as coking coal. important for exports, is said to be on the decline.
This could apply to an estimated volume of 2 - 3 Mt. However, with higher prices, more difficult deposits
can be considered for mining. Nevertheless, imports
The balance of imports and exports for coal trans- from the world market may continue to gain signifi-
ported by sea has gradually changed such that, in cance, especially on the East coast.
2006, the USA became a small net importer. Over-
all, including overland trade with Canada, the USA For the foreseeable future, the USA’s role as a swing
remains a net exporter of around 16 Mt/a. supplier of coking coal will continue, at least on a
modest scale.
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
Export developments, USA, 2004 - 2006

2004 2005 2006
Mt Mt Mt
Coal output 1,020 1,029 1,053
Steam coal 19 19 20
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
81

Canada
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General also-ran in terms of competitiveness. The reasons

Canada had its coal-exporting début in the early for this are the changing quality requirements to
1970s; until then, the country‘s coal industry had be met by coking coals and the relatively high min-
almost entirely served the domestic market. The ing and transportation costs to the coast, but also
move into the world coal market was triggered by long-stagnating demand on the world coking-coal
the growing coking-coal requirements of the Japa- market. The higher coking-coal price level in recent
nese and the Korean steel industries in the second years has led to a revival of hard coal-mining.
half of the last century.
Reserves/qualities
Their strategic aim was the development of assured BGR quantifies Canada's hard-coal resources at
supplies as a second string to their Australian 141 Bt and reserves at 4.3 Bt, giving Canada a
bow in the Pacific and in addition to the quanti- potential of 145.3 Bt. Approx. 91 % of all deposits
ties bought from the US at that time. Canadian are located in the Western provinces of Alberta and
companies developed three coal deposits, com- British Columbia. Lignite basins are confined to the
plete with infrastructure, within two decades to Province of Saskatchewan, while subbituminous
serve the export market. Exports surged from nil coals are located in a belt starting in the United
in 1969 to 36.5 Mt in 1997. Since then, however, States, extending to Alberta and reaching into the
the export-oriented hard coal-mining industry is an northwest via the foothills of the Rocky Mountains.
82

Coal-exporting countries • Canada
A hard-coal belt that starts in the Alberta Rocky Still, there are many significant new coal develop-
Mountains, also extends into British Columbia. ments underway in Canada. Most of these are PCI
coal developments which are taking place in west-
The subbituminous coalfields located in the foot- ern Canada. Big mining companies (e.g. Amcoal),
hills are in largely undisturbed and flat layers while too, are interested in PCI projects.
the hard-coal deposits in the foothills are often
inclined, faulted, folded, and generally impacted In eastern Canada, "Xstrata", together with
by plate tectonics. In some cases, the coal-bearing "Erdene Gold", is pursuing a project to re-open the
layers are up to 650 m thick with up to 60 seams of Donkin mine on Cape Breton Island (Nova Scotia).
workable thickness. The mine is said to have 200 Mt of power plant and
coking-coal deposits.
The country commercially exploits both lignites/
subbituminous coals and hard coals. The former are Coal mining in the Western provinces is confined
mostly consumed at mine-mouth power plants to to opencast pits. As in the Powder River basin/
generate electricity, whereas nearly all of the hard US, the waste is removed by dragline and the sub-
coal – incl 90 % coking coal – is exported. bituminous coals and lignite extracted by truck and
shovel. Once crushed, the coal goes directly via
The coking coals have the following typical quality belt conveyor to the nearby power plant without
features: generally low volatility of 21 - 25 % (also further preparation. Hard-coalmining, by contrast,
medium volatility in places: 26 - 29 %), 8 - 9.5 % involves numerous 1 - 10 m thick seams, usually
ash, 1 % (inherent) moisture and 0.5 % sulphur with a 20 - 40° incline, requiring selective mining
with a swelling index of 6 - 8. The coking coals are using bulldozer/frontend loader/shovel and truck.
classified by Asian consumers as hard to semi-soft. The life span of the opencast hard-coal pits located
Exported steam coals have calorific values of 5,800 in the Eastern foothills of the Rocky Mountains is
- 7,100 kcal/kg (as received) with 19 - 32 % volatile seriously limited owing to the rapid rise in the coal/
matter, 10 - 15 % ash, 7 - 9 % moisture and 0.3 - waste ratio to values of over 8 bcm/t coal. However,
1.0 % sulphur, and have a good grinding hardness the deposits located close to the surface are usually
of 60 - 70 HGI. The subbituminous coals of the still sufficient for operations to continue for some
Rocky Mountain foothills are largely equivalent time to come. In 2006, twenty-five coal mines were
in quality terms to those of the US Powder River in operations in Canada. Five companies produced
basin. coking and PCI coal for exports, two companies
produced bituminous steam coal for exports and
Mining development domestic use, and three companies produced sub-
IIn 2006, Canada mined some 70 Mt, incl 30 Mt bituminous, lignite and bituminous coal exclusively
coking coal and PCI coal, which was mainly export- for domestic coal-fired power generation.
ed. Steam coal was mined in an amount of 40 Mt.
This can be broken down into 4 Mt hard coal, 24 Mt The productivity of Canada's mining sector is in a
subbituminous coal and 12 Mt lignite. bandwidth of 7,000 – 11,000 t/ man-year.
World market prices, which are tending to weaken Cost developments

at a high level, and the decline in China's coking- In recent years, Canada, too, has had to cope with
coal imports again led to slower developments in hefty increases in its operating costs on a similar
Canada's export-geared mining sector. The export- scale to those of its Australian and American com-
coal mining sector facing sinking export income on petitors.
one hand, was also impacted by worldwide increas-
es in mining equipment and operation’s costs
which led to an overall lower capacity utilization.
83

