In recent years, eastern Poland has been purchasing coal en masse from Russia. Both individual consumers and heating plants have been relying on imported fuel from that country. Now, both have been forced to completely redirect their supplies, amidst a severe crisis in the fuel market. Coal shortages, high prices, and the inexorable passage of time are raising serious concerns about the upcoming winter.

The eastern wall has no alternative. Manufacturers and distributors agree on this.

“Our approach is primarily qualitative, meaning we consider the eastern frontier – customers who have traditionally received and consumed Russian coal. Our task will be to redirect coal to this market to meet their needs. This is because they have no other, alternative energy source,” said Tomasz Rogala, CEO of Polska Grupa Górnicza (Polish Mining Group) during a debate on the prospects for the mining industry held as part of the European Economic Congress. He spoke on April 27, a few days after the law came into force, providing, among other things, an embargo on the import to Poland and transit through its territory of coal from Russia and Belarus.

The motivation for this step, in the context of the Russian attack on Ukraine, was obvious. Unfortunately, its side effects were also obvious. If, according to data from the Katowice branch of the Industrial Development Agency, nearly 6 million tons of hard coal were imported from Russia to Poland last year (media reports often cite figures of around 8 million tons), then after the blockade of imports from this direction, it became necessary to offset this loss with at least an equivalent amount of coal from other sources. Otherwise, a shortage of this fuel will appear on the market, with all the consequences – high prices and panic among buyers. And this scenario is currently playing out. However, as industry representatives claim, it is not happening everywhere with the same intensity. There are regions where the situation is simply bad, and others where it is… very bad.

“There will certainly be a significant problem in the eastern part of the country, as most of the heating plants there, for logistical reasons, relied heavily on coal imported from the east.” Many of these heating plants don’t even have contracts with domestic producers, Łukasz Horbacz, President of the Chamber of Commerce of Polish Coal Sellers, said in early May during an interview at the SlaZag.pl studio.

As can be seen, both producers and distributors have identified Eastern Poland as the region facing the greatest challenges in securing coal supplies in the near future. But who exactly will be affected, and to what extent? Determining this precisely would require extensive survey research across virtually half the country, but analysis of local media, statements from local government officials and representatives of the heating plants they supervise, and a review of the Public Information Bulletins of these companies (especially tender procedures) allows us to form an opinion on this matter.

Coal from the Kuzbass Basin heated Suwałki and Olsztyn. Now, tariff increases are on the horizon.

“All supply chains that have so far served as our normal fuel supply chains for the company have been disrupted and will definitely have to be changed,” Michał Buczyński, president of Przedsiębiorstwo Energetyki Cieplnej in Suwałki, admitted on local radio in early April. He also made no secret of the fact that such a change would entail a drastic increase in fuel prices.

“Until now, a ton of coal fuel cost us approximately 350-390 PLN, while a ton of fuel imported from, for example, Colombia would cost almost 1,500 PLN per ton,” explained the president of PEC in Suwałki, explaining that Polish coal, due to its higher ash and sulfur content, was unlikely to be an option as a substitute, as it could generate problems for the company’s exhaust gas treatment systems. Therefore, in April, the company applied to the Energy Regulatory Office for a change in the current tariff (the new rates took effect on June 1). But that’s not all, as after the first price increase, the company intends to apply for the green light for another one.

“Seeing what’s happening in the market and the energy prices we’re currently experiencing, we can expect it to exceed 10%,” President Buczyński assessed the total balance of these increases.

It’s not difficult to establish that coal suppliers to the Suwałki-based PEC in recent years included companies such as KTK Polska (owned by Kuzbaska Kompania Paliwowa) and Krex, a company registered in Bielsk Podlaski (according to online trade information, 90% of its coal came from the Kuzbaskie Basin). It’s also easy to establish that the former also won the tender for the supply of 54,000 tons of fine coal for the 2021/2022 heating season for the PEC in Olsztyn. While the capital of Warmia has been systematically diversifying its heating mix for several years, placing a strong emphasis on biomass and waste incineration plants, it hasn’t completely abandoned coal yet. And, as you can see, it was Russian-licensed coal. As in Suwałki, customers here can expect a significant increase in heating bills this year. The increase could reach as much as 30%, which is unlikely to be welcomed calmly. Especially since heating prices in the city have already doubled in the past year.

