COAL MARKET OF UKRAINE: ANALYSIS AND DEVELOPMENT BACKGROUND UKRAJINSKÝ TRH S UHLÍM: ANALÝZA A POZADÍ VÝVOJE

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1 17 COAL MARKET OF UKRAINE: ANALYSIS AND DEVELOPMENT BACKGROUND UKRAJINSKÝ TRH S UHLÍM: ANALÝZA A POZADÍ VÝVOJE Ilona V. KOCHURA Ph.D. in Economics, associate pofesso, Poduction Management Depatment, Mine Faculty, Donetsk National Technical Univesity, Atema st. 58, Donetsk 83000, UKRAINE, tel.(+380) , kochuai@mail.u Abstact The aticle analyses factos influencing the Ukainian coal maket. Based on the analysis the peconditions of futhe development of coal industy in Ukaine ae fomulated. Abstakt Článek analyzuje faktoy ovlivňující th s uhlím na Ukajině. Na základě této analýzy jsou fomulovány podmínky dalšího ozvoje uhelného půmyslu Ukajiny. Key wods: maket, coal, expot, impot, analysis, pices. 1 INTRODUCTION Accoding to estimates of the Woking Goup of the Coal Enegy Committee ECE coal povides about 27% of total wold enegy poduction. This value is even highe in the electicity secto as about 44% of all electicity in the wold is poduced with the usage of coal. In tems of wold eseves coal exceeds all othe types of fossil fuels. So the multiplicity facto fo coal eseves (the atio of emaining eseves to annual poduction) cuently stands fo 122 yeas. Fo compaison, the multiplicity facto of gas eseves is 60 yeas and fo oil it amounts to 42 yeas. In pespective, a ise of the ole of coal as the one of the most impotant enegy esouces is expected aound the wold till 2020 due to the eduction in consumption of petoleum and petoleum poducts, evision of attitudes towads nuclea enegy development in many counties. In addition, an inceased demand fo coking and powe coal is obseved in the steel industy due to the fact that many metallugical entepises have placed natual gas with pulveized coal that is injected into blast funace heath. The cuent tend indicates positive fundamental easons fo futhe development of coal mining companies and futhe ise of the value of thei shaes. Nevetheless, in spite of the substantial eseves of coal (7th place in the stuctue of the wold's eseves and poduction of coal), and athe developed coal industy Ukaine has ecently significantly inceased its impots of coal poduction. Theefoe, such analysis of the coal maket and influence of vaious factos is an impotant poblem. Woks of such scientists as A. I. Amosha [1, 2, 3], E. N. Batkow [1], M. G. Zemlyanyj [6], A. I. Mioshnikow [4, 5], L. V. Rassuzhdaj, [1, 3], T. V. Ryauzova [6], U. P. Yashenko [3] and othes ae devoted to maket eseaches and analyses of coal poducts including Ukainian ones. Howeve, the elevance of ceating maket conditions fo coal industy, coal poduction maket libealization, tanspaency of picing and the mechanisms of state egulation of elations in these makets inceased in tems of the cuent situation of Ukainian complex economic development.