Also, transport costs have seen a disproportionate short notice. The Ridley Terminal has a capacity
rise, so that Canadian producers have hit the limits of 12 Mt. In 2006, at 2.8 Mt, larger amounts were
of their competitiveness. They are USD 34 – 35/t. handled for the first time. New projects by the
Free-pit costs are in a bandwidth of USD 38/t to Western Canadian Coal Company could revive the
USD 45/t, and handling costs USD 4 – 6/t. terminal. The two leading rail operators – CN and
The Canadian dollar has continuously firmed CP – have announced massive investment. CP wants
against the USD, leaving margins to dwindle. to invest CD 160 mill. in 25 projects, and CN as
much as CD 474 mill. The investments have a 5-year
time span.
Fob costs
2004/2005 2006/2007 For inland loading of Canadian coal to the US on
USD/t USD/t
ships that travel on the Great Lakes, the Thunder
Steam coal 49-63 76-86 Bay Terminal is used, capacity 11 - 12 Mt. The Thun-
der Bay Terminal also handles US coal from the Pow-
der River basin.
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 Handling capacities
expensive coking-coal provider. Capacities
Terminal Mt
Infrastructure Neptune Bulk Terminal 8
The infrastructure available to the Canadian coal Westshore Terminal 26
industry is excellently developed, reliable and Ridley Terminal 12
efficient, but nonetheless remains the sector‘s Total 46
weak point on account of the transport distances

involved. All exporting mines have rail links either
to Canadian National (CN), Canadian Pacific (CP) or Exports
BC Rail Ltd., with transport distances of over 1,000 Exports dipped 0.6 Mt to 27.6 Mt. A more serious
km to the exporting ports on the Pacific coast. Even fall by nearly 1 Mt was noted in exports to China.
more serious is the distance of 2,400 km to the Seabound exports amounted to 25.9 Mt, incl
densely populated industrial centres on the North 23.3 Mt coking coal and 2.6 Mt steam coal. The US
American lakes. Compared with other exporting took 1.7 Mt on the land route. The biggest buyers
countries like Australia, Indonesia, South Africa were Japan, taking 8.7 Mt, and South Korea, tak-
and even China, which serve the Pacific market, this ing 5.0 Mt; 7.6 Mt reached the European area, incl
is a definite drag on the industry‘s cost situation Turkey.
and competitiveness. The coal is exported via the
Pacific ports of Roberts Bank (Westshore Terminal) For any long-term increase in Canada's exports,
and Neptune Terminal (both Vancouver), Texada on developments in imports by India and China will be
Vancouver Island and Ridley Island (Prince Rupert), crucial.
with a handling capacity of 51.5 Mt annually.
Outlook
At present, the Westshore Terminal, with about Due to long transportation routes, West Canada‘s
25 Mt, is the most used loading port. The termi- hard coal-mining has a considerable cost disadvan-
nal is now being modernized and has expansion tage compared with Australian and US coking-coal
potential. The Neptune Terminal has a capacity of pits. Nonetheless, the outlook for Canada‘s coking-
8 Mt, only half of which is currently being used. Its coal exports are vastly improving thanks to higher
capacity can be expanded to 10 Mt/a at relatively world market prices and a tightening of the supply
84

Coal-exporting countries • Canada
Export developments, Canada, 2004 - 2006 Cline Mining - Lodgepole Mine Project
The mine is projected to produce 2 Mt/a of coking
2004 2005 2006
Mt Mt Mt
coal for exports.
Hillsborough Resources Limited in partnership
with Anglo Coal Canada and NEMI - Horizon
Steam coal 2 2 3
Mine Project
The project is planning to produce 1.6 Mt/a of cok-
ing coal.
Chief important
countries/regions Fortune Minerals Limited - Mount Klappan Mine
EU-15/after 2004: EU-25 6.2 7.1 6.4 Project
Other Europ. countries* 1.7 1.2 1.1 The project includes an open pit mine and a prepa-
Japan 5.4 7.5 8.7 ration plant with an anticipated production of 1.5
South Korea 0.0 5.0 5.0 Mt/a of anthracite coal.
USA 2.5 1.7 1.7
Latin America 3.2 2.7 2.6 The hard coal market leader in Canada continues to
*incl neighbouring Mediterranean countries be Elk Valley Coal. The company has completed the
development of the Cheviot pit.
range due to China‘s withdrawal from exporting In aggregate, these projects could add an extra 10
coking coal, since many consumers prefer not to - 12 Mt per annum of export quantities.
cover their needs with Australian coal only. Hence, In summary and relative to worldwide supply,
Canada‘s exports are on the up again at present. A Canada remains a marginal provider in coking-coal
brief summary follows. business.
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.
85

Vietnam
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General Reserves/qualities
Vietnam is making efforts to boost its economy. BGR puts Vietnam's hard coal resources at 6.5 Bt
The country has lost no time in recent years in and reserves at 564 Mt, i.e. a total potential of
expanding its coal mining activities, including some 7 Bt. The deposits are mainly located in
significantly increased exports. Vietnam reported northern Vietnam, with smaller deposits of anthra-
strong rises in its energy needs of 13 % a year in cite, hard coal and lignite in the centre and north of
the period from 1996 to 2005. The economy is the country. The most noteworthy reserves can be
growing at the remarkable rate of 8 - 9 % per year. found in the Quang-Ninh basin, these being divid-
ed into the three coalfields Hongai, Compha and
86

