GENERAL COAL MARKET SITUATION FORECASTS FOR 1973

I. THE GENERAL ECONOMIC SITUATION - TRENDS IN INTERNAL ENERGY CONSUMPTION

Economic growth during the past year has differed markedly as between countries. While expansion continued to be vigorous in France throughout 1972, enabling the GNP to increase by 6 % compared with the previous year's level, the German Federal Republic and the Benelux countries saw a significant increase in economic activity in the first half year only to find this slowing down somewhat in the second half. The annual growth rate of the GNP between 1971 and 1972 has thus not differed materially from that recorded for 1970-71, being 3 % in the German Federal Republic, 3 75 % in the Netherlands and slightly over 4 % in Belgium. Economic expansion rates in Italy have not been fast moving either, where the GNP has been increasing by 3 % on average annually, despite a slight pick-up in market conditions during the year. Even this has not enabled any useful improvement in production capacities to take place.

In the three acceeding countries, the 1972 results have been scarcely any better, the GNP in the UK and Ireland having grown by 3 % and 4 75 % in Denmark.

The forecasts for 1973 outline a lively upsurge of market activity in the main industrialized countries both within and outside the Community, the latest market indications confirming this forecast. In the US the GNP should increase by 6 % between 1972 and 1973, ie at the same rate as for 1971 to 1972. A similar increase is forecast in Canada and a clear improvement is expected in Japan (10 %).

In the enlarged Community, the prospects of internal demand growing are improving. It is likely that the growth rate of management outlay will continue to be fast both in terms of value and volume. A recovery in investments is anticipated especially in Italy and the Netherlands, where a recession was seen in 1972.

Economic activity should increase at a greater pace, impelled especially by these two elements of demand but also due to outside expansion. The acceleration could be especially lively in the Federal Republic of Germany, where orders received have greatly increased in the last months of the year.

In France, the expansion of overall demand has been maintained and makes it possible to expect an accelerated expansion rate in 1973, especially in industrial expansion. Taking into account the anticipated strong economic expansion rate in Italy and, to a lesser extent in the Netherlands and the UEBL, and that the production in the acceding countries should also show an increased growth rate, the increase in the GNP of the enlarged Community in 1973 should reach some 5 %, and that of industrial production a little over 6 % on average per annum.

TABLE 1

>PIC FILE= "T0012218"> Given these conditions one cannot see an improvement in the employment market of the enlarged Community. Since most of the economies of member countries are in the first stage of market upsurge, in which productivity advances are usually significant, the number of unemployed would be reduced only to a limited extent. In Italy, in the UK, in Ireland and the Netherlands unemployment levels should remain at high levels.

Moreover, the likelihood of inflationary trends continuing is great, bearing in mind the prospects of improved demand and economic activity. Since increases were in fact greater towards the end of 1972 and, despite improvements in productivity, an easement was not seen in terms of production costs. It is also to be feared that the costs of raw materials are bound to adjust to this increased demand from industrialized countries. It is also likely that, in the current market upsurge, undertakings will be able to recoup their sales prices from price increases which they have already had to make or will have to make.

Community exports may be accompanied by some reduction in surplus. In most member countries, the rate of imports should be greater than in 1972, backed particularly by a more steady internal demand for foreign products in Community markets.

The Community's external balance of trade may be accompanied by a slight reduction in surplus. In most member countries imports should grow somewhat faster than in 1972, caused primarily by a steadier domestic demand for more competitive foreign goods in the Community markets.

The energy consumption of the Community of Nine in 1973 will be some 1 312 million tons c.e., representing an average increase of 6 71 % as against 3 73 % for the previous year.

Among the statistics of the new members those of the United Kingdom have been distorted by the strike in the beginning of 1972 and during this year energy consumption hardly exceeded that of the previous year, the average increase for the Six being 5 % (see Table in Annex 1).

TABLE 2

>PIC FILE= "T0012219"> Coal's recession in both absolute and relative terms continues, but its share of the overall energy consumption differs widely from country to country. In the United Kingdom the pattern of energy consumptions is rather more biased towards coal (35 % of the total), while for the other countries the percentage ranges between 24 and 6 %, that for Germany being 22 %.