No one comes forward with an offer, the city mayor calls Silesia “for a request”

Two heat price increases also took effect this year in Biała Podlaska (as opposition councilors eagerly point out, prices have quadrupled since July of last year). The local PEC terminated its contract with Polska Grupa Górnicza (the notice period expired at the end of 2021) in 2019, arguing that it was unfavorable. At the time, it was deemed more advantageous to import fuel from the east. Now, as Dziennik Wschodni reports, PEC has decided to conduct emergency coal purchases, but only one responded to requests for proposals sent to 11 companies, and the price of fuel has increased almost threefold compared to what it was recently priced at. “Today, I’m calling the mayors of mining towns through connections and asking them to help me organize 1,000-2,000 tons of coal so that residents can have heat in their radiators,” Tomasz Andrukiewicz, the mayor of Ełk, admitted with disarming candor during a meeting of local government officials organized in early June by the Association of Polish Cities to discuss rising electricity, gas, and coal prices.

The unusual initiative of the mayor of this Masurian town is easy to understand if one considers the final outcome of the tender announced by the local PEC (Electrical Enterprise) for the supply of 5,000 tons of coal. “The procedure in question is subject to invalidation, as no bids were submitted that were not subject to rejection,” announced the company, which in recent years has also purchased coal from companies importing it from Russia. The protest organized by tenants of an Ełk housing cooperative in early May in response to significant increases in heating fees, among other things, also helped to understand Mayor Andrukiewicz. Members of the cooperative then picketed in front of the cooperative’s headquarters, and the city mayor offered them organizational support. But where will municipal tenants go to protest if they face similar fee increases?

The tenders run through Warmia, Pomerania, Podlasie, Mazovia…

By browsing the online tender results of local PECs (but also municipal offices, community centers, and schools) in search of traces of Russian coal, you can practically cross the entire length of Poland east of the Vistula River. We’ll reach Ostrowiec Świętokrzyski (among the suppliers for Miejskie Energetyka Cieplna last season was KTK Polska; it’s worth noting that no valid bids were submitted in the tender for the purchase and delivery of coal for the 2022/2023 heating season), Mrągowo (in July of last year, in a tender for the supply of “nut” coal to the local MEC, the offer from Dameta from Bartoszyce was selected as the most advantageous – its website clearly indicates Russia as the country of origin of its fuel), Elbląg (over the past two years, a company advertising itself as a “direct importer” of coal from the Kuzbass basin won the tender for the local PEC), Łapy, Darłowo, and Grajewo. “We buy high-quality coal imported from across the eastern border, which has lower sulfur and ash content compared to domestic coal (…) If we can use better quality coal at a lower price, then, considering the economic situation and environmental protection, the company uses imported coal,” said Marek Zawadka, president of PEC Żyrardów (Masovian Voivodeship), in a local biweekly just under a year ago. Today, the same president says in a radio interview that he is trying to “make a nod” to Polish mines and suppliers to obtain fuel for the next heating season, as it is significantly cheaper than that imported from sources other than Russia. He also leaves no doubt that heat prices for his customers will rise.

The heating sector will face a 2 million ton shortfall. Will “everything” be fed to boilers?

Such examples could be multiplied for a long time. However, the point isn’t to point fingers at heating companies that have purchased Russian coal in the past, or at companies that legally imported it from that source (Polish importers are currently on the verge of bankruptcy, along with a whole host of their subcontractors). Rather, it’s to understand the scope of the necessary intervention. However, heating companies themselves seem convinced that despite their own actions and those taken by the government (in early June, the Ministry of Climate and Environment reported that Poland had secured over 8 million tons of coal, mainly from Colombia, the USA, South Africa, Australia, and Indonesia), it will be impossible to accumulate adequate reserves before winter.

