Power traders sceptical over Polish coal embargo risk

Price increases at the Polish wholesale electricity market are unlikely despite the risk of an embargo on coal imports from abroad, Polish power traders told ICIS after coalminers blocked imports at the country’s border on Wednesday.

This is because prices are already considered to be so high that there is little upside risk left even in the case of a cheap fuel source being cut off, traders said.

Around 200 Polish miners are blockading trains carrying Russian coal at a border crossing in northern Poland in protest against an influx of cheap Russian coal into the country ( see sister publication CSD 24 September 2014 ).

This brought fresh talks by Polish politicians over a potential embargo on any imports of coal into the country which are seen as a threat to the domestic coal mining sector – a vital area of the Polish economy.

Power traders told ICIS that more protests from coalminers are to be expected ahead of upcoming political elections next year because miners they feared for their jobs in the face of what is already an oversupply of domestic coal.

One trader dismissed the likelihood of any embargo having an impact on Polish wholesale electricity prices.

Any moves on the coal or emissions market would not influence electricity prices in Poland because margins are already very high due to bullish prices, one trader explained.

Power for delivery throughout 2015 has risen by 10.2% since the beginning of this year, pushed up predominantly by surging prompt prices.

In April this year, some sources suggested that sky-rocketing prompt electricity prices were needed to justify the 1.8GW expansion of the coal-fired Opole plant being built by incumbent PGE ( see EDEM 28 April 2014 ).

State-owned utilities were relying on domestic coal and only foreign companies bought cheaper coal from elsewhere, traders believed.

Despite 5m tonnes of excavated coal sitting in reserve at the country’s largest coal-miner Kompania Weglowa, 11.2m tonnes of coal was imported in 2013, with 63% of this coming from Russia, latest reports show.

Traders and analysts previously told ICIS that an embargo was unlikely to happen ( see EDEM 9 May 2014 ). Karolina Zagrodna and Ellie Chambers