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Coal Purchasing scenarios

Coal Purchasing scenarios. UWA IFP and Pre-master Students . Contents. The types of coal and the distribution The European Coal Market The 5 purchasing scenarios Recommendation. Global sources of coal.

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Coal Purchasing scenarios

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  1. Coal Purchasing scenarios UWA IFP and Pre-master Students .

  2. Contents The types of coal and the distribution The European Coal Market The 5 purchasing scenarios Recommendation

  3. Global sources of coal Total recoverable reserves of coal around the world are estimated at 1,001 billion tons—enough to last approximately 180 years 67 percent of the world’s recoverable reserves are located in four countries: the United States (27 percent), Russia (17 percent), China (13 percent), and India (10 percent). The types basis on reserves Anthracite 53% Sub bituminous 29.7% Lignite 17.3%

  4. Key exporters Countries • USA • Australia • South Africa • Russia • Indonesia Global firms trading in coal • Big Four • Xstrata / Glencore • BHP Biliton • Anglo American • Rio Tinto

  5. European Coal Market • Coal consumption in OECD Europe increases by only 40 million tons (5 percent) (IEO2006) however, the region is and will continue to be a major market for coal. • Coal consumption in OECD Europe, at 887 million tons in 2003, represented 36 percent of total OECD coal use. • The major coal-consuming countries of the region, all with consumption of 65 million tons or more in 2003, include Germany, Poland, Greece, Turkey, the United Kingdom, and the Czech Republic.

  6. European Imports and Exports Consumption - Czech Republic 57.2 Mt (2004)

  7. Main uses of coal - Europe (2005)

  8. Option 1 Australia • Price (Bit): $ 52 - $ 55 per tonne (Steam 2007 price) • Time lag:approx 34 days • Shipping prices: from the port of Newcastle to Europe is $ 34 per ton. • Destination port: Rotterdam / Hamburg • Other shipping costs: By coal barge from Hamburg at a rate of $ 81 - $ 88 / 25 tonnes / 1000 km • Comments: Currently Australian ports are experiencing high congestion and as a result there is a backlog. Currently 27 days waiting to load and there are up to 68 ships waiting • Estimated total cost: $ 2,080,000(product) + 1,360,000(sea) + 140,800(river) = $ 3,580,800 CZK 74,689,134 = CZK / t 1,867 plus road transport Base price: CZK / t = 2,300

  9. Option 2 South Africa • Price (Bit): $ 57.21 per tonne (2007 price) • Time lag:approx 23 days • Shipping prices: from Richards Bay, to Rotterdam climbed to $31.17 a ton (05, 2007) • Destination port: Rotterdam / Hamburg • Other shipping costs: By coal barge from Hamburg at a rate of $ 81 - $ 88 / 25 tonnes / 1000 km • Comments: Most South African coal tends to produce far more NOx during combustion than some other coal origins thus will be affected by new EU emissions regulations • Estimated total cost: $ 2,288,400 (product) + 1,246,800 (sea) + 140,800(river) = $ 3,676,000 CZK 76,661,689 = CZK / t 1,916 plus road transport Base price: CZK / t = 2,300

  10. Option 3 Indonesia • Price (Bit): $ 45 - $ 47 per tonne (2007 price) • Time lag:approx 27 days • Shipping prices: from Kalimantan to Europe $ 24 a tonne (Jan 2007) • Destination port: Rotterdam / Hamburg • Other shipping costs: By coal barge from Hamburg at a rate of $ 81 - $ 88 / 25 tonnes / 1000 km • Comments: The congestion at Newcastle port has turned buyers away from Australia to seek Indonesian supplies instead, prompting FOB prices loaded at Kalimantan to rise to $57-$60 a tonne for global Newcastle equivalent specifications, presenting a $4-$7 premium to Australia's coal prices. The coal mined in Indonesia generally has heat values ranging between 5,000and 7,000 kcal/kg, with low ash and sulphur levels. • Estimated total cost: $ 1,880,000 (product) + 960,000 (sea) + 140,800(river) = $ 2,980,800 CZK 62,183,318 = CZK / t 1,554 plus road transport Base price: CZK / t = 2,300

  11. Option 4 Poland • Price (Bit): $ 61 per tonne (2007 price) • Time lag:approx 3 -4 days • Shipping prices: Rail transport $ 1,434 to $ 1,461/ 25 tonnes / 1000 km • Destination rail terminal : Brno • Comments: Hard coal production again reached almost the level of 94 Mio t. 17 Mio t of this coal is exported, mostly to the other EU Member States. Nevertheless there’s a logistic problem about export: the harbours are located in the Northern part of the country, whilst the mines lay in the Southern part. Transporting the coal over the entire country increases the price considerably. In addition, low import coal prices push the companies to rather buy imported cheap coal. Coke production amounted to 15 Mio t, 5 Mio t were exported. • Estimated total cost: $ 2,440,000 (product) + 2,337,600 (rail) = $ 4,777,600 CZK 99,735,130 = CZK / t 2,493 Base price: CZK / t = 2,300

  12. Option 5 Germany • Price (Bit): $ 69 per tonne (2007 price) • Time lag: approx 7 – 8 days • Shipping prices: at a rate of $ 81 - $ 88 / 25 tonnes / 1000 km • Destination: Bratislava river port By coal barge from Hamburg Other shipping costs: by rail from Bratislava; Rail transport $ 1,434 to $ 1,461/ 25 tonnes / 1000 km • Comments: Germany is one of the largest importers of coal and new EU regulations on transportation and emissions of coal have created higher prices. In addition the costs of production are higher compared to other producers outside the EU. • Estimated total cost: $ 2,760,000 (product) + 129,600 (river) 2,337,600 (rail) = $ 5,227,200 CZK 108,835,590 = CZK / t 2,720 Base price: CZK / t = 2,300

  13. Comparison of options

  14. We propose the following • Short term supplies In order to satisfy the short-term supply of 1,200 the best option would be to source coal imports form Poland as this would offer the most cost effective option and the least amount of time lag for delivery. In addition since the volumes are low making an order this small on the international market would be extremely expensive • Long-term supplies The Indonesian supply offer thelowest cost pricesin addition to lower shipping costs. This creates an opportunity to save on cost. Thus the long-term bulk order of 40, 000 tonnes could be supplied within the specified time frame

  15. References • http://www.globalcoal.com/news/coalnews.cfm • http://www.busrep.co.za/index.php?fSectionId=603&fArticleId=3168110 • http://www.busrep.co.za/index.php?fSectionId=&fArticleId=2506751 • http://www.bloomberg.com/apps/news?pid=20601086&sid=arfQvCWZpHVE&refer=latin_america • http://www.marisec.org/worldtradeflyer.pdf • http://www.ame.com.au/pdf/coalferrous/Met%20Coal%20Strategic%2006.pdf • http://kpmg.com.mx/publicaciones/libreria/publica_2006/sep/Coal%20Meeting%20Global%20Challenges.pdf • http://www.czech.cz/en/czech-republic/transport/boat-transport/ • http://www.paiz.gov.pl/files/?id_plik=1677 • http://www.eia.doe.gov/cneaf/coal/page/special/feature.html • http://www.worldcoal.org/index.asp

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