European governments - tired of pouring billions of dollars of subsidies into inefficient coal mines - have been consolidating operations, and coal producers are alarmed that their governments will close even more domestic mines that can't compete against cheap foreign coal.
Malcolm Edwards, commercial director for state-owned British Coal, says international prices are too low and cannot be sustained. Further mine closures could produce another shortage of the kind seen in the 1960s.Mr. Edwards says that major international coal producers, which had brought new mines on-stream on the basis of over-optimistic demand projections in the early 1970s, are depressing prices in a bid to drive out competition. Most exporters are selling at prices that only cover their low variable costs.
These pleas are falling on deaf ears as governments move to cut the spiraling costs of subsidizing their coal mines.
Belgium, France, Spain, the United Kingdom and West Germany have made deep cuts.
Earlier this month, U.K. Energy Secretary Cecil Parkinson warned British Coal that it will have to fight for its share of the electric utility market after the Central Electricity Generating Board, the state-owned utility, is privatized.
The giant utility buys 70 million metric tons of British Coal's annual 100-million-ton production.
British Coal cannot expect any special favors from the government and would have to be the supplier of choice, not necessity, Mr. Parkinson told Parliament.
The CEGB is locked in a gentleman's agreement that requires it to purchase much of its fuel supply from British Coal. It has had limited success in extracting price concessions. It pays an average price of 42 ($72) a ton while foreign coal can be landed for around 30 ($55) a ton.
British Coal faces a bleak outlook if its major customer breaks free from government pressure. The CEGB has estimated that it could save up to 750 million ($1.37 billion) a year - equivalent to a 7 percent cut in electricity prices - if it were allowed to buy all of its coal from abroad. However, even if the United Kingdom was opened up to foreign competition, the lack of port handling facilities for deep sea colliers of 150,000 tons would limit importsto about 20 million tons. Imported coal has to be transshipped from the continent in smaller vessels at a freight rate of about $10 a ton.
U.K. coal imports are running at around 10 million tons a year - mostly specialized coking coal for the steel industry that British Coal cannot supply.
Foreign suppliers are testing the British market to see if further opportunities will develop. China is shipping cargoes of anthracite to independent traders and has clinched a contract to deliver 1.2 million tons over three years to the CEGB. The utility is also buying 2.4 million tons from Australia and Colombia.
The most exciting development for foreign coal suppliers is the proposed construction of three coal-fired power plants in Turkey. The projects, still bedeviled by political and financial problems, involve the guaranteed export of 3.5 million tons of Australian coal a year for 25 years. Turkey also plans to use a new coal port which will be built to import the Australian coal, as a stockpiling point to export coal throughout the rest of Europe and the Middle East.