WORLD COAL

JULY 2016

JULY 2016 - VOLUME 25 NUMBER 7

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1906 2016

110

Since 1906, Loesche GmbH has been constructing

vertical roller grinding mills. Patented in 1928, the
roller grinding mill technology has been continually
advanced and in the meantime is synonymous with
Loesche GmbH.
From the very start up to the present, nearly 1.000
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The new year 2016 will be a very special one
celebrating 110 years of Loesches innovative
engineering and Loesche mills around the world!

110

VATIVE ENGINEERING

For more information please refer to:

www.loesche.com.

11

Contents

Contents
03 Comment

Stackers & Reclaimers

05 Coal News

24 Economic, Ecological And Safe

For decades, scraper reclaimers have been proving their

sustainability as an economic, ecological and safe way to
manage coal stockpiles at power, steel and cement plants, as
Andreas Markiewicz, SCHADE Lagertechnik GmbH, Germany,
explains.

10 Industry View: Coal After Paris

Debo Adams, IEA Clean Coal Centre.

53 Suppliers Round-Up

Regional Report: Russia

Conveyor Maintenance

12 Is There A Future For The Russian Coal Industry?

29 Centred: The Art Of Conveyor Belt Tracking

Bilan Uzhakhov, Director General of Russian Coal Group,

Russia, reviews the challenges facing the Russian coal industry
and explains what Russian coal companies need to do to
survive.

Paul Harrison, Martin Engineering, USA, provides part one of a

two part series on conveyor belt mistracking, including ways to
identify and combat these misalignments.

Room-And-Pillar Mining

Underground Automation & Control

34 The Power Of Information

17 The Strongest Link

Karol Bartodziej, FAMUR, Poland, details the key factors

behind automation and control system reliability in
underground mines.

Yiwen Sun, Joe Sidhom and Willem Fourie, Joy Global, USA,
outline the importance of employing operational excellence to
optimise underground haulage systems.

39 Lowering The Cost Of Low-Seam Mining

Uli Lange, Eickhoff Germany, and Francois van Tonder and

WernerMarx, Eickhoff South Africa, illustrate the correlation
between room-and-pillar production costs and seam heights
and explain what OEMs can do to support low-seam mining
operators.

General Interest
43 Thinking Outside The Box

Harold A. Walker and Donna F. Walker, PICOR, USA, illustrate

how modern coal ports can advance shiploading and eliminate
port pollution.

47 Clean, Green and Pristine

Robin Eves, Clean Coal Technologies Inc., USA, introduces a

new clean coal technology that intends to enable coal to provide
an economical and environmentally cleaner energy bridge to
the future.

This month's

front cover

Mining equipment and services provider, Joy Global, is focused on helping its
customers do more with less, and has new products and services, including its
fully integrated JoySmart Solutions, to help customers work smarter. See the
latest on 26 28 September at MINExpo 2016.
For more information: www.joyglobalminexpo16.com.

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Comment

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S
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o it happened. On 23 July, the UK voted to leave the EU by a margin of

