By Tony Lodge
Research Fellow, Centre for Policy Studies, London
The British government’s plan to ban all coal-fired power stations by 2025 has made headlines around the world.1 Many will now close early and, with that closure, the mining, coal handling, and import facilities that once dominated British ports will become redundant. Though now in decline, this formerly large thermal coal dependency supported many deep and surface mines across Britain and supplied thermal coal internationally. Britain’s electricity supply industry is now looking to combined-cycle gas turbine (CCGT) plants, renewable energy, and new nuclear power plants in its quest to meet ambitious CO2 reduction targets.
But the end of thermal coal mining and coal-fired electricity generation in Britain risks overshadowing significant new coal mining ambitions to supply Europe’s growing coking coal demand. The British metallurgical coal (also known as hard coking coal) resource is significant and of high quality. It is this prospect, as well as the growing markets in the recovering European steel-making sector, that has prompted a pioneering British project to propose and seek to develop Britain’s first new deep coal mine for 30 years.
West Cumbria Mining (WCM) is at the forefront of plans to produce some of the finest hard coking coal in the Western Hemisphere with production planned to start in 2020. Importantly, this coal production will not face the UK government’s high carbon taxes that have penalized thermal coal burning power plants as it will be used in the steel-making sector. This distinction is important; this is not an energy-related project, but rather a 50-year mining operation to supply the steel- and iron-making industries with high-quality metallurgical coal.
The timing of this project is important. Morgan Stanley has declared coal to be “the spectacular turnaround story of 2016”.2 On the back of Chinese coal production caps, coal prices have soared with coal vastly outperforming other commodity markets. The value of coking coal shipped from Australia, the world’s top exporter of the industrial commodity, had tripled by December 2016 to more than US$300 a metric ton for the first time since 2011. Macquarie forecasts coking coal to stabilize at around US$200 a ton, with global output of metallurgical coal remaining in high demand as steel mills source more supply.
WCM has secured the rights to extract metallurgical coal from the rich offshore coal seams of the Cumbrian coast in the North West of England. The company, led by CEO Mark Kirkbride, plans to use two abandoned drift tunnels constructed to access a former anhydrite mine. These will connect the offshore coal resource with an abandoned industrial site onshore where modern, low-profile coal treatment and handling buildings will be sited. An underground conveyor will move coal to a rapid rail loader situated on the existing coastal railway less than a mile from the site.
The proposal is ambitious both in its design and output targets. It will utilize state-of-the-art technology and mining methods to achieve production of around 3 million tonnes per annum, aiming to deliver up to 2.5 million tonnes of saleable metallurgical coal product a year.A The target seams are High Volatile Hard Coking Coals (HV HCC). They are sought by European steelmakers due to their excellent furnace performance characteristics (very high fluidity) and extremely low ash and phosphorous content.
Planning consent is being sought in spring 2017 from local government bodies to take the initial development of the project to the next phase of what will be one of the major metallurgical coal mining operations in Europe. Local political figures strongly support the project, which will create more than 510 skilled mining, engineering, and supporting jobs.B
Bad headlines dominated the European steel sector in 2015 with prices at record lows, but there are now signs of growing stability and rising prices.3 WCM’s product would be a core component for incorporation within a blend of other types of metallurgical coals to produce suitable coke for use in iron and steel production. Indeed, it is extremely similar in character to the premium hard coking coals mined in the eastern U.S. and currently imported and consumed by the UK and European steel industry. The WCM coal is the equivalent of US HV-A material, a key market benchmark coal for pricing purposes.C
Consequently, the future global market outlook for HCC demand is key. World and European steel demand is set to grow significantly by 2030, particularly in the construction sector. The forecast global HCC demand to meet such growth is unlikely to be met by operating and proposed new metallurgical coal mining projects. There is a real risk of a future global shortage in HCC supply with so few new mining projects being proposed.D
Forward planning by WCM has already identified a sea freight export facility in North East England, where its metallurgical coal can be exported easily and quickly from the deep-sea wharf Redcar bulk terminal facility into Europe. This was until recently part of the vast SSI steelworks that became an early victim of the collapse in world steel prices. This coal loading berth at Redcar is a direct 100-mile rail journey from the proposed mine. WCM will also seek to supply metallurgical coal to British steelworks which are showing signs of recovery following the recent slump in output and prices.
The mine’s development and operation will be undertaken by bolter-miners and remote operated continuous miners, working a partial extraction run-out and pocket retreat mining method. WCM argues that this method offers the greatest flexibility and can respond quickly to prevailing ground conditions to maintain consistent production levels, especially where multiple mining sections are operated.
Importantly, given local environmental considerations, the mine will have state-of-the-art low-profile surface buildings to ensure minimum visual impact. This will be in stark contrast to the large headstock and winding gear of traditional mine buildings, which can still be seen in the area where they have been preserved as a monument to the area’s industrial legacy. There will be no tips of mine discard, as this will be transported from the site by rail to a quarry where it will be crushed and screened prior to use as fill material on construction and other such projects.
Although the UK is turning away from thermal coal to generate electricity, this new project is attracting considerable interest as curious observers learn that not all coal is the same. As readers of this journal know only too well, there are various types, qualities, and consequently different markets.
As coal’s thermal markets come under greater policy strain, projects like this allow the fuel a valuable platform to demonstrate its alternative and varied uses. Consequently, it deserves the attention, focus, and support it is receiving.
- A. Author interview with WCM CEO Mark Kirkbride, December 2016.
- B. WCM has met and is working closely with Jamie Reed, local Member of Parliament, local councillors, and policy leaders.
- C. Key parameters and qualities of WCM coal are equivalent to US High Volatile ‘A’ Hard Coking Coal type.
- D. Analysis and forecasts provided to WCM by Wood Mackenzie.
- Reed, S. (2015, 18 November). Britain calls for closing of coal-fired power plants by 2025. New York Times, www.nytimes.com/2015/11/19/business/energy-environment/britain-to-close-coal-fired-power-stations-by-2025.html?_r=0
- Hoyle, R. (2016, 11 November). Coal prices on fire. The Wall Street Journal, www.wsj.com/articles/coal-prices-on-fire-1478840770
- Staff. (2015, 9 November). Steel industry calls for EU action on Chinese imports. BBC News, www.bbc.com/news/business-34763597
The content in Cornerstone does not necessarily reflect the views of the World Coal Association or its members.
Receive e-mail alerts when the new issue comes online!
Click here to opt-in or opt-out.
Receive the new edition in print!
Click here to opt-in or opt-out.