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www.coalimp.org.uk
British andEuropean Importsof Russian Coal
Nigel YaxleyManaging [email protected]
Coaltrans Moscow18th June 2007
Slide 2
British and EuropeanImports of Russian Coal:Current and Future Market TrendsUK in a European Context Import Trends
Port Infrastructure
UK Generation Demand Drivers Future Burn Scenarios LCPD Issues
Issues for Russian Coal in the UK European Opportunities SWOT Summary
2
Coaltrans Moscow18th June 2007
Slide 3
UK dominates Europeanimports from Russia
Source – MCIS 2006*IEA 2005 Data
0
5
10
15
20
25
30
35
40
45
Mill
ion
Ton
nes
(Ste
amC
oal)
UK
German
y
Finlan
d
Spain
Polan
d*
Slov
akia*
Denm
ark
Roman
ia*
Netherlan
ds*
Italy
Belgium
*
Fran
ce
Greec
e*
Swed
en*
Hung
ary*
Bulgaria**
Russia Others
Coaltrans Moscow18th June 2007
Slide 4
UK imports have growndramatically…
0
10
20
30
40
50
60
70
80
90
100
Mil
lion
To
nn
es
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Steam Coal Demand UK ProductionSource – Dti
3
Coaltrans Moscow18th June 2007
Slide 5
…and in 2006 Russianimports exceeded UK supply
Russia South Africa ColombiaIndonesia Poland USAOthers
USA
CanadaOthers
Australia
Steam Coal(42.8 Mt)
Coking Coal(6.9 Mt)
* Source - MCIS
NB Pie charts toscale by area
Coaltrans Moscow18th June 2007
Slide 6
Many UK ports were usedin 2006…
Immingham12,529,273
Clydeport5,789,827
Avonmouth5,707,707
Tees5,238,527
Medw ay3,779,820
Liverpool2,954,691
Hull2,407,790
London1,990,969
Port Talbot1,713,452
Tyne1,345,269
Leith1,304,834
New port1,169,870
Others2,222,789
Source – HMRC
4
Coaltrans Moscow18th June 2007
Slide 7
…with Russian importsthe most widely spread
Immingham3,654,019
Avonmouth3,543,782
Liverpool2,382,175
Hull2,360,543
Clydeport1,818,514
Medway1,741,698
London1,737,834
Leith1,304,834
Tyne1,164,140
Newport1,125,749
Rosyth909,209
Belfast31,065
Port Talbot32,753
W arrenpoint22,562
Tees142,369
Grangemouth140,956
Blyth229,551
Unknown364,466
Source – HMRC
Coaltrans Moscow18th June 2007
Slide 8
Ports all around the UKreceived Russian shipments
Source – EWS Energy/HMRC
Immingham
Hull
London
MedwayAvonmouth
Liverpoo l
Clydeport
Leith
TyneBlyth
Newport
Rosyth
Tees
Grangemouth
NB Arrows to Scale
5
Coaltrans Moscow18th June 2007
Slide 9
UK generation demandhas several drivers Available capacity
New build/plant closuresOver 11 GW new coal plant planned
Prices Spark Spread vs Dark Spread (Clean) Seasonality
Large Combustion Plants Directive (LCPD)Operating regime for opted-out plant Progress with FGD installation
EU Emissions Trading Scheme
Coaltrans Moscow18th June 2007
Slide 10
Scenarios vary widely forfuture UK coal burn…
0
10
20
30
40
50
60
70
2010-12 2015-16 2020-21 2024-25
Mil
lio
nT
on
ne
s
White PaperMeasures
BaselineLow
Medium
High
Coal Forum Future Generation Sub-GroupEnergy White Paper Projections
Zero
6
Coaltrans Moscow18th June 2007
Slide 11
…and UK supply and demandscenarios cover a wide range
0
10
20
30
40
50
60
70
80
2006-7 2010-12 2015-16 2020-21 2024-25