52% to 48%. The result has thrown the UKs usually staid politics into
disarray; discussions of that, however, I will leave to mainstream and social
media. But here are a few thoughts on what a Brexit vote might mean for the
coal industry.
The short answer is: not a lot. As Nick Butler, Visiting Professor and Chair of
the Kings Policy Institute at Kings College London wrote recently in the
FinancialTimes: At one level, the UKs exit from the EU should have very little
impact on the energy business. The price of oil, gas and coal is set by
international markets, not by the institutions in Brussels. Indeed, other factors
will have a much greater impact on the coal market from Chinese cuts to its
coal capacity to the global (over)supply of natural gas. And then, of course, there
is a certain US presidential election coming up in November.
In the UK itself, it is true that old coal-fired plants have closed as a result of
EU regulation. But some of the policies that have most damaged the UKs
coal-fired power sector have been homegrown. The UKs carbon tax, for
example, significantly damaged the economics of coal plants. Similarly the
much-publicised promise to close all coal-fired power plants within the decade
was a British government decision, as was the withdrawal of funding for carbon
capture and storage research.
Indeed, as Professor Butler puts it, UK energy policy has been shaped more
by the emotional attachments of individual leaders to particular forms of
energy and their hostility to others than any diktat from Brussels. We will
therefore need to wait until the Conservative Party elects its new leader (and the
countrys next Prime Minister) until the shape of the UKs energy policy
becomes clearer. Even so, it would be a surprise indeed if coal saw any
renaissance.
Staying with the EU for a moment and more interestingly for the coal
industry (although much less widely publicised) Germany has reportedly
abandoned plans to set a timetable to end coal-fired power production. Germany
had previously said it would phase out coal well before 2050 in order to help
meet its climate goals. More protests at the countrys lignite mines and power
plants seem likely especially as domestic lignite mining is only due to end
around 2045, while hard coal mining will be done by 2018.
Ultimately, however, the coal industry will be impacted more by decisions
made in Beijing, New Delhi and the capitals of ASEAN countries than those
made in London, Brussels or Berlin. And there are signs of a slight improvement:
BMI Research recently raised its average price forecast for thermal coal to 2020
on the back of aggressive cuts to supply particularly in China.
Moreover, last month saw positive news from a major mining company after
months of divestments. BHP Billiton announced that it would be increasing both
its thermal and metallurgical coal production over the next few years to take
advantage of its low position on the cost curve (see Coal News, p. 6). Making the
announcement, BHPs President Operations Minerals Australia, Mike Henry,
presented a bullish case for coal: The developing world needs steel; steel needs
coking coal, he said. Meanwhile, on thermal coal, the company was confident
that base demand in emerging economies will remain resilient for decades to
come. After four-years of slowdown and barring any further exogenous
shocks there may be signs of life in Old King Coal.

Banpus Achievements on Commitment to Sustainability

to Become a World-class Organization

BANPU The Asian Face of Energy

www.banpu.com

Thriving as Sustainability Leader

Banpu is recognized as the sustainability
leader in the Coal and Consumable Fuels
Sector, winning the prestigious Industry
Leader and Gold Class Sustainability awards
for two consecutive years (2015 and 2016),
as well as the Industry Mover 2016 award
by RobecoSAM, an assessment company
in charge of the Dow Jones Sustainability
Indices (DJSI).

Attaining International Acceptance

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in the Energy Sector of the Emerging Market
Index for two consecutive years
(2014 - 2015).

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Coal News

Coal News
INTERNATIONAL GE goes all in on coal with the launch of Digital Power Plant for Steam

edia reports often characterise

coal and coal-fired power as a
technology of the past: a dirty baseload
power source that has no place in todays
cleaner, greener and ultra-flexible power
mix. But one company is challenging that
perception and helping to bring coal very
much into the twenty-first century.
That company is GE. World Coal first
reported on what GE was doing in the
coal-fired power space back in April, when
the company announced it was acquiring
NeuCo a supplier of plant optimisation
technologies to the coal power industry.
But GE is now going further with the
launch of the Digital Power Plant for Steam
at its Minds + Machines event in Paris.
Digital Power Plant for Steam is a suite
of technologies that offers coal-fired power
plants the opportunity to improve
performance and efficiency, reducing
greenhouse gas emissions along the way. It
follows on the footsteps of similar
solutions for the wind and gas power
industries but as Scott Bolick told
WorldCoal in a recent interview, coal
throws up its own unique challenges and
opportunities.

The coal challenge

Firstly, the average efficiency of coal-fired

power plants around the world is just 33%,
which is not helped by the relatively old
age of the existing fleet: 50% of coal-fired
power plants in Europe, for example, are
over 25 yrs old. Coal-fired power plants are
also increasingly being asked to operate
flexibly to work around more intermittent
renewables energy sources not something
that they were originally designed to do.
And of course there is the challenge of
emissions and climate change regulations
particularly after the COP21 Paris
Agreement.
GEs Digital Power Plant for Steam
helps to tackle these challenges both in

new plants and as a retrofit on almost all

existing plants commissioned in the past
25yrs, including non-GE and legacy
Alstom plants. It represents GE going all
in on coal-fired power efficiency, said
Bolick. For example, Digital Power Plant
for Steam is able to contribute 1.5
percentage points of efficiency over the life
of the plant, helping to maintain peak
efficiency for longer periods of time. This
reduces coal consumption (reducing costs)
and carbon emissions.