While oil is holding its position with an average of 60 % of the total, natural gas is increasing its share by reaching 13 % of needs.

The enlargement of the Community, with the accession of the United Kingdom, effectively doubles Community coal production, yet without greatly changing the overall pattern of this industry on the Community level. Firstly, in the United Kingdom practically the entire production is used within the country, only 2 % being exported. The abolition of frontiers is unlikely to make significant changes in the trade flow between the United Kingdom and the continent, in the short term at least, coal being without duty and transport being saddled with cross-channel costs. In addition, the UK coal industry is a labour-intensive industry, as are those of the former Community of Six, with all the social and regional problems this entails.

In practical terms, all the information for the new member countries is not yet available for this first "balance sheet" for the Nine, and there are also occasional problems of statistical alignment. Despite a few gaps of this kind, it is possible to form an overall picture of the structure of the enlarged Community and to identify the place of coal on its own and in relation to the other energies in the major consumption sectors. The tables for 1971-72 cover the nine countries as far as possible, to make them more graphic and comparable.

II. BREAKDOWN OF INTERNAL COAL DEMAND

1. TREND IN OVERALL INTERNAL DEMAND

The inclusion of new members, the UK primarily, affects the overall pattern of the coal market as shown in Tables 3 and 4. The consumption pattern in the United Kingdom is, in fact, different from that of the Community of Six. Power stations account for nearly half of total consumption and coking plants for a quarter, while in the Community of Six the situation is the reverse, carbonization accounting for more than half and power stations for 30 % of consumption.

The structure of coal consumption in the Community of Six has no intrinsic connection with the general level of industrial production. Carbonization depends on the balance between coke and the demand of the steel industry. With power stations, apart from variations in electricity demand, the policy on plant and conversion from one fuel to another has a significant effect on coal consumption.

Despite the economic recovery in 1972, which should foreseeably continue in 1973, coal consumption should recede and decrease from 180 to 160 million tons between 1971 and 1973, amounting to a reduction of 11 % in two years.

In the United Kingdom, overall demand for coal over two years will go down from 128 to 114 million tons, in other words also an 11 % (1) reduction, but the estimate for the main category, power stations, is unresolved until the detailed application of the Coal Industry Bill is known, according to which specific subsidies will be allotted to coal going to this consumption sector. In any event, all the Coal Industry Bill clauses can do is to consolidate the present position of coal.

TABLE 3

>PIC FILE= "T0012220"> Due to the cutback in coke utilization in the miscellaneous industries sector and in domestic uses, the share of the steel industry in overall coke consumption is growing and will reach 80 % in 1973.

Total coke consumption in 1973 in the Community of Nine will go up to 76 million tons, a figure slightly above that for 1971. (1)This corresponds to an annual 5 % average reduction.

TABLE 4

>PIC FILE= "T0012221"> 2. TRENDS IN INTERNAL DEMAND BY SECTORS (a) Power stations

After a temporary slowing in 1971, internal consumption of electricity has resumed a growth rate corresponding to the long-term trend, a rate which is slower in the UK than in the other member countries. In total figures, power consumption will reach 1 018 TWh in 1973, an increase of 63 TWh over 1972, or 6 77 % (7 73 % in the Six, 5 73 % among the new member countries).

The 1973 breakdown by type of firing or source of the power stations in the Community would, therefore, be as follows, given average hydraulicity and temperature: >PIC FILE= "T0012222">

Nuclear energy's share still remains at 6 76 % of the total, or 10 900 MW installed capacity, half of this being in the UK. At present 17 000 MW are being built, preparatory to raising installed capacity to 28 000 MW. Beyond this there are plans for new reactors with an installed capacity of 17 600 MW, the largest part of this at 13 000 MW being in Germany.

Conventional power stations not only maintain a predominant position but new plant of this type are called for in 1973 to cover two-thirds of increased demand.

TABLE 5 >PIC FILE= "T0012223">

In all coal-producing countries, except for the UK, coal's share in supplying power stations is receding both in percentages and absolute terms. Coal's contribution for 1973 is estimated at 38 % with 108 million tons c.e. for the Community as a whole.