Coal-exporting countries • Vietnam
Hong Bi and containing – according to Vietnamese The current strong increases in production and
data – 6.6 Bt of measured, including 3.1 Bt of mine- exports are said to have been enabled in part with
able, anthracite reserves. Chinese support.
Production is both in underground pits and open- The opencast mines use truck-and-shovel methods,
cast mines. The share of opencast mines is on the while underground operations use bord and pillar,
decline, since the deposits drop to depths of 350 m, and longwalls. Productivity, at 500 – 600 t/man-
so that they are no longer accessible for opencast year, is very low. Opencast deposits being limited,
operations. Ninety-five per cent of output is anthra- Vietnam must develop modern underground min-
cite. ing methods and is making use of support from
abroad to achieve this.
Besides the anthracite reserves, there are also sub-
bituminous coal resources in the Red River basin, The Vietnam National Coal Corporation (VINA-
said to contain over a total area of 3,500 km2, 210 COAL) controls 95 % of the mining. The qualitites
- 300 Bt lying 250 - 1,200 m beneath the basin. The are characterized by low sulphur contents (0.6 %)
Red River basin is currently being explored more and can, following preparation, reach calorific val-
thoroughly in order to determine which deposits ues of over 7,000 kcal/kg.
will be accessible in the medium term.
After 2013, in addition to today's focus, the Red
The qualities are low in sulphur (0.6 %) and, River deposit is set to commence production and
depending on processing, can reach calorific values reach an output of 5 Mt by 2020. In the long term
of over 7,000 kcal/kg. (by 2023), Vietnam proposes to generate 70 % of
its power needs from coal.
Mining development
Precise output figures are not available, although Cost developments
on the basis of domestic consumption of approxi- Data on employees and costs are not yet available.
mately 14 Mt and exports of some 29.8 Mt we esti- Since Vietnam is exporting more and more, it must
mate an output of about 44 Mt in 2006, extracted be assumed that this is profitable in Vietnam's cur-
from around 35 known mines. According to Vina- rent economic setting.
com, the mining capacities of Vietnam's pits were
estimated as follows (most likely raw coal): Productivity per man-year is said to be 500 – 600 t.
■ Opencast 26.5 Mt Infrastructure

■ Underground 38.1 Mt The coasts on the eastern side of Vietnam are most-
■ Total 64.6 Mt ly shallow and so far have only permitted access
for ships below 10,000 DWT. Thanks to excavation
This helps explain the rapid rises in exports. The work, bigger ships can be loaded in Campha, so
government now demands that exports be kept that 65,000 DWT ships can also be handled, with
below 20 Mt/a in future with a view to securing additional loads when lying in the roads.
domestic needs.
Hongai port can handle 10,000 DWT ships quayside
Output is set to rise further and reach 80 Mt in the and 30,000 DWT ships in the roads.
long term (by 2025). At present, opencast produc-
tion predominates but, if output targets are to be According to Vinacom, total export capacity at Viet-
achieved, there will have to be a switch to more nam’s ports amounts to approximately 34 Mt/a:
underground operations due to deposit depletion.
87

Export and port capacities, Vietnam, 2006 In 2007, Vietnam's government levied a 10 %
export tariff to curb exports. Average export pro-
Mt
ceeds were approx. USD 30/t fob in 2006. This low
Campha/Cua Ong 15.0
value suggests that it is relatively high-ash coal that
New ports in Campha 10.0
is reaching China, supplies which are competitive
Hon Gai/Nam Cau Trang 3.0
only because of the short transport distance.
Hon Gai/Dien Väng 1.5
Hon Gai/Troi 1.5
Outlook
Uong Bi/dien Cong 3.0
Official Vietnamese data and the realities of actual
Total 34.0
developments do not always agree. In the future,
Vietnam's energy needs will tend to rise and
The hinterland infrastructure, i.e. roads and railway restrict its export opportunities. The recent rapid
lines, is being boosted with Chinese assistance, in increases in output and exports are partially due
order to supply consumers in China's south-west. to the easily-worked deposits at opencast mines,
yet the future potential for opencast production
Exports remains limited.
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.
Hard Coal Production and Export Data for Vietnam
2004 2005 2006¹)

Mt Mt Mt
Output 28.0 34.0 44.0
Exports 11.3 17.1 29.8
Inc. China 6.1 9.9 20.1
Export rate in % 40 50 68
¹) estimate
88

Coal-exporting countries • Poland
Poland
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General country’s power generation is based on hard coals

Poland is not only one of Europe‘s traditional hard and lignite, three fifths being accounted for by hard
coal producers; it was once one of the main sup- coal and two fifths by lignite.
pliers to the world hard coal market. The country
assumed the leading role among European coal Reserves/qualities
mining countries in 1972 with an output of 150.7 According to BGR, Poland has hard coal resources of
Mt and, until 1979, was the world‘s second largest 167 Bt and reserves of 12.5 Bt, i.e. a total potential
coal exporter after the USA, selling 41.4 Mt in that of 179.5 Bt. Polish data put currently accessible
year. Although its role as an exporting country was reserves at 4.8 Bt and "easily reachable" reserves at
already fading in the 1980s, output was maintained 2.8 Bt.
at a significant level (1988: 193 Mt) compared with
other European countries. It was not until the polit- They are distributed between the Upper and Lower
ical turnaround in eastern bloc countries associated Silesian and the Lublin basins, with the Upper Sile-
with a growing market-economy that Poland experi- sian coalfield accounting for 93 % of the total. The
enced, in the early 1990s, a contraction of its hard coal formation there contains some 400 coal seams,
coal mining industry, a process that had already about half of which are of economic interest with
begun in Western Europe 20 years previously. Thus, a thickness of 0.8 - 3.0 m. About two thirds of the
output amounted to a mere 94 Mt in 2006 and has seams are at an incline of less than 10°, and the
stabilized in recent years. Poland‘s coal is currently rest at a maximum of 35°. Some 56 % of the minea-
in a better competitive situation than in the past ble coal reserves consist of steam coal, and 44 % of
thanks to high world market prices. 93 % of the
89