Million
Tonnes
(All
Mark
ets
)
Low
Medium
High
Total UK Demand ScenariosRange of Supply Scenarios)
High
Low
Zero
Coaltrans Moscow18th June 2007
Slide 12
Purchase Options are Limitedby the LCPD
New SOx and NOx limits from 1 January 2008at opted-in plants FGD plants will tolerate a range of sulphurs But NOx becomes a bigger issue
Opted-out plants run for 20,000 hours from1/1/08 – must close by 31/12/15 Equates to 28.5% load factor spread over whole
period
IPPC plant limits will also apply Further tightening of NOx limits post 2015
May require Selective Catalytic Reduction (SCR)
7
Coaltrans Moscow18th June 2007
Slide 13
Over 70% of plant is optedin to the LCPD…
Source – EWS Energy/HMRC
Kilroot(Northern Ireland)
Opted-in – 20.6 GW
Opted-out – 8.2 GW
Coaltrans Moscow18th June 2007
Slide 14
…and over 11 GW new coalplant is proposed
Source – EWS Energy/HMRC
Kilroot(Northern Ireland)
Opted-in – 20.6 GW
Opted-out – 8.2 GW
New – up to 11.4 GW
8
Coaltrans Moscow18th June 2007
Slide 15
20.6 GW of plant is opted into the LCPD…
Station Operator Capacity (GW)Aberthaw RWE npower 1.5Cottam EDF Energy 2.0Drax Drax Power 3.9Eggborough British Energy 2.0Ferrybridge (stack 1) SSE 1.0Fiddlers Ferry SSE 2.0Kilroot AES Kilroot 0.5Longannet Scottish Power 2.3Ratcliffe E.On-UK 2.0Rugeley International Power 1.0Uskmouth Carron Energy 0.4West Burton EDF Energy 2.0TOTAL 20.6
Coaltrans Moscow18th June 2007
Slide 16
…and 8.2 GW is opted out
Station Operator Capacity (GW)Kingsnorth E.On-UK 2.0Tilbury RWE npower 1.0Cockenzie Scottish Power 1.2Didcot RWE npower 2.0Ferrybridge (stack 2) SSE 1.0Ironbridge E.On-UK 1.0TOTAL 8.2
Opted-out plant at Kingsnorth, Tilbury, Cockenzie andFerrybridge may be retrofitted with supercritical boilersor replaced with new clean coal capacity
Total new projects announced amount to 11.4 GW, butthe outturn will depend on the regulatory framework
9
Coaltrans Moscow18th June 2007
Slide 17
Russian Coal performs lesswell than others for NOx
Not a precise scienceBut some general conclusions
Russian coal generally has high fuelnitrogen, which tends to push it downthe NOx-friendly league table
Indonesian and South American coalsare preferred for NOxUK buyers are trialling Indonesian coals
Coaltrans Moscow18th June 2007
Slide 18
Relative NOx Emissions forWorld-Traded Coals
0 .0 0
0 .2 0
0 .4 0
0 .6 0
0 .8 0
1.0 0
1.2 0
1.4 0
1.6 0
UK SA COL RUS POL AUS INDO China
Source – E..ON UK
10
Coaltrans Moscow18th June 2007
Slide 19
UK Generator customerswant…
Consistent qualityNo blends of high and low volatile content – all
blend components should be high volatile
Low sulphur – 0.3 to 0.5%Good calorific value – minimum 6,000 kcal NetGood handleability – 0 to 50mm and free flowing Reliable supplier – coal available for vessel Representative sampling of the cargo –
introduction of automatic sampling. Competitive prices
Source – E..ON UK
Coaltrans Moscow18th June 2007
Slide 20
Will Russian coal remain thedominant player in the UK?
