Economics of Coal Mining

According to the World Coal Association, total global coal production reached approximately 7,600 million tones in 2011, of which 6,600 million tones was hard coal, the remainder being brown coal/lignite.  This represents 30.3% of global primary energy needs, and generates 42% of the world’s electricity.

Approximately 13% (around 717Mt) of total hard coal production is currently used by the steel industry and over 60% of total global steel production is dependent on coal.  Coal is also used extensively in cement manufacture and as a liquid fuel.

Coal production has grown fastest in Asia, while Europe has actually seen a decline in production.

Transportation costs account for a large share of the total delivered price of coal. Therefore international trade in steam coal is effectively divided into two regional markets – the Atlantic and the Pacific.  The Atlantic market is made up of importing countries in Western Europe, notably the UK, Germany and Spain. Coal stockpiles in the port of Rotterdam are at the lowest level since August 2008 as nuclear power cutbacks increased demand for coal.

The UK has had a long history of coal production. Although the importance of coal as an energy source has declined, it continues to provide around 17% of the nation’s primary energy consumption and about one-third of its electricity.  This means there is a continuing need for coal for our major coal-fired power stations, of which three (Ferrybridge, Eggborough and Drax) are situated nearby in Yorkshire.

According to 2011 Government figures (DECC), the UK consumed 51.2 million tonnes of coal in 2011, including 41.8 million tonnes in power stations. Coal imports to the UK were 32.4 million tonnes, indigenous production was 18.3 million tones, with the rest being lifted from stock. This represents a huge balance of payments deficit of the order of £1.5 billion per year.

Coal-fired power stations provided 30% of the UK’s electricity (gas 40%,  nuclear 19%, others (including renewables) 11%).   You can follow this link to see how much of the UK’s electricity needs are being met by burning coal at any given time, day or night.

The price of coal has fluctuated a lot recently and is currently (June 2014) around £55 per tonne.  However, it has been close to £80 per tonne, and it is almost certain that it will rise to that value and more over the proposed life of the mine.