“There will be shortages. We analyzed the coal gap in heating plants and found that there will be a shortage of approximately 2 million tons this year,” Jacek Szymczak, president of the Polish Chamber of Commerce for Heating, stated during the aforementioned meeting of local government officials. Therefore, he called for an urgent amendment to the Council of Ministers’ regulation on heat supply restrictions, specifying the order in which supplies are limited for various categories of entities, which would allow for the rationalization of coal consumption. He also urged the suspension of emission standards for heat sources. “Because we will have to burn everything that can be burned in boilers. Neither sulfur, ash content, nor calorific value will be as important,” Szymczak predicted.

The mood among heating companies is even gloomier, as the problem with coal availability and price is another blow the industry has suffered in recent years. Rising CO2 emission certificate prices (by 162% between the beginning of 2021 and April 2022, according to IGCP data) and the reluctance of banks to finance investments in companies using fossil fuels had already called into question their profitability and ability to finance the necessary transformation. Now, their situation has worsened even further. “Many companies faced a dilemma: either pay for the fine coal or buy certificates. And heating company owners will now face a huge problem of how to cover losses and make up for these negative results,” warned the mayor of Ostrowiec Świętokrzyski, Jarosław Górczyński.

Households are in greatest need

Heating plants and the customers for the heat they produce are just one group affected by the current disruptions in the coal market. The second group – as is very clear from the statistics on coal imports – are individual customers, who received the majority of coal imported from outside Poland last year. The statistics do not reveal the specific regions to which the imported coal from Russia was sent, although the addresses of the dealers involved indicate that, in this case, a significant portion of the customers also lived east of the Vistula River.

As of today, they know exactly as much as any other individual coal buyer in Poland – the government is willing to subsidize up to three tons of coal this year, provided they find dealers willing to sell it to them at a price no higher than PLN 996.60 gross per ton. Since the government subsidy would be a maximum of PLN 750 per ton, sellers would have to collect a total (from the customer and the state) of no more than PLN 1,746.60 per ton. Whether this will happen remains an open question – at the beginning of June, when the government presented its proposal, the rates listed by coal dealers differed significantly from the above amount.

Of course, for a discussion about the transaction price to be meaningful, the subject of the transaction must exist: coal, which in the case of eastern Poland must be delivered either from domestic mines, mostly located in Silesia, or from ports located on the Baltic Sea. Both solutions have their limitations. Perhaps this is precisely why initiatives such as the May decision by the State Forests authorities to facilitate the purchase of firewood by individual customers are being undertaken. This, as the Ministry of Climate and Environment openly admitted, was a response to the “rising prices of energy and fuel materials.”

“This is particularly important for residents of rural areas and small towns whose households are not connected to municipal or urban heating systems,” the ministry stated at the time.

Coal from Russia accounted for more than half of all imports

Last year, Russian coal accounted for over 61% of all imports of this fuel to Poland, while in the thermal coal category (and the entire volume of Russian supplies was thermal coal), its share reached 87%. Its customers were mainly heating companies and individual customers.

According to data from the Katowice branch of the Industrial Development Agency (ARP), the first quarter of this year brought imports of 2.84 million tons (including 2 million tons of thermal coal), of which nearly 1.2 million tons came to Poland from Russia (i.e., 41.6% of the total and over 58% of thermal coal). Considering that trade from that direction has almost ceased since the outbreak of the war, it can be assumed that this is the amount of coal that actually reached Poland during the first two months of the year. This was slightly less than during the same period last year (when nearly 1.3 million tons were imported from Russia, representing 54% of total imports), although it is worth noting that the overall import volume in the first quarter of this year was almost half a million tons higher than a year earlier.

Michał Wroński, journalist at SlaZag.pl