Digital Power Plant for Steam

So what exactly does Digital Power Plant
for Steam offer coal-fired power plant
operators? According to Bolick, it can be
broken down into the following major
applications:

nn Asset Performance Management for

the Digital Steam Plant: monitors
equipment health, informing
operations decisions and helping to
reduce unplanned downtime and
extend plant life.
nn Operations Opimisation for the Digital
Steam Plant: provides customers with
plant and fleet-wide visibility of the
impact of operations decisions on
efficiency, emissions, capacity and
production costs. This includes:
Boiler optimisation.
Coal analysis.
Smart start.
nn Business Optimisation for the
Digital Steam Plant: this aggregates
information, such as fuel and power
price, demand and plant capacity, to
enable energy traders to make better
buying and selling decision.

Case study: Owensboro

Municipal Utilities

An example of what can be achieved by

GEs Digital Steam Plant system comes

from the town of Owensboro, Kentucky.

Owensboro Municipal Utilities (OMU) has
been running the boiler optimisation
software, also know as BoilerOpt, at its
Elmer Smith coal-fired power plant since
2005 2006. GE acquired BoilerOpt with its
acquisition of NeuCo earlier this year and it
now forms a part of the Digital Steam Plant
offering.
The optimisation software allowed
OMU to reduce its NOX formation by
1015% before any post-combustion
control systems were added, explained
Kevin Frizzell, Director of Power
Production at OMU to World Coal. But it
also provided a benefit after the NOX
control systems started to impact steam
temperatures in the plants boilers.
BoilerOpt allowed OMU to balance the
need to manage NOX formation with the
need to maintain steam temperature to
hit the sweet spot, as Frizzell put it
something that human operators would
have found much more difficult.

Setting the platform

Returning to the big picture: coal is set to

remain the worlds second largest energy
source through to 2030 and an even more
critical power source for emerging
economies. Yet the operating environment
that coal faces is in almost constant flux at
present as renewables disrupt the
traditional model of baseload power and
regulations make it tougher to operate
coal-fired plant.
In that environment, innovation is key.
As Ganesh Bell, Chief Digital Officer at GE
Power said recently, the only way to meet
the current challenges is by applying data
science and intelligent software-defined
automation to every aspect of the electricity
value chain. Digital Power Plant for Steam
marks another big step on that journey.

Read the full article: bit.ly/29pZmdd

July 2016 | World Coal | 5

Coal News

Coal News
DIARY DATES
Coaltrans Australia
25 26 August 2016
Sydney, Australia
www.coaltrans.com/australia
11th ECCRIA
5 9 September 2016
Sheffield, UK
www.maggichurchouseevents.co.uk/crf
Mining Strategic Excellence: South America
6 7 September 2016
Santiago, Chile
www.metalbulletin.com/events/miningsa
Electra Mining Africa 2016
12 16 September 2016
Johannesburg, South Africa
www.electramining.co.za
Coal Marketing Days Conference
20 21 September 2016
Pittsburgh, USA
www.platts.com/events
MINExpo 2016
26 28 September 2016
Las Vegas, USA
www.minexpo.com
Coaltrans Japan
29 30 September 2016
Tokyo, Japan
www.coaltrans.com/japan
Coal Power Asia Conference
3 5 October 2016
Kuala Lumpur, Malaysia
www.coalpowerasia.com
World Coal Leaders Network
16 18 October 2016
Lisbon, Portugal
www.coaltrans.com/world-coal-conference
World Mining Congress
18 21 October 2016
Rio de Janeiro, Brazil
www.wmc2016.org.br
IMARC
7 11 November 2016
Melbourne, Australia
imarcmelbourne.com
COAL-GEN 2016
13 15 December 2016
Orlando, USA
www.coal-gen.com

6 | World Coal | July 2016

INTERNATIONAL BHP to take advantage of low-cost position

HP Billiton is to increase its coal

volumes to the 2018 financial year by
5million t or 8% according to a recent
presentation by its President Operations
Minerals Australia, Mike Henry, as the
company exploits its low-cost assets.
Even in todays difficult environment, all
of our operations remain cash positive, said
Henry. The company has delivered over
US$3billion of productivity gains since 2012
and is targeting another US$600million by
the end of FY2017.
The company also remained positive on
the continued need for both its metallurgical
and thermal coal. The developing world
needs steel; steel needs coking coal, said
Henry. We have the strongest resource
position in the seaborne market.