coking coal. All of the country‘s natural resources, The planned privatization of Poland's state-run pits
including coal, are state-owned. has failed to materialize to date and there is strong
opposition from the workforce to this policy. In any
The raw coal from modern underground operations event, for the steam coal mines, there are no seri-
is diluted by secondary rock and requires prepara- ously interested buyers. More recent thinking aims
tion. In the past, this produced “western” quality at an initial public offering with a sale of minority
standards only for coking coal. The extension of shareholdings. Poland's mining sector urgently
existing, and the commissioning of new, prepara- needs investment to maintain output.
tion plants in recent years has led to a closer match
to world market requirements, for all coals. This By 2010, the Polish state proposes to discontinue
quality is marked by 25 - 31 % volatile matter, 8 its subsidies, which are currently some USD 2.0 –
- 16 % ash, 7 - 11 % moisture, 0.6 - 1.0 % sulphur 2.3/t for steam coal. Work is now underway on a
content, and has a calorific value of > 6,000 kcal/kg new concept for 2007 – 2013 which is set to make
(as received), though the grinding hardness of 45 - Poland's pits competitive and subsidy-free.
50 HGI is usually less favourable. The coking coals
are of medium to high volatility (23 - 33 %) with an In the long term, output is nevertheless expected
ash and sulphur content of 7 - 9 % and 0.6 - 1.0 % to fall to 77 - 78 Mt in 2010 and to 70 Mt in 2020.
respectively. Their coking properties with a swell- In the medium term, more investment will have to
ing index of 6 - 9 are excellent. go into the development of new reserves – above
all coking coal – in order to maintain output. So far,
Mining development the funds for this have been lacking. According to
Total output was down by 2.7 Mt in 2006 to some Polish data, hard coal mining needs capital spend-
94 Mt, so that the steady decline in Poland's out- ing of USD 6.2 – 7.7 bn if it is to be competitive.
put continued. The scale-down in production came
mainly at the expense of seaborne exports (- 5.6 All mines in Poland are underground operations,
Mt), while domestic sales remained largely stable in with average extraction depths around 600 m.
2006. Most output was lost at Kompania Weglowa Extraction is fully mechanized, the coal being
(- 2.2 Mt). Some pits were shut due to depletion of mined by longwalling.
deposits, others owing to inefficiency. Poland's output is supplemented by imports of
5 Mt of mainly Russian coal. Coking capacity is
The coking coal group Jastrzebska, by contrast, was approx. 10 Mt/a. Some 55 – 60 % of coke output is
able to increase its output and exports. The com- exported.
pany is also profitable thanks to high income from
coking coal sales. Cost developments
At present, the Polish hard coal mining sector has
a workforce of some 120,000. This suggests a
Poland`s largest hard coal producers
Number of mines Output Mt Exports Mt

Company 2005 2006 2005 2006 2005 2006
Kompania Weglowa SA 18 17 52.6 50.4 15.1 10.7
Katowicka Group Kapitalowa 7 7 17.7 17.0 1.6 1.4
Jastrzebska Spolka Weglowa SA 5 5 12.8 13.3 2.3 2.9
Independent mines 4 4 14.0 13.7 0.5 0.8
Total 34 33 97.1 94.4 19.5 15.8
90

Coal-exporting countries • Poland
productivity of just under 800 t/man-year. Major Exports in 2006 can be broken down as follows:
improvements can hardly be expected with work-
ing depths of 500 - 600 m. Polish mining costs are Exports
estimated at USD 60 - 65. If we include freight and
Coking coal Steam coal Total
handling (some USD 20/t), Poland‘s mining sec- Mt Mt Mt
tor requires export prices of at least USD 80 - 85/t
Seaborne 0.8 7.8 8.6
for steam coal. The labour cost share is over 50 %.
Overland 2.2 5.2 7.4
Together with the USA, this makes Poland a mar-
Total 3.0 13.0 16.0
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. While exports of steam coal fell by 3.7 Mt, cok-
ing coal exports edged up by just under 0.5 Mt in
Fob costs 2006.
2004/2005 2006/2007
USD/t USD/t
The biggest takers of Polish coal – excluding coke
Steam coal 60-65 70-75 – were neighbouring states, like Germany (7.3 Mt),
the Czech Republic (1.6 Mt), Slovakia (1.0 Mt) as
Due to high wage agreements in recent years, well as Austria (1.2 Mt). The UK took 1 Mt.
which are well above the advances in productivity, Coke exports totalled 6.3 Mt in 2006. Poland
the competitive position has further deteriorated. imported smaller amounts (5 Mt) of coal from Rus-
This is also reflected in declining exports, above all sia, Ukraine and the Czech Republic. The Russian
seaborne exports. quantities could increase as Polish production
declines.
Infrastructure
In view of falling export volumes, transport infra-
structure is now rather oversized and saw no chang- Export developments, Poland, 2004 - 2006
es in 2006. Export logistics are well developed in
2004 2005 2006
Poland. Loading ports include Gdańsk, Świnoujście,
Mt Mt Mt
Szczecin and Gdynia. While in Gdańsk, the load-
ing of capesize freighters is possible, Świnoujście
and Gdynia are accessible to panamax ships, and
Steam coal 18 16 13
Szczecin only for handysize ships. Also of growing
Coking coal 3 3 3
importance are the railways for coking and high-ash
Coking exports 5 4.5 6.3
coal exports, above all to Germany. This is where
both Polish and German freight companies operate.
Chief important
Inland shipping (Oder River) is of no great impor- countries/regions
tance for exports, at approximately 1.5 Mt or 8 % of EU-15/after 2004: EU-25 17.5 17.1 15.9
total exports.
Exports Outlook
Hard coal exports fell from 19.5 Mt in 2005 to 16 Poland's mining sector faces further change.
Mt in 2006. Of this, Weglokoks exported 15.3 Mt; Although output has stabilized in recent years, fur-
smaller amounts were exported via other distribu- ther falls must be expected since too little is being
tion routes, going mainly to neighbouring coun- invested in the development of new reserves. Ris-
tries. ing wages without matching advances in productiv-
ity, are also making the situation more difficult. For
91