2 Commodity coal output, million tones 18 The pupose of the aticle is to eveal and analyze the factos, favoably and negatively influencing the Ukainian coal maket, and on this basis to fomulate peconditions fo the futhe development of the coal industy in Ukaine. 2 COAL MARKET ANALYSIS Like any othe maket the coal maket develops unde the laws of supply and demand, so thee is a need to analyze coal poduces and consumes. 2.1 Analysis of coal poduces and consumes Demand fo coal in Ukaine is epesented by the following uses: powe, coke and metallugical plants, own needs of mines, population, utilities, impotes. In 2010, the oveall balance of maketable coal poduction totaled 67.1 million tons, theeof 37.2 million tons of powe coal (including themal powe plants million tons) was shipped fo the needs of the Ukainian enegy industy and poduction secto and 6.1 million tons fo expot; 23.5 million tons of coking coal fo coking was supplied to the domestic maket and 0.3 million tons fo expot. The poposal of coal is conducted by its poduces - coal mines, coal mining associations and tade companies. Accoding to official statistics, 75.2 million tons of coal was poduced, which coesponds to 55 million tons of maketable poduction (including powe coal million tons, coking coal million tons) in Ukaine in The dynamics of commodity coal output [7] in ecent yeas is shown in Fig. 1. The dynamics of coal poducts consumption [7], as well as the consumption of othe enegy mateials ae shown in Fig ,4 61, , , yeas Fig.1 Dynamics of commodity coal output in Ukaine A eduction of coal output in Ukaine to 55 million tons, and a significant incease in its consumption to 67.1 million tons have caused an incease in the deficit of domestic poducts in ecent yeas and led to impots of lacking volumes of coal fom CIS counties and fom aboad in ecent yeas. In million tons of powe coal wee impoted and 9.1 million tons of coal fo coking. Majo expotes and impotes of Ukainian coal ae shown in Fig. 3. It should be noted that at the pesent time, in fact, thee ae two sepaate makets - a maket of powe coal and a maket of coking coal, although they inteact with each othe. Coking coal is fed to a coke plant, whee coke needed in metallugical poduction is made of it. It can also be used fo enegetic needs. The main pupose of powe coal is the stability of themal powe plants, eplacement

3 Consumption 19 of coke with coal injection into blast funaces, as well as its use as a domestic fuel. Since the beginning of the centuy the demand fo powe coal has inceased in contast to coking coal which must compete with petoleum, gas and othe enegy souces ,0 70, , , ,0 63,5 50 Coal, mln.tones Gas, mld. cub. m 50, , yeas Fig. 2 Dynamics of consumption of coal poducts and natual gas in Ukaine Bulgaia E x p o t e s Russia Kazakhstan USA Austalia, etc. Ukainian coal maket Tukey Belgium Moldova Italy Spain Hungay Poland I m p o t e s Othes Fig. 3 Expotes and impotes of Ukainian coal Coal is extacted by about 160 Ukainian mines; theeof about 60 high-quality anthacite coal mines. The leades of the extaction ae "Dovzhanskaya-Capitalnaya" and "Kasny Patisan" SE "Svedlovskantatsit" (appoximately 13-15% and 12-13% of the total poduction of anthacite, espectively). Coking coal that is not less expensive and scace is extacted in 46 mines. Hee the leades in mining ae "Kasnoamejskaja - Zapadnaya #1" and Zasyadko (appoximately 20% and 12% of the total poduction of coking coal, espectively) [8]. The constant shotage of quality coking domestically-poduced coal is obseved on the Ukainian maket. This is detemined by the next easons: 1. Metallugical makets both in Ukaine and aound the wold ae chaacteized by positive dynamics of poduction. Coking coal consumption should gow in step with pig-ion poduction.

