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Coal is back in his favour. This is how companies defend themselves against production shutdowns

Coal is back in his favour.  This is how companies defend themselves against production shutdowns

In Europe, a number of companies, especially industrial and chemical companies, are trying to switch to coal. Previously, they were switching from coal to less emitting gases, but now there is a trend in the opposite direction. This is especially true in Germany, where local businesses may be cut off from gas supplies in the winter, as authorities will do their best to ensure homes do not run out of gas.

Chemical BASF, Germany’s largest consumer of industrial energy, is preparing a contingency plan for the Ludwigshafen subsidiary. The company’s plants can operate as long as the gas supply is at least 50 percent. Factory maximum demand for this raw material. It is possible to replace blue fuel with crude oil. However, if the supply drops below 50 percent. In the long run, stopping production will not be avoided.

Chemicals company Lanxess is delaying the shutdown of the coal-fired power plants it continues to operate at its German plants in Leverkusen and Krefeld, although this could mean an increase in the carbon footprint of the company’s products.

Kelheim Fiber, a producer of viscose fibers used in hygiene products, is considering converting a gas-fired power plant to oil burning.

German chemical group Evonik Industries also announced that it will reduce gas consumption. – By replacing natural gas with LPG and continuing to operate the coal-fired power plant, we can completely abandon natural gas supplies at our largest German plant in Marl, without any significant production constraints – said CEO Christian Coleman. The company is testing the use of LPG in the facilities and securing coal supplies for the Marl coal-fired power plant, which was originally scheduled to close this year. The company announced that it will strive to ensure the continuity of operation of the coal unit also beyond 2022.

Some companies still have facilities that can use alternative fuels such as heating oil or coal. However, according to our estimates, only 2-3 percent. Industrial gas consumption can be replaced in this way. But this is not enough to solve the problem we are facing, warns Jörg Rothermel of VCI, the trade body for the German chemical industry.

The situation is also complicated in terms of costs. In some cases, the transformation of production processes requires additional investments, and in addition, coal alone remains expensive. Its prices at ARA ports on the spot cost about $340. per ton, compared to $143 a year earlier. per ton. In annual contracts they remain above $200. per ton.

– For a week and a half, we note a slight discount on coal, which was affected, among other things, by the drop in the price of oil from $ 120 a barrel to less than $ 100 until the winter, coal prices will remain high, about $ 300. in a spot. It will be conquered by expensive gas, the prices of which are affected by the actions of Russia – estimates Jakub Zakopek, an analyst at Erste Securities Polska, in an interview with Interia.

The analyst asserts that a return to coal increases the demand for carbon dioxide emissions allowances. Companies are buying them more than before, which translates into higher prices for certificates. While its cost in the second half of July was about 75 euros per ton, you already have to pay 85 euros for it.

Logistics is another challenge. After the outbreak of war, chaos reigned in world markets. Everything became complicated – the methods of supplying raw materials, food, as well as materials and products. Sanctions imposed on Russia the start of supplies of various goods from other directions more than before. In turn, Russia itself had to look for new markets, changing the routes of shipped goods.

Europe buys gas from new suppliers in an effort to become independent from Russia. There is no way out, because only 20 percent of it flows through Nord Stream 1. The volumes delivered by Moscow along this road to the Old Continent. The ban on Russian coal has also been in effect since August. Western countries are trying to get fuel from alternative suppliers. Poland also buys coal in remote areas – in Africa, Colombia, North America and Australia. The Russians, in turn, are trying to redirect the export of their goods to India, China and Asian countries.

– The volume of volumes transported by sea is increasing, the transport time is increasing, while the fleet remains the same. Northern European ports – Hamburg and ARA ports – severely congested. We have another logistical shock in the world, deliveries are off – says Jacob Zkobeck.

There are also local obstacles. In Germany, for example, the Rhine dries up, and the depth of the river is less than 0.5 meters. Uniper recently announced that it is unable to deliver coal to its power plant on the Rhine via the existing route – until now it has been transporting raw materials on barges. The company is trying to switch to ground transportation, but it’s a huge challenge.

There are also problems in Poland, ranging from the transshipment capacity of ports on the Baltic Sea to the increased distribution of raw materials in the interior of the country. What’s more, the Czech Republic, Slovakia and Hungary are also trying to supply themselves through our ports. In addition, some grain from Ukraine is exported through the territory of Poland, which further complicates the situation.

Time is also a challenge. Jakub Szkopek explains that while the ship from Russia has sailed directly to the ports on the Baltic for twelve days or so, from Australia it has been heading for two months to the ARA ports, and you have to add another month to unload the cargo to other ships and deliver it to the Baltic ports.

Meanwhile, the ports in Northern Europe are “crowded”. Overcrowding in some of them reaches a critical level. The sheer volume of units to be offloaded, as well as labor disputes, manpower shortages and the holiday season, are leading to serious logistics problems. Operators urge customers to pick up containers as soon as possible after unloading to improve port operations. Added to this is the limited availability of road transport in many countries, which hinders the flow of more goods.

There is no shortage of problems, and they are expected to increase further. The closer to the heating season, the more tense it becomes. Lately, a crisis is chasing a crisis, it seemed that a moment of respite would come after the pandemic. Nothing could be more wrong – the war in Ukraine shattered all hopes for stability. Another difficult winter awaits Europe.

Monica Borkoska

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