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.
92

Coal-exporting countries • Venezuela
Venezuela
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General able, since the state has substantial holdings in the

One potential major contributor to the world hard big coal companies. The envisaged expansion of
coal market is Venezuela. This country made its the coal mining industry is being hindered by state
first big impression in 1991 with exports of 1.9 Mt intervention in the private sector‘s development
and now supplies the world market with a volume plans for the infrastructure. To this must be added
of some 8 Mt, in 2006, a 1 % share. Although Ven- uncertainty among foreign investors about the
ezuela will never be a big player on an international security of investment and about the future taxa-
level, its development potential is nevertheless tion of profits and their transfer abroad.
substantial and of growing interest to European
and North American consumers in particular. With Hugo Chavez now exerting an even greater
One obstacle to the speedy development of coal influence on raw-material policy than in the past,
exporting is poor infrastructure, which has been investment certainty for foreign investors has con-
inadequate for some years. There has been a lack tinued to fall.
of efficient rail links from the exporting mines to
the deep-water ports and of facilities for handling Reserves/qualities
capesize vessels. The country‘s coal resources of some 7 Bt are rela-
tively modest by world standards. This is true in
As in all of South America, raw materials are in particular of the measured and mineable 1.4 Bt
state ownership. Coal mining rights are granted by reported by the Venezuelan energy ministry. The
the mining ministry (Ministerio de Minas), which BGR puts reserves at 480 Mt, i.e. a total potential of
issues licences for prospecting, exploration and some 7.5 Bt. Most of these resources can be mined
extraction. The royalty levied on the coal mined in opencast operations and are distributed across
is 10 % of the sales proceeds, free mine. As in five coal basins, i.e. the Fila Maestra and Naricual
the mineral oil sector, state influence on the coal basins located on the East coast; the Falcon basin,
mining industry, which has been unimportant as likewise near the coast; the Andine basin situated
regards exports and foreign currency, is consider- southwest of Lake Maracaibo; and, finally, the Gua-
93

sare basin in the extreme northwest of the country seams. Since the seams are not seriously contami-
which, with more than 90 % of total reserves, is the nated with mineral matter, even the raw coal is
most important by far. A coal formation located of very high quality and needs no further costly
there dates back to the more recent Cretaceous or preparation apart from crushing and screening. The
the late Tertiary (approximately 70 mill. years ago). remaining underground mines are confined to small
It is 130 m thick with up to 23 seams having a max- companies with low degrees of mechanization.
imum thickness of 13 m. With a moderate incline, Coal mining is currently concentrated on the Gua-
the deposits are hardly disturbed. The Guasare sare region, which accounts for some 90 % of total
basin is a continuation of the neighbouring Colom- output, while mining by the small operators in the
bian Guajira coalfield. east of the country (Fila Maestra/Falcon) has been
dormant for some years now.
The quality of the Guasare coals is largely identical
with Colombian Guajira coal. The highly volatile (35 The biggest producers currently are CARBONES
%) coal contains a mere 6 - 7 % ash and 7 % mois- DEL GUASARE and CARBONES DEL GUAJIRA, with
ture, so that a calorific value of 6,900 kcal/kg (as other mines located in the Falcon and Fila Maestra/
received) is reached. This being so, it makes excel- Naricual basins not producing at the moment. Alto-
lent steam coal, especially since it contains only 0.5 gether, Venezuela‘s hard coal mining sector has a
% sulphur. What is more, it also has slight coking mining capacity of just under 9 Mt/a.
properties, so that it is increasingly being used as
PCI coal, and some can also be employed as semi- Venezuela's output is largely a function of the Paso
soft coking coal. Dieblo opencast mine. Here, productivity is 5,000
to 6,000 t/man-year. Due to transport logistics
Mining development based on trucks and to the truck-and-shovel meth-
Venezuela's coal mining sector, despite attractive od, output as well as transport by truck to the coast
deposits and short routes to the coast, is making are heavily affected by fuel-price rises.
little headway. Difficult weather conditions have
again impaired existing production. The small Output/exports by company
opencast mine Fila Maestro was even shut down.
The Brazilian coal, iron and steel group CVRD is 2005 2006
Mt Mt
interested in the Socuy project. After the project
Carbones Desl Guasare 5.27 5.50
was delayed by Venezuela's elections, talks are now
Interamerican Coal 0.52 1.00
to be resumed. The Venezuelan state is said to be
Carbones De La Guajira 0.77 0.63
getting involved itself in the extensions to the nec-
Other 0.52 0.62
essary coal port and financing it.
Total 7.08 7.75
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 Cost developments
Socuy, Mina Norte, Las Carmelitas, Paso Diablo and Mining or operating costs in modern large-scale
Cosila mines. By 2012, output in Zulia province is opencast mines are currently quantified at USD 18
set to grow to 24 Mt. The potential for this certainly - 22/t. Transport by truck to the port (some 80 km)
exists, although despite many announcements costs a further USD 3 - 9/t with handling costs of
there have been no results so far. USD 3 - 5/t, since the coal must be transported to
an offshore loading terminal by barge. This means
Most of the coal is mined in opencast pits using that the coal finally reaches the ship with fob costs
truck and shovel in view of the large number of of USD 28 – 36/t.
94

