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The coking coal market is global. Coking coal production is systematically growing, having doubled since 2000.

JSW Group is the largest producer of high-quality coking coal and a major producer of coke in the European Union. The type and range of the Group’s activities and products are largely sensitive to changes on the intertwined coal, coke and steel markets.

Coal companies in Poland usually produce coal for electricity and heating generation purposes. The largest domestic coal companies, aside from JSW, are: Polska Grupa Górnicza and Lubelski Węgiel Bogdanka. JSW is the only domestic producer of hard coking coal and a major producer of semi-soft coking coal. The other domestic producers mainly produce coal for energy purposes, with coking coal having a small share of their total production volume.

Currently in the European Union coking coal production takes place in several countries only: Poland, Czech Republic and in small quantities Germany. Germany intends to soon completely cease hard coal mining. The deficit of coking coal on the EU market is mainly made up by imports from Australia, USA, Canada, Russia and in recent years Mozambique. The import needs will be growing in connection with the planned shut-down of OKD’s mines in Czech Republic, which is expected to be completed by 2023.

Coal market

The coking coal market is global as demand for coking coal and coke largely depends on the condition of the steel industry, which uses the commodity in large furnaces in the production of pig iron – over 70% of steel is produced in large-furnace technology. Coking coal is usually processed into coke at large steel-makers’ own coking plants.

Guaranteed stable deliveries of key raw materials at competitive prices are important to the European steel industry. A lack of sufficient own sources of supply means that the European Union is almost entirely dependent on the import of both iron ore and coking coal. In 2017, the European Commission emphasised coking coal’s critical raw material status by placing it on its list of 27 raw materials that carry the risk of supply shortages and the effects of which for the economy would be greater than in the case of other raw materials.

Global coking coal production is highly concentrated in several countries. The largest producers of coking coal are China and Australia, which together have a market share of more than 75%.

Producers of coking coal, total

China, the largest producer of coking coal globally, is also a major importer of this raw material. All of its production ends up on the domestic market. Australia – the second largest producer of coking coal, behind China – exports nearly 100% of its production. Global demand for coking coal depends on a single customer – China, whereas global supply depends on the main supplier – Australia, which together with other major exporters – USA, Canada and Russia – account for 85% of coal supplies to the global market.

The level of global coking coal imports – aside from the supply-demand relationship between China and Australia – is also driven by one-off events such as adverse weather conditions, logistics or geological problems. These events are temporary and lead to alternative sources of import being activated.

Largest importers of coking coal, total

As leading producer of coking coal in the European Union, JSW, while benefiting from a geographic advantage, is subject to general trends on the global market. With no quarterly benchmarks for coking coal, the determinant of global coking coal prices, being published since Q2 2017, price negotiations are currently based on daily quotations for Australian or American coal.

JSW's share in coking coal production in Poland, EU and globally

JSW Group is a major supplier of high-quality coking coal to the domestic and European market. The remaining portion of the coal produced by JSW is coal for energy purposes. Coal for energy purposes is used by JSW mainly to generate electricity and heating for own purposes. The remaining part of coal for energy purposes is sold to domestic energy enterprises. JSW Group, not a major domestic producer of coal for energy generation, is seen by customers in the domestic energy generation segment as a supplementary supplier, in connection with which JSW cannot independently shape market realities, rather it has to adapt to the existing ones.

JSW's share in production of coal for energy generation purposes in Poland and UE

JSW’s share in production of coal for energy generation purposes in Poland

JSW’s share in production of coal for energy generation purposes in UE

The price of coal for energy generation purposes in Poland is largely driven by the situation on the domestic market and competition between domestic producers. The market for coal for energy generation purposes in Poland is largely dependent on the domestic economic situation, weather conditions, energy policy (prices of electricity, use of biomass, lignite-based electricity generation, share of subsidised renewable energy). Prices for coal for energy generation purposes to a limited extent follow the global trends in price indexes for spot transactions. While indexes set trends, the situation on the domestic market and competition between domestic producers are of key significance. Market prices for coal for energy generation purposes are determined by PSCMIThis is a group of price indicators for benchmark coal for energy generation purposes produced by domestic producers and sold on the domestic energy market (PSCMI 1 index) or the domestic heating market (PSCMI 2 index). These indicators are based on monthly ex-post data and express the sales price for hard coal (ex-works), with quality parameters optimised for customer needs.

Coke market

Poland is the second-largest exporter of coke in the world, behind China

JSW Group as an active participant in the „coking coal – coke – steel” supply chain operates in a volatile market setting, determined by the situation on the steel market and the strong competition on the coking coal and coke supply markets. Poland is the largest supplier of coke to the European market.

Just as in the case of coking coal, the coke market is global. Coke production is increasing and demand for coke mainly depends on the level of steel production in large-furnace processes and changes in the technological processes for steel production. Coke production is mainly concentrated in Asian countries, which account for over 80% of global coke output. European Union members account for merely 6% of coke consumption, consuming approx. 41-43 million tonnes.

Global coke production

Largest producers of coke, total

Coke consumption structure globally and in the EU is similar: approx. 80% of coke is used for producing pig iron in oxygen-blown converter processes and the other 20% outside of large furnaces. A vast majority of coke is produced in coking plants owned by steel-makers. This production is for the internal purposes of steel works owned by these steel-makers. Only a small volume (slightly over 4% of total production volume) is internationally traded.

The European Union predominantly features coking plants integrated with steel works, which meets their needs using internally produced coke in the first place. At JSW Group, coking plants are independent, meaning that the entire coke output is for sale. Several independent coking plants are also located in Hungary, Czech Republic and Bosnia. JSW Group’s advantage over other coke producers lies in the availability of raw material – a majority of integrated coking plants are mainly based on coking coal from own mines.

Largest exporters of coke. Share in global market.

The Polish coke industry is relatively young, with an average age of coke assets being 16.4 years, while the average age of coke assets globally is 25.3 years and 22.9 years in Europe.

Coke production at JSW Group’s coking plants accounts for: 44% of domestic coke output, 10% of EU’s coke output and 1% of global coke output, respectively.

Steel market

The steel market is dominated by global steel-makers and steel production is largely concentrated in Asian countries. China remains the largest producer of steel.

Steel production is still dominated by oxygen-blown converter technology using coke, which accounts for over 70% of the global steel production structure. Steel production in electric arc furnaces accounts for approx. 25% of raw steel output, while production in open hearth furnaces has a small and declining share. The oxygen-blown converter process also dominates in the European Union but steel production in electric arc furnaces has a larger share than the global average.

Demand for steel and level of production and the prices obtained by producers set the market conditions for coking coal producers. They specify demand for coking coal and realisable prices for this raw material.

Global steel production

Steel production by geographic region

Guaranteed stable deliveries of the key raw materials at competitive prices are important to the European steel industry. A lack of sufficient own sources of supply means that the European Union is highly dependent on the import of both iron ore and coking coal. Demand for steel is mainly generated by investments: in construction (this sector accounts for nearly half of the domestic steel consumption), road building, energy and rail as well as in the structural, machinery, ship-building, household products and automotive industries.

ArcelorMittal is the largest European producer of steel and the largest buyer of coking coal and coke. The balance of ArcelorMittal’s needs and production capacities shows that this customer’s existing annual demand at its European plants reached:

25.3 million tonnes of coking coal, including:
- 16.5 million tonnes of coking coal in coking plants integrated with steel works
- 8.8 million tonnes of coking coal in coking plants other than plants integrated with steel works
6.5 million tonnes of coke mainly from independent coking plants owned by ArcelorMittal

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