4 20 2. Volumes of coking coal mining in Ukaine educed due to the exteme deteioation of the technological equipment at state mines, difficult geological conditions, high isks of accidents and injuies, as well as exhaustion of economically attactive eseves. Besides the decline in poduction esulted in seious accidents at the two mines of Donetsk and Lugansk egions that poduce coking coal (July 2011). 3. Competitiveness of steel poduction is connected with the need fo coal with a low sulfu content (0.5%), which is not poduced in Ukaine. 4. Despite the fact that Russia is a main supplie of high quality coking coal in ecent yeas, a significant pat of the most valuable types of coal is consumed by Russian poduces of coke. In Ukaine, low-sulfu coals with a high content of inteit ae pimaily impoted. Thus, the shotage of coking coal poduced domestically can maintain in the nea futue, and fo a long time as well. Expets believe that the eal way how to povide Ukainian steel companies with high-quality coking coal in the nea futue is to incease its impot fom aboad (USA, Austalia and Canada). A balance between demand and supply of powe coal in Ukaine is expected in The balance on this maket is influenced by such key factos such as the pivatization of powe geneating companies, financing of the coal industy and the investments in this secto, dynamics of supply and demand fo enegy esouces in the wold maket [9]. In tems of coking coal, if the pospects to boost its poduction ae not encouaging, meanwhile due to objective easons, thee ae all the peequisites fo inceasing powe coal poduction. Such peequisites ae: 1. Reduction of expensive impoted gas consumption (Fig. 2). 2. Shifting fom natual gas to coal and fuel oil in themal powe plants. 3. Stating to implement the technology of pulveized coal injection into blast funaces, educing both the natual gas and metallugical coke consumptions. 4. Global demand fo powe coal is gowing apidly and that will allow to incease expots of the Ukainian powe coal. 5. Possibility to incease electicity expots to EU counties in the futue. 2.2 Analysis of coal pice One of the impotant factos fo consumes (domestic poduces of coke, metallugical and enegy plants) is the pice of coal. Coal pices depend on its quality, tanspotation costs and othe conditions. Pices fo powe coal ae usually adjusted accoding to its caloific value. Taking into account the expected gadual ecovey of the global steel poduction a high level of wold pices fo coking coal in 2011 may at least emain on the same level. In the domestic maket, the pices will be suppoted by gowing demand fom the Ukainian steel industy and pesevation of the deficit of coking coal due to its insufficient poduction at Ukainian mines. Pices fo powe coal ae taditionally much less sensitive to economic cycles than those fo coking one. Due to the incease of global demand fo powe coal gadual gowth of wold pices is expected. But in the ealities of ou county othe cicumstances come to the foefont. Intenal maket mechanisms ae undedeveloped because of the state egulation of pices and subsidies fo coal. State-owned entepises ae foced to sell fuel to powe stations fo pices set by the Ministy. Consideing that these pices ae below the cost of manufactued poducts, this leads to losses of mines and inceases of budgetay allocations to the secto. Despite the fact that pivate coal mines supply coal to powe stations fo commecial pices, occasionally thee is a elation to the state

5 21 economic policy. Fo example the decision of the Cabinet of Ministes 285 of Apil 2, 2009, unde which the National Joint Stock Company "Enegy Company of Ukaine" was to buy powe coal exclusively fom state-owned mines belonging to the State Entepise "Ukainian Coal". In this situation, pivate companies ae foced to look fo impotes of coal. If thee is a shotage of coal in stock of themal powe plant, the govenment has to solve this poblem with expotes fom neighboing counties. Fo compaison, the domestic and expot pices fo coal ae shown [10] (Table 1, Table 2). As it can be seen fom the tables the domestic pices fo coal in Ukaine ae lowe than the expot ones which is anothe peequisite fo the development of own coal industy. Tab. 1 Domestic and expot pices fo coking coal (May 2011) Pice without VAT, $/t Ukaine (depending on the ank) Russia DAF Ukainian bode FOB Vostochny Global maket Austalia, FOB Queensland Tab. 2 Domestic and expot pices fo powe coal (May 2011) Pice with VAT, $/t Ukaine on the basis of kcal / kg FOB Riga FOB Vostochny 120 Global maket South Afica, FOB Richads bay Euope, СIF АРА Austalia, FOB Newcastle Japan, СIF One moe poblem is seasonality of the poduct on the maket. A seasonal decline in consumption of powe coal is connected as a ule with the end of the heating season, which leads to weakening demand and, possibly, a decline in pice. When the use of coal of themal powe stations is planned fo the autumn-winte peiod, the demand as well as touble-fee TPP opeation stabilize. A decline in poduction of coke and steel poducts in Ukaine and othe CIS counties, that often occus in summe, also leads to the eduction in demand and pices fo coking coal.