The table in Annex 2 shows the share of each energy source in supplying fuel to power stations for the three years under review. Even with so short a period as three years, it is possible to recognize the changing pattern of supply to power stations.

Running counter to the forecasts, coal consumption in Germany during 1972 is receding slightly, a trend which should become more marked in 1973.

New aid measures, decided in 1972 and aimed at setting up purely coal-fired power stations up to a maximum of 6 000 MW capacity, should replace the existing "Verstromungsgesetze". Until now orders have been given for the installation of 2000 MW. Continuation of this programme will depend on the amount of credit available in relation to the required subsidy per unit of installed capacity. Lignite, oil products and especially natural gas are advancing at a rapid rate.

In France, regression has been faster : 25 % of outlets in two years, following the conversion of coal-fired power stations to oil-fired and, in 1973, oil will cover 56 % of supplies to power stations. There is a price bias towards oil, despite the aid to indigeneous coal.

In Belgium, coal with its 2 million tons, will account for only 15 % of fuel supplies to power stations. Additional requirements are largely covered by oil.

In the Netherlands, less than one million tons of coal, or 4 %, will be consumed in power stations in 1973 ; oil tonnage will decrease similarly ; the gap and overall increases in demand being met by natural gas, which will account for three-quarters of fuel supplies.

In the UK, a substantial part of supplies, nearly two-thirds, will be covered by coal, due to the country's energy supply structure and the type of power stations. The share of natural gas, while on a very limited scale, has still increased from 1 to 4 % in two years. The actual implementation of aid for the supply of steam coal to power station recently decided upon is as yet unclear. The figure of 58 76 million tons c.e. represents the foreseeable situation without aid and should be regarded as a minimum, likely to be exceeded by several million tons.

The trend in consumption of coal and lignite respectively over the three years under review is shown for each of the Community countries in Table 6.

TABLE 6 >PIC FILE= "T0012224">

Out of an overall coal consumption of 121 million tons c.e. in 1971, 12 million tons c.e. were imported from third countries. 70 % of this amount originated from Poland and the US, though Australian imports have begun to show. The breakdown for 1971 both by countries of origin and importing countries is shown in the following table:

TABLE 7 >PIC FILE= "T0012225">

Coal imports in 1971 for the Community of Six went down to below 7 million tons as opposed to 9 million tons in the previous year. The United Kingdom imported 3 76 million tons in 1971 but a drastic cut in these figures is anticipated during 1973. On the other hand, Danish imports during the same year should go up to 3 75 million tons again.

Four-fifths of this coal comes from Poland and the remainder from the USSR.

(b) Steel industry

For the Community of Six signs of recovery were seen from the beginning of 1972 and Community steel production is now running at 113 million tons, an increase of 10 million tons over 1971 and 3 79 million tons higher than 1970. External markets have had a great impact on steel production, while the internal market has remained fairly steady despite some build-up in stocks by the consumers.

In the United Kingdom the first indications of a pick-up were somewhat later, ie during the second half year of 1972, the improvement being limited.

Basic steel production was up to 26 million tons, a slight increase over 1971. A similar upward trend was seen among the major manufacturing industries of the world. Both in the US and in Japan crude steel production in 1972 did increase by 8 % compared with the previous year.

The accession of the United Kingdom, Denmark and Ireland will have a stimulating effect on the steel market, which will benefit from the impetus given to it by the processing industry, but this will still be limited in 1973, depending on the progressive lifting of customs duties.

In 1973, actual consumption of crude steel might increase by a further 5 % as a result of concentrated investment policies in this sector. No substantial compensating moves may be expected in terms of exports to third countries, these having already reached a fairly high level.

Crude steel production should stand at 119 million tons for the Six, to which a figure of 28 79 million tons should be added for the three new member countries, making an overall Community total of 148 million tons. This estimated figure for crude steel production corresponds to some 104 million tons of pig-iron production, 86 million tons of this being for the Six.

TABLE 8 >PIC FILE= "T0012226">

There should be no supply problem in raw materials, in terms of quantity at least, during 1973. A continuing reduction in the coke rate in blast furnaces, which went below the forecast figures in 1972, is to be anticipated. The launching of new steel plant and the continuing improvement in blast furnace operation should further reduce the coke rate further to an average figure of no more than 522 kg in 1973.