Coal-exporting countries • Venezuela
Fob costs
Planning for new infrastructure is slow in getting
2004/2005 2006/2007
US $/t US $/t off the ground. For the Socuy project, the construc-
Steam coal
tion of both a port and an 80-km railway line is
24-31 27-34
necessary. The project, going by the name Zona
Portuaria Simon Bolivar and with an initial capacity
Given this cost range, it should be borne in mind of 12 Mt/a for panamax ships, is making only slug-
that the exported coal has a favourably high calo- gish progress; the same is true of planning for the
rific value in comparison with most internationally railway line from Socuy/Paso Diablo to the port.
traded coal.
Venezuela's ports also shipped some 1.5 Mt of
Infrastructure Colombian coal.
The infrastructure of the Guasare coalfield is poor.
There is no rail link from the mines to the ports of Exports
shipment, so that the entire amount of several mil- In line with disappointing production develop-
lion tonnes a year has to be transported by truck ments, exports have been similarly disappointing.
over a distance of 85 km on public roads. All ports, The biggest buyer was the USA, taking 4.5 Mt.
like Santa Cruz de Mara, Palmarejo, Baja TCSV and Canada imported 0.5 Mt. South American states
Ceiba, are located on Lake Maracaibo. They have a bought 0.7 Mt. About 2 Mt went to Europe. Vene-
handling capacity of just under 10 Mt annually, but zuela's export figures also include some Colombian
are only directly accessible for handysize ships with quantities.
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- Export developments, Venezuela, 2004 - 2006
ing interim store. Although now technically opti-

2004 2005 2006
mized, this is still a costly procedure. Mt Mt Mt
Exports via Venezuelan ports Export rate, in % 100 100 100
2005 2006
Chief important
Mt Mt
countries/regions
Bulk Wayuu 5.61 5.60 EU-15/after 2004: EU-25 2.4 2.1 2.0
Carbones Del Guasare USA 4.4 4.3 4.5
El Bajo 0.81 1.00
Carbones Della Guajira
Interamerican Coal
Outlook
Guanta 0.13 0.20
Venezuela's full output and export potential
Geoconsa
remains unused. The Guasare basin with current
La Ceiba 0.78 0.80
operations at Paso Diablo and the projects Mina
Carbones Del Caribe
Norte, Socuy and Caduivi would have the potential
Interamerican
for 20 Mt/a. For this, a deep-sea port is necessary.
Millinton
If CVRD – thanks to the good Brazil/Venezuela
Palmarejo 0.47 0.40
link-up – can go ahead with the Socuy project, this
Xcoal
would be a breakthrough for the Venezuelan coal
Canevca
sector.
Millinton
Carbones Del Guasare
Total 7.80 8.00
95

Coal geology and mining techniques

Deposits Western, Central and Eastern Europe, while in Asia
Coal, which is a product of organic, i.e. plant, sedi- they can be found in Siberia and above all in China.
mentation, occurs in seam-shaped deposits. Since In North America, they are supplemented by hard
this process was not continuous, the sediment is coals from the Mesozoic era, i.e. the Jurassic and
often interspersed with clayey-sandy sediments, the Cretaceous periods (130 - 70 mill. years). They
so that we usually encounter coal in multi-seam are located in the mining areas of the Rocky Moun-
deposits. Growing pressure from more recent rock tains in the US and Canada and in their eastern
sediments triggered a carbonization process which, foothills.
with increasing dewatering of the organic substanc-
es and carbon enrichment, ended in the formation The hard coal deposits of the southern hemisphere,
of coal. The rock formations that followed then by contrast, were formed in the Palaeozoic era or
frequently deformed what had originally been hori- the Permian period, i.e. 250 – 290 mill. years ago
zontal seams with a series of folds and faults. and in what were then temperate zones. They are
found only sporadically in southern Brazil (Santa
Most of the hard coal resources in the northern Catarina), but above all in South Africa and in the
hemisphere date back to the Carboniferous period, east Australian coalfields of New South Wales and
i.e. their sedimentation occurred 290 - 355 mill. Queensland. India's hard coals, too, (from the
years ago. The deposits in North America include time when India still formed part of South Africa
the hard coal mining areas of the Appalachians in earth's evolution) belong to the Permian, and
and Canada's eastern provinces, in Europe those of only the hard coals of South America's northern
Underground coal mining operation
Mine Surface
Facilities
Previously
Coal Shearer Mined Area Mined Longwall
and Roof Panel
Supports
Coal Conveyor
Coal Pillars to Surface
Retained for
Roof Support
Direction of
Mining Mined Area
Next Longwall Coal Shearer and

Panel to be Roof Supports
Continuous Mined
Miners
Developing
Coal seam Roadways
Coal Conveyor
Coal Pillar
Source: World Coal Institute
96

Coal geology and mining techniques
Surface coal mining operations and mine rehabilitation
Graded Topsoil and Overburden Overburden Spoil pile Tipping Subsoil and
embank- subsoil from benches being Dragline overbur- topsoil
ment stripped by dug by excavated bucket Dragline den from being Grass and
to act as motor scrapers shovels and by dragline unloads backfill benches replaced trees
baffle and carefully hauled by burden levelled to backfill and shaped
against stored dump trucks by
noise and bulldozers
dust
After the soils are replaced in their