Corporate Social ResponsibilityIncreasing concern over safety, social
responsibility, environmental stewardshipAccreditation to international standards
may be requiredConcerns over security of supply
Rail infrastructure Concerns heightened by recent events
Political factorsBuyers may look for greater diversity
11
Coaltrans Moscow18th June 2007
Slide 21
CSR – Over-ArchingPrinciples
UN Global Compact Ten Principles Covers human rights, labour, the environment
and anti-corruption Ties in several other UN declarations and
conventions
International Council on Mining and Metals –Ten Principles of Sustainable Development ICMM working on verification processes to
measure corporate performance againstprinciples
Coaltrans Moscow18th June 2007
Slide 22
CSR – RelevantInternational Standards
Social Accountability 8000Global, verifiable system for managing
corporate social performance ISO 14000
Environmental management and verificationsystem
OHSAS 18001Health and safety management system
12
Coaltrans Moscow18th June 2007
Slide 23
Europe is the world’s thirdlargest coal consumer…
Coaltrans Moscow18th June 2007
Slide 24
USA59
CANADA23
BRAZIL22
MEXICO10
JAPAN162
KOREA127
AUNZ1
OECDEUR/EU27311
ETnonEU+ATE39
ME28
CHINA39
RUSSIA33
ATLANTICMARKET INDIA
84
ODA199OLAM
22
NAFR12
SAFR3
HARD COAL TRADE IN REFERENCE SCENARIO, 2030 (million tonnes)
KEY:
EXPORTS(e.g. 100 Mt)
IMPORTS into REGION or COUNTRY(e.g. 100 Mt)
REGION100
100
TO ASIAPACIFICMARKET
World Energy Outlook 2006, IEA
“e” after tonnage means an estimated split between Atlantic and Pacific markets
33
37e
6 3e
18e
20e
3e
13e
40e
112
90e
8e
47e78e
320e
95
30
110e
INDONESIA
5
3 May 07
ASIAPACIFIC
MARKET
Source:
Notes:
17
…And the IEA forecasts coalimports to Europe growing
Source: IEA/UK Coal Forum
World Coal Trade Flows 2030In the Reference Scenario
13
Coaltrans Moscow18th June 2007
Slide 25
Reducing local productioncould create opportunities
Source – MCIS 2006*IEA 2005 Data
0
10
20
30
40
50
60
70
80
90
100
Mill
ion
Tonn
es
(Tot
alH
ard
Coa
l)
UKGerman
yFinlan
d
Spain
Poland
*Slov
akia*
Denm
ark
Rom
ania*
Nethe
rland
s*
I taly
Belgium
*Fran
ceGre
ece*
Swed
en*
Hunga
ry*
Bulgaria**
Russian Imports Other Imports Production
Coaltrans Moscow18th June 2007
Slide 26
European hard coalproduction is reducing
99 97 93
29 2824
2520
21
1313
13
1212
12
0
20
40
60
80
100
120
140
160
180
200
2004 2005 2006 (Estimate)
Mill
ion
Tonn
es SpainCzech RepublicUnited KingdomGermanyPoland
14
Coaltrans Moscow18th June 2007
Slide 27
Summary - SWOT Analysisfor Russian Coal in Europe Strengths
Low sulphur Smaller shipments Improved quality and
reliability Established supplier
relationships
Weaknesses NOx performance Rail infrastructure Corporate social
responsibility issues Cost base
Opportunities Demand from new plant Reducing local supply
Poland/Germany?
Geographical advantages
Threats Climate change policies Political interference
Real or perceived
Reduced internationalprices
www.coalimp.org.uk
Thank You
15
Coaltrans Moscow18th June 2007
Slide 29
SA 8000 Elements (1)
Child Labor: No workers under the age of 15; minimumlowered to 14 for countries operating under the ILOConvention 138 developing-country exception; remediation ofany child found to be working
Forced Labor: No forced labor, including prison or debtbondage labor; no lodging of deposits or identity papers byemployers or outside recruiters
Health and Safety: Provide a safe and healthy workenvironment; take steps to prevent injuries; regular healthand safety worker training; system to detect threats to healthand safety; access to bathrooms and potable water
Freedom of Association and Right to Collective Bargaining:Respect the right to form and join trade unions and bargaincollectively; where law prohibits these freedoms, facilitateparallel means of association and bargaining
Discrimination: No discrimination based on race, caste, origin,religion, disability, gender, sexual orientation, union orpolitical affiliation, or age; no sexual harassment
Coaltrans Moscow18th June 2007
Slide 30
SA 8000 Elements (2)
Discipline: No corporal punishment, mental or physicalcoercion or verbal abuse
Working Hours: Comply with the applicable law but, in anyevent, no more than 48 hours per week with at least one dayoff for every seven day period; voluntary overtime paid at apremium rate and not to exceed 12 hours per week on aregular basis; overtime may be mandatory if part of acollective bargaining agreement
Compensation: Wages paid for a standard work week mustmeet the legal and industry standards and be sufficient tomeet the basic need of workers and their families; nodisciplinary deductions
Management Systems: Facilities seeking to gain and maintaincertification must go beyond simple compliance to integratethe standard into their management systems and practices.