Meanwhile, despite greater uncertainty in

the outlook for thermal coal, the company
was confident that base demand in
emerging economies will remain resilient for
decades to come, Henry added. Our
higher-quality coals position us well in an
increasingly carbon-constrained world.
On the back of this positive outlook, the
company will increase its coal production in
both Queensland and New South Wales.
In Queensland, where the companys
metallurgical coal assets are located, the
company is aiming to increase production
from 42.5 million t in FY2016 to 46 million t in
FY2018. Meanwhile, thermal coal production
in New South Wales will jump from
17million t in FY2016 to 21 million t in
FY2018.

INTERNATIONAL Rio Tinto restructures (again)

nder Rio Tintos new CEO,

Jean-Sbastien Jacques, changes
have been made to the mining giants
organisational structure. Jacques has
indicated the company is performing
remarkably well and it is committed to
balance sheet strength.
Focus on shareholder returns will not
change, but we are strengthening our
structure and delivery by placing our assets
at the heart of the business to drive
improved performance, saidd Jacques.
As of 2 July 2016, Rio Tintos product
group structure will be reduced to four
product groups: Aluminium, Copper &
Diamonds, Energy & Minerals and
IronOre. A newly shaped
Growth&Innovation group has also been
created to focus on future assets and
technical support.
Under the new structure, aluminium
will retain its focus on safety, cash and
value creation from its high-quality
bauxite, alumina and aluminium
businesses. Iron Ore will be exclusively

focused on the groups well-established

iron ore operations in Western Australia.
Copper & Diamonds will combine two
businesses into a single product group,
which the company has indicated will help
it maximise its technical underground
mining expertise.
The Energy & Minerals division will
combine Rio Tintos coal, uranium, salt,
borates and titanium dioxide businesses,
as well as the Iron Ore Co. of Canada.
This has led to speculation among
analysts that the company could be
preparing to spin off these assets.
According to Sanford C. Bernstein, as
reported by Bloomberg, the restructure
and apparent combining of unwanted
assets into the new Energy & Minerals
product group could signal the initial steps
towards a spin off. It highlighted the
parallels to BHPBillitons actions last year,
when BHPs unwanted coal, aluminium,
nickel, magnesium, silver, lead and zinc
assets were combined and spun off to form
South32.

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Coal News

Coal News
INTERNATIONAL Coal exploration and mine development news

term is for 5 months, with a production

target of 70 000 tph.

Tanzania

Australia

Canada

Cockatoo Coal

Atrum Coal

Feasibility work on the Mbeya

coaltopower project (MCPP) has now
advanced to a level where Kibo can
commence the formal EPC-bid process
for both the Mbeya power plant and the
Mbeya coal mine. On 31 May 2016, the
company met with SEPCO III to start the
EPC-bid process for the Mbeya power
plant in accordance with the provisions
ofthe joint development agreement in
place between Kibo and SEPCO III.
TheEPC bid process for the Mbeya
coalmine is also well under way and
thecompany is set to receive thefirst
EPCbudget quotations from the
eightbidders that have expressed an
interest tobid for the mine EPC and
mining contract.

round-up of news from coal

projects around the world.

The Queensland state government has

granted an additional mining lease for
Cockatoo Coals Baralaba North mine.
The lease covers an area of 1446 ha. and
has been granted for a 25 year term. The
new lease extends the life of the Baralaba
North mine and in conjunction with the
environmental authority approved in
February will allow Cockatoo to
continue to produce ROM coal at a rate of
up to 4.1 million tpy. Cockatoo now
expects to complete an updated reserve
update over the new lease and two other
lease areas associated with the
BaralabaNorth mine as part of the
development of new mine plans for the
restart of the mine.

JOGMEC

Mitsui Matsushima is to form a joint

venture with Japan Oil, Gas and Metals
National Corp. (JOGMEC) to fund
exploration of the Eastern Coal project in
the southern part of the Bowen Basin in
southeast Queensland. Under the
agreement, JOGMEC will earn up to
42.1% of Mitsui Matsushimas 41.7%
stake in the Eastern Coal project.

