WARSAW — Poland’s leading coal mining company has halted production at two of its mines for two weeks because of the spread of coronavirus among at least 240 of its workers.
It’s just the latest blow for Polska Grupa Górnicza (PGG), Europe’s largest coal mining company, which is reeling from plummeting demand for coal from Polish power plants, rising mining costs, the expansion of renewables, increasing foreign competition and a clash with its powerful labor unions.
In a sign of its troubles, late last month the Agia Trias bulk carrier carrying some 140,000 tons of coal from Colombia arrived in the Polish port of Gdańsk. It makes more economic sense for Polish utilities to import coal from across the Atlantic than across the country.
The Colombian shipment was reportedly contracted by Poland’s biggest power company, state-owned PGE, which paradoxically has a 15 percent stake in PGG. In 2018-2019, Poland imported some 35 million tons of coal, around a quarter of domestic output during that period, according to an analysis by the Polish energy website Wysokie Napięcie.
Already ailing, PGG is being hammered by the coronavirus. The government in March locked the country down to contain the spread of the disease, a step that caused energy demand to fall by an annual 13 percent. In response, PGG aimed to cut work hours and pay by 20 percent for three months and freeze investment to qualify for the government’s “anti-crisis shield,” an economic relief and stimulus package.
Already at odds with the management over pay and frustrated by Polish utilities buying imported coal, the unions are now fighting tooth and nail against any wage cuts.
“If the company does not take action and the demand for coal decreases further, PGG will generate losses of 240 million złoty (€53 million) per month. In the worst-case scenario after three months, this means a loss of over 700 million złoty,” PGG’s CEO Tomasz Rogala said in a statement.
Miners refused to go along with those plans. Already at odds with the management over pay and frustrated by Polish utilities buying imported coal, the unions are now fighting tooth and nail against any wage cuts.
The unions gave the government and PGG’s management until May 4 to table a plan that would address the company’s deeper problems and guarantee jobs.
“We don’t want to hear three months from now that the cuts didn’t work and more cuts are needed. We want to be sure that the company is still around by that time and in years to come,” said Patryk Kosela, spokesman for the Sierpień’80 trade union.
PGG’s management insists that the company will be in even more trouble if workers don’t agree, arguing that the union counterproposals fall 100 million złoty short of the company’s plan.
“The position of the miners is unacceptable because it won’t save the company,” Rogala said.
The slump in demand for domestic coal, which generates 74 percent of Poland’s electricity, has left at least 16 million tons of coal piled up across Poland, enough to power the country’s coal-fired plants for six months, Wysokie Napięcie calculated.
A wider problem
PGG isn’t the only European coal miner grappling with the challenge of the coronavirus.
The outbreak forced Czech company Sev.en Energy to shut down a lignite mine in the western part of the country in April.
In Romania, where the state-owned lignite miner and power producer Complexul Energetic Oltenia generates a quarter of the country’s power, a €251 million state loan aimed at saving some 13,000 jobs was approved by the European Commission in late February.
The loan could stabilize the company as Romania’s economy is shaken by the coronavirus outbreak.
“The current crisis could give CE Oltenia sort of a short-term lifeline with the government wanting to avoid any trouble that it can and also because investment in green energy is also going to be hampered,” said Radu Dudau, director of energy Policy Group, an energy think tank.
The outlook for PGG is grimmer.
Even if management reaches an agreement with unions at PGG, the peace that it will buy is going to be only temporary, said Joanna Maćkowiak-Pandera, CEO of Forum Energii, a Polish think tank.
“Domestic coal is uneconomic and Poland wouldn’t want to further increase its utilities’ reliance on coal imports in the longer run. The answer is to reduce the use of coal, first of all in the heat sector and in households, then in the power sector,” she said.
“This is an unprecedented time. The government will have to think twice before giving money to save Polish coal in the current crisis, when literally everybody, not just miners, needs help,” she added.
That’s not a comfortable position for coal miners — long used to being the country’s most powerful labor movement dating back to communist times.
“Miners are to be treated worse during the pandemic,” said an April 23 statement from Sierpień’80, adding that the government’s anti-crisis rescue package is there for “fat cats, rich companies and foreign firms, but not Polish companies, Polish mines and Polish miners.”