Coal seams Overburden Dragline proper sequence, they are ripped to
excavation relieve compaction and then cultivated,
limed and fertilised
Source: World Coal Institute
Andes, i.e. Colombia and Venezuela, are assigned increasing use has been made of hydraulic shovels
to earth's late Mesozoic era, i.e. the Cretaceous recently. By contrast, the extraction of several, and
period. more inclined (upward of 15°) seams is by truck and
shovel, with the entire group of seams and waste
Mining techniques layers being worked in horizontal slices (levels). The
Coal deposits can extend to depths of several thou- group of seams is first drilled and blasted and then
sand metres in complex conditions, but can also be worked from top to bottom, separately for waste
flat deposits close to the surface, so that extrac- and seams, the material being loaded onto heavy
tion conditions, too, vary, and the coal must be trucks. Rope and smaller hydraulic shovels as well
extracted selectively from the surrounding strata. as frontend loaders are deployed, occasionally sup-
Depending on the depth of the coal seams and ported by bulldozers.
their overlying layers (waste), the coal is extracted
either in opencast pits or underground mines. A technique hardly ever used in hard coal mining,
by contrast, is the extraction method usual in lig-
The profitability threshold worldwide in the open- nite mining involving bucket wheel excavator, since
cast mining of hard coal is currently an average its deployment requires relatively soft coal and sur-
waste/coal ratio of some 6 – 8 bank cubic metres rounding strata.
(bcm) to 1 t of raw coal for the entire opencast
pit content and its life. The higher the sales pro- Deposits where the above waste/coal ratio of 6 –
ceeds for the coal, the higher the feasible waste/ 8 bcm/t is exceeded are worked in underground
coal ratios. The mining technology employed in mines. Where deposit depth allows, this is done
opencast pit operations depends on the number from the surface by tunnelling using gently sloping
and thickness of the seams and on their inclina- tunnels fitted with conveyor belts. Coal deposits
tion. Minimum thicknesses of 0.5 to 1.0 m are at greater depths, by contrast, are developed by
considered workable. Where the seams worked are shafts, through which the coal is conveyed. In
flat, the waste is crushed or loosened by drilling underground mining, it is now rare for seams of less
and blasting and removed by dragline. The seam than 1.5 m thickness to be worked. Higher-quality
exposed in dragline operations is likewise drilled coking coal is also mined to thicknesses of 1 m in
and blasted and then loaded by shovel or frontend places. Extraction involves either board and pillar
loader onto heavy-duty trucks for transportation. In or longwall mining. In the former case, a continu-
this work, rope shovels are generally deployed, but ous miner is used to drive haulage roads crossing at
97

right angles into the coal seam, with pillars being the Carboniferous period, which are widely distrib-
left standing between them to bear the cover. uted in the northern hemisphere, prove to be rela-
Transportation of the raw coal to the belt conveyors tively easy to prepare, the situation is much more
is often by shuttle cars. One variant of the board difficult in the case of the "Gondwana" coals of the
and pillar method involves conventional drilling southern continents from the Permian period owing
and blasting using frontend loaders to load the coal to the intimate intergrowth of coal with inorganic
onto the belts. In longwalling, by contrast, continu- sedimentary substances.
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
98

Transportation and handling of hard coal

The transportation costs for hard coal – especially They have their absolute limits in:
where purchases are made overseas – have a crucial
share in the end-consumer price, which can account km
for more than half the total costs depending on the Canada 1,100
supplier country. Russia
on average 4,000
In view of the impact of transportation costs on Kuznetsk/Baltic ports 4,500
prices, the efficiency of the coal chain is being con- Yakutia/Far East 2,450
tinuously improved. The chain from mining location
to end consumer consists of the following links: 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
■ Transportation in the exporting country to unit trains of up to 2.5 km in length (200 wagons
the coast and 4 - 6 engines) are powered by diesel or elec-
■ Storage in the exporting port tric engines and have a capacity between 10,000
■ Port handling and, in places, additional – 16,000 t. Where rail links to the coast are non-
transportation to an offshore loading facility existent, the coal can also be taken to the port by
■ Marine transportation truck (Colombia 300 km, Venezuela 80 km). Another
■ Discharge at the port of destination option is shipping by inland waterway, e.g. to the
■ Storage in the importing port US Gulf ports (600 - 2,900 km) or, in Indonesia, to
■ Transportation to the consumer. the deep-water ports/loading points.
Transportation of hard coal to the port of shipment In the port of shipment, the coal is discharged by
is generally by rail. The feasible distances for eco- tippler and moved by belt conveyor and stacker
nomic transportation are limited by cost considera- to stockyards that can take a total volume of up
tions, i.e. the export mines are located relatively to 6 Mt with up to 50 different varieties. Recovery
near the coast. For example, rail distances for is by bucket wheel reclaimer or subsurface extrac-
export coal from the following countries are: tor onto conveyor belts, which take the coal to the
shiploader and, finally, to the ship. For each ship to
km be loaded, there are one or two shiploaders avail-
Colombia 45-210 able with loading capacities of up to 6,000 t/h,
Indonesia* 50-200 so that loading a large freighter hardly ever takes
Australia more than a day. Altogether, there were some 100
New South Wales 80-280 ports of shipment and/or offshore loading facilities
Queensland 132-380 worldwide in 2006 with an annual handling capac-
South Africa 420-590 ity of about 1,200 – 1,300 Mt of coal.
USA
Appalachians 480-1,425 Marine transport of coal is by bulk freighter. The
Powder River Basin 1,690-3,650 entire bulk volume on the world market amounted
China 550-650. to approx. 2,900 Mt in 2006. It can be broken
* inl. shipping only
down as follows:
99

Entire bulk volume on the world market 2006 for delivery in the next three years. Depending on
cargo size, distance to the port of discharge and
Mt %
permissible draught in the ports, three ship sizes
Coal 782 27.2
are deployed to transport the coal, viz.
Steam coal 595
Coking coal 187
■ 10,000 to 50,000 dwt = handysize,
Iron ore 721 25.1
■ 50,000 to 60,000 dwt = panamax and
Cereals 281 9.8
■ 80,000 to 150,000 dwt = capesize
Bauxite 69 2.4
Phosphate 31 1.1
Handysize ships are mainly used for small quanti-
Other 989 34.4
ties (e.g. anthracite, lump coal), short distances,
Total 2,873 100.0
coastal shipping and ports of shipment/destina-
tion with only little draught. However, most coal
For traffic in dry bulk commodities, a freight hold of transportation on the oceans uses panamax and
373 mill. dwt in 6,369 ships was available in 2006. capesize freighters. The first can pass through the
Coal travelled some 4,000 Btonne-miles, equiva- Panama Canal, while the second have to round
lent to an average transport distance per tonne of Cape Horn or the Cape of Good Hope; in the lat-
approx. 5,000 nautical miles. At end-2006, about ter case, this is not entirely true, since the Suez
1,183 bulk carriers had been ordered, scheduled Canal can now be used by smaller capesize ships as
Cost structure of various export countries for steam coal