Stanmore Coal

Stanmore Coal Ltd has reported that it

has awarded a contract to UGM Highwall
Mining Pty Ltd to commence highwall
mining operations at Isaac Plains. The
contract is for the extraction of over
300000 t of low cost ROM coal. This coal
will be extracted at approximately 20%
lower FOB than the existing opencast and
will be supplied to Asia. The contract
8 | World Coal | July 2016

Atrum Coal is finalising an updated

pre-feasibility study (PFS) for its
Groundhog North anthracite project in
British Columbia. Under the new
development plan, the company will
begin with a smaller starter
underground mine, in the so-called
Western Domain of the Groundhog
North Complex, with production of up to
880000tpy of ultra-high-grade
anthracite. The updated PFS will then
include subsequent development stages
for larger underground operations.
Additionally, following the granting of a
Bulk Sample Permit in early May, Atrum
is now preparing for site operations to
extract bulk samples of anthracite at the
Groundhog project to supply to potential
customers, primarily in Japan and
SouthKorea.

Jameson Resources

The pre-application phase of the

environmental assessment (EA) process
for the Crown Mountain metallurgical
coal project in the Elk Valley coalfield of
British Columbia is nearing completion.
Two key documents have been completed
in draft form: the valued components
(VC) document and the AIR. The VC
document identifies environmental and
human environment components that
will be assessed during the EA process.
The AIR specifies the information that is
required for the application for an EA
certificate. The VC document is open for
public comment. Following this, the
company will finalise the VC document
and produce a final AIR.

Kibo Mining

USA
Paringa Resources

The CAPEX estimate for the construction

and development of the 1.8milliontpy
Buck Creek No.2 mine has been
finalised.The estimate, based on pricing
provided by vendors and contractors, has
been reduced by US$5million from
US$44million to US$39million due to
continued reductions in the costs of
labour,materials and supplies, as well as
the optimisation of the facilitys design.
This estimate encompasses all major
capital items, including site development,
electrical substation, box-cut access to the
coal seam, surface facilities, coal
preparation plant, materials handling
andthe Green River barge load-out
facility.The final CAPEX estimate will
beincorporated into the bankable
feasibility study, which is due later
thisyear.

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Industry View

Industry View
COAL AFTER PARIS Debo Adams, IEA Clean Coal Centre

he December 2015 Paris

Agreement aims to hold the
average global temperature increase to
well below 2C and to pursue efforts to
limit the global temperature increase
to 1.5C. Greenhouse gas (GHG)
emissions should peak as soon as
possible and then reduce rapidly after
peaking, to reach a balance between
GHG sources and sinks by the second
half of this century. It also says that
finance flows should be consistent with
a pathway to low-emissions of GHG.
A technologymechanism has been
introduced to strengthen cooperative
action on technology development
and transfer, as it is recognised that
accelerating, encouraging and enabling
innovation is critical. The importance
of capacity building for developing
countries was also identified to
facilitate technology development,
dissemination and deployment,
as well as the timely and accurate
communication of information among
other aims.
So this was an encouraging result.
There is a target agreed by 195 countries
and mechanisms established to
encourage the transfer of technology and
finance to poorer parts of the world.
Many of the emerging economies do not
have reliable access to electricity, but do
have substantial coal resources or access
to cheap coal.
Thus regardless of the aims agreed in
Paris, the IEA expects that 44% of energy
needs will still be met by fossil fuels in
2050. This means that high-efficiency,
low-emissions (HELE) technologies and
carbon capture and storage (CCS) are
vital if the Paris ambitions are to be
realised. The mechanisms agreed in
Paris are important as it is in Asia
mainly that most coal developments will
take place.
10 | World Coal | July 2016

Currently, ultra-supercritical (USC)

coal power plants emit almost 20% less
CO2 per unit output than
traditionalsubcriticalones.
Developmentsinadvanced
ultrasupercritical (AUSC) plants mean
that a plant operating at 51% efficiency
(net LHV basis)wouldemit up to 28%
less CO2 than a subcritical plant. In
1993, the first USC unit was installed in
Japan. All units built there are
subsequently also USC and operate at
about 45% efficiency. Japan has a
technology roadmap to 2030 to increase
the efficiency of coal-fired plants and
develop carbon capture. They also aim
to build an AUSC plant.
In 2006, the first USC unit was
commissioned in China. By 2017, USC
capacity in China will be over
208000MWe, with efficiencies of up to
46 47%. USC units operate in more
than ten countries, including China,
Germany, India, Japan, Korea and the
US, and the first units are under
construction in Malaysia (2015) and
Taiwan (2016). There are further
coal-based transformational
technologiesunder development,
including the integration of
gasificationbased units with fuel cells,
chemical looping combustion and
various cycles that use supercritical CO2
as a working fluid to drive a gas turbine
to achieve very high efficiencies with
lower capital costs.
In China in 2014, 67% of total power
generated was supplied by coal. The policy
of closing small old inefficient coal-fired
power plants and replacing them with large
efficient ones is significantly improving the
average efficiency of coal use. At the same
time, China is diversifying its fuel mix to
include significant quantities of wind, solar
and hydropower, with a rise in nuclear
power.

