British and European Imports of Russian Coal: - Association of UK

1

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


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


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

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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


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

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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


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

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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


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

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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


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)

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Slide 13

Over 70% of plant is optedin to the LCPD…


Kilroot(Northern Ireland)

Opted-in – 20.6 GW

Opted-out – 8.2 GW


Slide 14

…and over 11 GW new coalplant is proposed


Kilroot(Northern Ireland)

Opted-in – 20.6 GW

Opted-out – 8.2 GW

New – up to 11.4 GW

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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


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

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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


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

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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


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

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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


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

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Slide 23

Europe is the world’s thirdlargest coal consumer…


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

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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


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

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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


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


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.

British and European Imports of Russian Coal: - Association of UK

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Transcript of British and European Imports of Russian Coal: - Association of UK