Poland digs deep to make a case for coal

Acouple of years ago, coal miners in the Silesia region of Poland staged a sit-in on the roof of their mine, protesting against lay-offs and pit closures that had shrunk a once prestigious industry to less than a quarter its old size. But now the three leading coal companies are showing profits, technical schools are training the first apprentice miners in years, and the industry is bullish on the future. That optimism has been boosted by fears over gas supplies, which has made coal appear a more secure source of energy.

"The future looks very good for coal because gas is imported, unfortunately from the east, and the technology of converting coal to electricity is more and more modern," says Andrzej Barczak, a coal industry specialist at the Katowice Economic Academy. However, there are growing worries that the global coal price boom is ending and that Poland has missed a chance to reform and privatise its mines.

After the collapse of communism in 1989, the government, with substantial help from the World Bank, embarked on a programme to cut the size of the mining sector. The number of working pits was slashed from about 80 to about 30 - a restructuring that cost more than 4bn zlotys (E984m).

The international boom in coal prices of the past two years, fuelled in part by demand from China, helped turn the balance sheets of the remaining Polish mines from red to black and halted talks of further cuts. Kompania Weglowa - the largest coal producer in Europe with 17 mines, 70,000 employees and about 55m tonnes of coal production a year - expects a profit of 102m zlotys this year. However, that is down from 283m zlotys in profits a year earlier. Other coal miners have shown similar drops in profit as the world coal price has declined. "Interest in Polish coal is increasing, especially in Europe. France and Germany have easy access to a large source of energy close to their borders," says Zbigniew Madej, spokesman for Kompania Weglowa.

The problem for Polish mines is that they are not just competing against Russian natural gas. There are also low-cost coal producers such as South Africa, Australia and the US. The World Bank feels the most likely long-term future for the Polish industry is as a supplier to local industry. But Poland's coal mines probably still need production trimmed by 10m-15m tonnes, or about 20 per cent of the total.

Source: www.ftd.de