Coal consumption and coal imports to

India will continue to grow, as will its
demand for energy. India has a national
programme for AUSC plant, with a target
efficiency of 49% (LHV). There is a huge
market in India for clean coal
technologies (CCT). But extensive
research is required to match CCT to
Indian coal, which typically has a high
ash content.
In the EU, coal will remain important
for the foreseeable future. Currently, coal
supplies more than 26% of electricity
generated and is on a par with nuclear
and renewables.
Although coal power may well
decline further in the US, it will continue
to be the second largest user of coal after
China. There is a substantial clean coal
R&D programme underway in the US
with some focus on developing AUSC
plant and establishing CCS. The US is
funding an advanced combustion
programme and investing in
pressurisedoxy-combustion research
forcarbon capture as part of a drive to
establish second generation coal
basedCCS schemes with lower
efficiencies penalties and reduced
capital costs.
Coal will continue to make a vital
contribution to the energy mix until 2050
at least, across most of the world. Any
growth in coal use is not consistent with
current climate policies, unless HELE
technologies and CCS are included. The
IEA Clean Coal Centre has an important
role to play in analysing and
disseminating information and
knowledge on these practical ways to
improve efficiency and reduce emissions
from fossil fuel-fired plants.

Author

Debo Adams is Communications Manager at

the IEA Clean Coal Centre.

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Is there
a future
for the
Russian
coal
industry?
Bilan Uzhakhov, Director General of
Russian Coal Group, Russia, reviews
the challenges facing the Russian coal
industry and explains what Russian coal
companies need to do to survive.

ccording to the Russian Prime Minister,

Dmitri Medvedev, Russias coal exports in
2016 are forecast to remain level with the
previous year and can be described as rather
good results considering the current climate. Actually,
the current state of the Russian coal industry is far from
being favourable. Is there a future for Russian coal miners
and what can the government do to support the industry?
Russia ranks sixth in the world when it comes to
total coal output. In 2015, coal in Russia was mined by
192 companies: 121 opencast mining operations and 71
underground operations. In 1Q16, 95.7million t of coal
was mined in Russia with thermal coal occupying a
substantial share in the total output.
At first glance, the state of the Russian coal mining
industry does not seem to be dismal: in 2015 coal

12 | World Coal | July 2016

Russian Coal Co.'s Pereyaslovskiy coal mine.

July 2016 | World Coal | 13

extremely low global prices make

the domestic market attractive for
selling thermal coal. And the
competition in that market will get
fiercer.
The domestic market is, however,
faced with a significant problem in
the form of the rates charged by
Russian Railways. These rates result
in all potential profits often being
used to cover logistical expenses. As
a result, transportation costs have
decreased profit on some coal
deliveries to almost nothing. It
appears that the domestic sales
market of Russian coal is now fully
dependent on railway rates.

Export: devaluation as
respite

Russian coal output (million t).

Russian coal production by type.

production increased by 4% to reach
373 million t, while consumption
growth hit 2%. However, the
Russian coal industry is facing a
number of problems and risks both
in the domestic market and relating
to exports.

