Polish coking coal output shows signs of recovery

Signs of recovery are emerging in Polish coal output but plans by producer Jastrzebska Spolka Weglowa (JSW) to substantially increase its coking coal output may take some months and are not without challenges.

Poland's overall coal production, comprising coking and thermal, recovered from a slump in June and rose by nearly 3pc from a year earlier and 13pc against the previous month to more than 5.3mn t in July, data from Poland's government statistics office GUS show. But January-July output was still 2.5pc down from the previous year at 36.2mn t.

JSW's output of coal increased in July and August following a weak start to the year. The company maintains its plans to slightly increase its thermal and coking coal output this year to about 15.5mn t from 15mn t in 2018. This is despite output in the first half falling by 11.5pc from a year earlier to just over 7mn t.

Investment to access new deposits at its existing mines will ensure recovery in production in the second half of the year, the company said.

JSW also plans to increase the share of coking coal in its overall coal production. Coking coal accounted for 69pc of JSW's total coal output in the first half, with the company planning to increase this share to over 70pc at the end of this year.

JSW plans to increase the share of coking coal in its Budryk mine to about 60pc in November from just more than 21pc currently. But the plan involves mining at a depth of 1,290m, the deepest mine in Poland. JSW also plans to increase the share of coking coal over thermal coal at some of its other mines next year.

JSW's plans have the potential to ease tight supplies of coking coal in Poland. Lower domestic output this year have forced steel producers to increase imports despite weakening demand for steel. The mining firm declared force majeure following a fatal shaft collapse at its Zofiowka mine in May. Earthquakes in January also caused a collapse at the Polska Grupa Gornicza's Rydlutowy mine and also hit JSW's Knurow-Szczyglowice mine in southern Poland.

Output of coke and steel in the country remained subdued in July. Coke production in July fell by 3.5pc from the previous year to 762,000t, GUS data show. January-July output was 4.5pc lower at 5.3mn t.

Crude steel output in July rose by 2pc from the previous year to 826,000t but remained 7pc down at 5.7mn t for January-July.

JSW is still optimistic about demand from coke plants and steel producers in the second half of this year that may see some relief in their costs because of falling prices of coking coal. The company said it has not received any request from any of its customers to reduce supplies below contracted volumes and expects European steel producers may reconsider earlier plans to scale back output.