6 3 CONCLUSIONS Based on the above mentioned data conclusions about the neaest pospects of the Ukainian coal maket development can be made. In spite of the difficulties accompanying today's economy and the coal industy in Ukaine, the pospects fo its futhe development can cause no doubt. Fist of all, fo the following easons: gowth of wold demand fo powe coal; gowth in domestic demand fo coal fuel due to a educed consumption of expensive impoted gas in Ukaine, tansfe of themal powe plants fom gas to coal and oil, positive dynamics in the metallugical industy and implementation of enegy-saving technologies out thee, as well as the inceasing demand of population; lack of altenative enegy souces in Ukaine; quite low pices compaed to those fo impoted poducts caused by subsidized payments. All of this ae the basic peequisites fo building up own mining volumes pimaily fo poviding own needs in powe coal and educing impots of coking coal. It is possible to ovecome the cisis in the coal industy only with coodinated effots of all banches of govenment, business and science. One of the main incentives to ise the efficiency of the coal industy must become an open and tanspaent domestic coal maket. 22 REFERENCES [1] Амоша О.І. Ринки вугільної продукції в Україні: стан, проблеми та шляхи їх вирішення / О.І. Амоша, Є.М. Братков, Л.М. Рассуждай// Економіка пром-сті N 2. С [2] Амоша О.І. Світовий паливно-енергетичний комплекс: сучасний стан та тенденції розвитку / О.І. Амоша, Є.Є. Гарковенко // Економіка пром-сті N 4. С [3] Амоша А.И. Основные направления развития угольной промышленности с учетом потребности в угольном топливе / А.И. Амоша, Л.Н. Рассуждай, Ю.П. Ященко. Донецк: ИЭП НАН Украины, с. [4] Мирошников А.І. Сегментація ринку вугільної продукції / А.І. Мирошников // Торгівля і ринок України: Тематич. зб. наук. пр. Вип. 21, т.2 / Голов. ред. О.О. Шубін. - Донецьк: ДонДУЕТ, С [5] Мирошников А.І. Маркетингова діяльність підприємств оптової торгівлі вугільною продукцією. / А.І. Мирошников // Вісник соціально-економічних досліджень. Вип. 28/ Одес. держ. екон. ун-т; Редкол.: проф.. Звєрков М.І., доц. Ковальов А.І., проф. Буркинський Б.В., проф. Валуєв Б.І., проф. Редькін О.С., та ін. Одеса: ОДЕУ, С [6] Земляний М.Г., Ряузова Т.В. Конкурентний ринок вугілля України // Управленческие технологии в решении современных проблем развития социально-экономических систем: Монография/ под общ. ред. Е.В.Мартяковой Донецк:ДВНЗ «ДонНТУ», С [7] Статистичний щорічник України за 2009 рік / Держкомстат України; за ред. О.Г. Осауленка. К.:Консультант, с.

7 23 [8] Состояние мирового рынка угля в условиях угрозы замедления экономического роста/ Аналитический отчет компании по управлению активами «Велес менеджмент» (Украина). [9] Прогнозный баланс рынка энергетического угля в Украине в 2011 году [Електронний ресурс]. Режим доступу: [10] Рынки угля// Металл Эксперт (34). [11] Інформаційно-аналітичні звіти про розвиток вугільної промисловості України (за р.р.) [Електронний ресурс]. Режим доступу: RESUMÉ Na základě výše uvedených údajů lze učinit závě o kátkodobých pespektivách ozvoje thu s uhlím Ukajiny bez ohledu na poblémy, kteé dnes povázejí ekonomiku Ukajiny a odvětví uhelného půmyslu, pespektivy dalšího ozvoje nevedou k pochybám. Je to podloženo především následujícími důvody: ůst poptávky ve světě po enegetickém uhlí zvýšení vnitřní poptávky po uhelném palivu v souvislosti se snížením spotřeby dahého dováženého plynu na Ukajině, záměnou používání plynu v tepelných elektánách za uhlí a mazut, výaznou dynamikou metalugického půmyslu se začátkem zavádění enegeticky úsponých technologií a také s ůstem poptávky obyvatelstva absence altenativních zdojů enegie na Ukajině ve sovnání s dovozy dostatečně nízké ceny následkem dotací. Jde o základní předpoklady po ůst objemu vlastní těžby především po zabezpečení vlastních potřeb enegetického uhlí a snížení dovozu koksovatelného uhlí. Překonat kizi uhelného odvětví lze pouze koodinovaným úsilím všech zaměření vlády, podnikání a vědy. Jedním z hlavních stimulů zvýšení efektivnosti uhelného půmyslu se musí stát otevřený a tanspaentní vnitřní th s uhlím.