Domestic consumption:
gas and Kazakh imports
are coming

Russian coal miners admit that 2015

was successful in the domestic
market due to low water levels in

14 | World Coal | July 2016

the hydraulic power systems of

Siberia and the Far East. This
resulted in the load being shifted
from hydropower plants to steam
plants, including coal-steam plants.
But this year is unlikely to bring
such good luck. The programme of
Siberia gasification is being
implemented as planned. With low
gas prices, it will develop more
quickly. Another stumbling block for
coal miners will be an increase in
cheap coal imports from
Kazakhstan. However, todays

Coal is Russias fifth largest basic

export product. When it comes to
coal exports, Russia ranks third in
the world after Indonesia and
Australia. In 2015, the export
proceeds totalled US$9.5 billion and
in 1Q16 they stood at US$1.9billion.
Russian coal mining companies
would prefer to export coal rather
than deliver it to the domestic
market from the standpoint of cost
effectiveness. In 2015, the volume of
exports was 155million t, or 40% of
the total coal output in Russia. The
countys export volume has
constantly increased starting from
the postSoviet era, when global coal
prices began to increase. Between
2007 and 2009, the world coal
market witnessed a decrease in
prices that then gave way to the
price increase recorded until 2012.
From 2012 to the present day, the
global fall in prices have been
balanced by a rise in the strength of
the dollar against the rouble. The
devaluation of the rouble supported
exports and offered some
advantages to Russian coal in the
world market.
In addition to low prices, the
reduction in coal consumption by
many countries for environmental
reasons is still the major stumbling
block for export. For example, in
2015, Russian coal deliveries to
China decreased by 11 million t. In
spite of this, China is still one of the

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Russian thermal coal ouput in 2015 (million t): top five producers.
primary export markets for Russian
coal.
In 2015, the main export areas for
Russian Coal Group included
Poland, South Korea, Japan, China,
Bulgaria and the Baltics. The
companys exports can be divided
into Europe (51% of export) and
Asia and Pacific countries (49%).
Deliveries to China are still treated
as one of the priority export areas
and are carried out via traders, as
well as directly through overland
borders. Russian Coal Group treats
Poland as another top priority
foreign sales market, as local
production falls due to the high
costs of mining.

Reduced investment a
stumbling block

Investment in the Russian coal

sector will not exceed RUB 52 billion
this year, a fall on previous years,
representing one of the major
threats to the industry. At the
current rate of exchange, it is less
than US$1 billion. For comparison,
in 2013, investments in the Russian
coal industry totalled around
US$2billion. The consequences of
this reduced investment will make
themselves felt not only in 2016 but
also in 2017 2018. The investment
reserve created in 2013 2014 is
now used to maintain current
production levels.
In the opinion of the author,
further reduction in investments is
impossible because that would pose
a threat to the existence of the
industry itself. Lack of
manufacturing investments will
result in an increase in production

16 | World Coal | July 2016

cost. Coal producers have low

profitability and the lack of
investment will only make these
profitability figures worse.
In 2015, Russian Coal Groups
investments totalled around
RUB1.5billion. In 2016, depending
on the market situation, the
company plans to invest another
RUB 1.5 billion. This level of
investment is necessary in order to
support its existing facilities,
namely seven companies in the
Amur region, the Republic of
Khakassia and the Krasnoyarsk
Territory that employ over 4000
miners.

Best savers to survive

Today, most Russian coal producers

suffer losses. Over recent years, the
companies costs have increased
dramatically, while export prices are
now at the level of the years
20032004. If the dollar stands at
less than RUB 70, all the positive
impact of the 2015 devaluation will
be lost. It will be the major
stumbling block for business
efficiency of domestic coal
producers, whose costs continue to
increase. After all, considering the
devaluation, to upgrade
equipment,60% of which consists
ofimported equipment,
companieswill have to pay a much
higher price.
The list of survivors of the
current severe conditions can
onlyinclude those coal companies
that:
nn Are not afraid of carrying out
restructuring by getting rid of

non-performing assets with high

operating costs.
nn Continuously optimise costs.
Todays market conditions are
forcing coal miners to cut down
on everything. Many companies
are not adapted to such a state of
things.
nn Regularly improve the efficiency
of production and management
processes.
Optimising business processes
and increasing labour productivity
are now of vital importance.

What can the Russian

government do?

What can the Russian government do

in order to support the coal industry?
To begin with, it can support the
development and deployment of
advanced coal processing
technologies, which can contribute to
making applications of coal more
diverse. Developing those
technologies is not possible without
government support. Taking such
technologies to the level of pilot
production entails high levels of
investment that are currently not
available to the business. The
payback period is the key to the
future.
In any event, the future of the
Russian economy is closely
associated with coal mining: the coal
industry now employs 148 000
Russians and another 500 000
Russians are employed in related
sectors. Coal companies are crucial
enterprises in 31 Russian industrial
towns that have the total population
of 1.5million people.

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