40 years ago, Polish coal market accounted for 1/5 of total global coal trade. Since then, Polish mining industry went trough numerous restructuring processes, which in the end resulted with total marginalization of Polish coal on the international scale. First problems started, when coal producers had to face new market reality after 1989. Second wave of troubles came right after joining the EU in 2004, when Polish mines lost its protective umbrella and had to compete with foreign coal, flooding the Polish market from various directions. Today, Polish coal market is struggling with number of issues still to be solved. Every now and then another government is announcing its programme for healing the sector, but in the end they find out that it is best to just let things happen.

Polish coal market consists of three key groups of participants. On one side there are coal producers, both state-owned companies and private ones. On the far end, there are coal consumers, greater in number and dispersed, and also in large majority state-owned. Somewhere in between there are coal traders, trying to find their place on the market between mining sector and energy and other coal consuming industries.

In contrast to main international coal markets in the Atlantic region, Polish coal and energy sector is under a great pressure of their state owner. Some experts reckon that without the “leash” from Ministry of Treasury Polish coal sector would have a chance to compete with other key international coal markets and maybe reclaim to a certain extent some of the lost share in the global market. However, current political situation does not seem likely for the authorities to take such actions in the following years.

Today, Poland is still the largest hard coal producer in whole European Union, second in Europe (with Russia taking first place) and tenth in the world. Although Polish coal production succeeded to maintain at a high, stable level despite the aggressive EU decarbonization policy, undermining coal producers both in legal and financial dimension. Paradoxically, all EU efforts in decreasing carbon emissions and general use of coal as a fuel did not had such a harmful effect on Polish coal mining industry as… Polish coal mining industry itself. Partially thanks to the irresponsible actions and reckless decisions taken by the owner (Ministry of Treasury), but mainly due to the weak sales policies, bad forecasting and in general poor management, Polish mines driven themselves to a helix of overproduction, extremely high costs and on the other end tremendously low prices, followed by price dumping wars between the domestic producers.

Variety of coal offered by the Polish mines to the market is considered as unsuitable for some consumers: in 2012 average prices of domestic coal were lower than the prices of import, and yet the market imported 8.2 million tonnes, leaving producers with 5.8 million tonnes of coal stocked on the piles. Maintaining competitiveness of prices of domestic coal is also very costly for the producers, since production in Poland is approximately 40 USD/t more expensive than in Russia or US. The numbers are even higher when compared with other Pacific and Atlantic markets: production of one tonne of Polish coal is twice more expensive than production in Australia and three times more expensive than production in Columbia or Indonesia.

Following topics in INSIGHTS series:

Polish coal production (resource base, historical overview, producers profiles)

Domestic coal consumers

Polish coal import, export and local trade