CIF ARA 2006
USD/t tce
80
Ocean transport
70 Domestic transport/transhipment
Mining costs
60
50
0
40
30
20
10
0
South Africa
Indonesia
Colombia
Australia
Russia
(NSW)
Source: VDKI. Hamburg 2007
100

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.
101

Literature
Baruya, Paul: World Coal supply costs, IEA Clean World Coal Institute: Ecoal, The Newsletter of the
Coal Centre, London 2007. World Coal Institute – various publications, London.
BP Plc: Statistical Review of World Energy 2006, Also, items of information from the international
London 2007. coal press, editions 2005 - 2007
Coal Industry Advisory Board: Coal to Liquids, Australian Coal Report, Sydney, Australia
Workshop Report 2006, Paris 2007
China Coal Report
Energy Information Administration – EIA: Interna-
tional Energy Outlook 2007, Washington 2007. Clarkson Dry Bulk Trade Outlook
Gesamtverband des deutschen Steinkohlenberg- Coal Americas, Knoxville, USA

baus (Central Association of German Hard Coal
Producers): Jahresbericht "Steinkohle 2006", Essen Coal Trans, Epsom/Surrey, UK
2007.
Indonesian Coal & Power, Sydney, Australia
International Energy Agency: Coal Information,
Paris 2007. McCloskey´s Coal Report, Petersfield, UK
International Energy Agency: World Energy Invest- Platts International Coal Report, London, UK
ment Outlook, Paris 2003.
South African Coal Report, Randburg, South Africa
International Energy Agency: World Energy Out-
look 2006, Paris 2006. World Coal, Farnham, UK
Kopal, Christoph: Weltmarkt Steinkohle, Zeitschrift As well as brochures and news of the national
für Energiewirtschaft, Number 1, 2007. umbrella organizations of the coal mining sector
and of coal producers and consumers; talks at coal
National Mining Association: 2006 Coal Producer conferences, in particular Coaltrans conferences
Survey, Washington 2007. and McCloskey coal conferences
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.
102

RWE Power
10/2007
Essen • Cologne
RWE Power AG | World Market for Hard Coal
www.rwe.com
2007 Edition
www.derspringendepunkt.info
RWE Power
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Worl Market For Hard Coal-RWE 2007

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World Market for Hard Coal

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

World Market for Hard Coal

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

rwe broschüre weltmarktsteinkohle uk fin.indd 4 29.11.2007 12:28:39 Uhr

World Market for Hard Coal

Dr. Wolfgang Ritschel

6 Summary 50 Coal-exporting countries

rwe broschüre weltmarktsteinkohle uk fin.indd 5 29.11.2007 12:28:39 Uhr

World energy mix, 2006

Primary energy consumption 16 billion tce Power generation 19 trillion kWh

rwe broschüre weltmarktsteinkohle uk fin.indd 6 29.11.2007 12:28:39 Uhr

World hard coal output and maritime trade, 2006

5.4 Bt hard coal output

World trade (maritime) 782 Mt = 15 %

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

rwe broschüre weltmarktsteinkohle uk fin.indd 7 29.11.2007 12:28:39 Uhr

In the international steam coal trade, the ongoing

Following the growth seen in recent years (1999

However, further expansion in world steam coal

rwe broschüre weltmarktsteinkohle uk fin.indd 8 29.11.2007 12:28:39 Uhr

Markets for hard coal

Definition tice, this study classifies anthracite, bituminous and

Worldwide distribution of hard coal reserves (Bt)

North America 167

rwe broschüre weltmarktsteinkohle uk fin.indd 9 29.11.2007 12:28:39 Uhr

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

Europe 19 2.6 162 3.0 117

rwe broschüre weltmarktsteinkohle uk fin.indd 10 29.11.2007 12:28:39 Uhr

rwe broschüre weltmarktsteinkohle uk fin.indd 11 29.11.2007 12:28:40 Uhr

Hard coal‘s contribution to power generation, 2005

100% 93 92 Hard coal

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

rwe broschüre weltmarktsteinkohle uk fin.indd 12 29.11.2007 12:28:40 Uhr

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

1980 1985 1990 1995 2000 2005 2006

Mineral oil 4.35 4.05 4.48 4.71 5.13 5.79 5.83

Source: BP Statistical Review of World Energy

rwe broschüre weltmarktsteinkohle uk fin.indd 13 29.11.2007 12:28:40 Uhr

rwe broschüre weltmarktsteinkohle uk fin.indd 14 29.11.2007 12:28:40 Uhr

World coal consumption, by region

2004 2010 2015 2020 2025 2030

rwe broschüre weltmarktsteinkohle uk fin.indd 15 29.11.2007 12:28:40 Uhr

rwe broschüre weltmarktsteinkohle uk fin.indd 16 29.11.2007 12:28:40 Uhr

Strategy to limit CO2 emissions from coal-based power generation

2010 2015 < 2020

Horizon 1 Horizon 2 Horizon 3

Source: RWE Power AG

rwe broschüre weltmarktsteinkohle uk fin.indd 17 29.11.2007 12:28:40 Uhr

1.6 CO² emissions in t per MWhel

Source: Central Association of German Hard Coal Producers

rwe broschüre weltmarktsteinkohle uk fin.indd 18 29.11.2007 12:28:41 Uhr

Most important technology options for CO2 capture at power plants

Three technologies 1 Post-combustion CO² capture (steam power plant)

Coal Gas proces- CO² CCGT

Source: RWE Power AG

rwe broschüre weltmarktsteinkohle uk fin.indd 19 29.11.2007 12:28:41 Uhr

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

Underground mine Electricity Oil platform

CO2 storage site

Deep saline aquifers

Source: RWE Power AG

the lowest-cost method, even if specific investment Liquefaction of coal