TABLE 9 >PIC FILE= "T0012227">

In 1972 steel and pig iron production for the Community of Six was above the forecasts made a year before, the outcome of persistent underestimates of the scale of steel industry movements both upward and downward. Such underestimates were, however, compensated for by an over-estimate of the coke rate, according to which the coke consumption of 46 76 million tons in fact equalled the actual figure. In 1973 an increase of demand for coke can be expected for the Community as a whole despite the anticipated reduction in the coke rate.

TABLE 10 >PIC FILE= "T0012228">

(c) Domestic heating

The use of solid fuels in the domestic heating sector is estimated at 45 million tons c.e. for 1973, or 15 % of overall Community demand, nearly half of this amount being consumed in the United Kingdom. This type of use is negligible in Denmark but accounts for nearly one million tons in Ireland.

The pattern of heating in the United Kingdom differs from that on the Continent. The use of electricity as a heating medium is in wide use, while individual cookers and central heating are rarer. The open fire still maintains a significant position. Within two years, from 1971 to 1973, a 23 % loss of outlets is to be expected, though the rate of reduction is likely to slow down in 1973 according to forecasts.

Coal, both bituminous coal and coke, will experience pressure from the other energies in all the producer countries, and this includes the United Kingdom, where the difference between coal and domestic fuel prices is less great than on the Continent. Available statistics do not give a clear picture of the relative positions of coal and the competing energies, oil and gas, in supplying the domestic sector.

TABLE 11 >PIC FILE= "T0012229">

The breakdown of different categories of solid fuel by countries consumed in the domestic sector will be found in the Table in Annex 3.

(d) Other sectors - Miscellaneous industries

The favourable market conditions predicted for 1973 show a possible slowing down in the loss of coal outlets for the miscellaneous industries sector, which will, however, still represent an average for the Community of 25 % over two years. The rate of regression is less marked for coke, which is increasing its share in certain countries and specific consumption sectors such as chemistry and electrometallurgy ; the tonnages involved are small.

TABLE 12 >PIC FILE= "T0012230">

Table 13 shows the share of different fuels in supplying the "miscellaneous industries" sector for the Community as a whole. The average figure of 9 % for 1973 for solid fuels covers very widely differing items according to countries and the progress made in substitute energies, which is itself directly linked to the relative scale of indigenous coal production. This percentage is higher in the United Kingdom, 19 %, going down to 9 % in Germany and 7 % in France. It is below 3 % for countries without coal production such as Ireland and Denmark.

Oil maintains a dominating position with 67 % of the total but the use of natural gas is advancing rapidly and in 1973 this fuel should cover a quarter of energy consumption in this sector, the maximum figure being 74 % in the Netherlands.

TABLE 13 >PIC FILE= "T0012231">

- Railways and gasworks

Total coal consumption in these two sectors will not rise beyond 3 74 million tons in 1973, or 1 % of overall Community consumption, four-fifths of this being in Germany. In the United Kingdom consumption in these two sectors has become minimal, although it stood at 16 million tons five years ago, nearly all of it going to gas works, ie 15 million tons, the changeover in railway equipment having already taken place then. The disappearance of conventional gasworks is primarily due to the rapid introduction of natural gas.

III. PRODUCTION OF METALLURGICAL COKE - COKING PLANT PRODUCTION CAPACITIES AND THEIR SUPPLY OF COAL

Overall metallurgical coke production for the Community of Six showed a regression in 1972 mainly due to the situation in Germany, where the need to adjust the balance in relation to accumulating coke stocks has proved of limited effect, coking plant activity being linked to fulfilling gas sale contracts. A slight regression was also noted in France. Forecasts for 1973 foresee activity picking up again, except in Germany. In the Netherlands production will increase by nearly a half, reaching 2 79 million tons as a result of new coking plants coming into operation.

Of the three new member countries only the United Kingdom possesses a carbonization industry. Ignoring the 1972 results affected by the strike, the forecasts for 1973 see a volume of production scarcely above that of 1971.

Total production for the Community of Nine should stand at 83 million tons, somewhat below the 1971 level. The coke balance will create new undistributed stocks of nearly 4 million tons in Germany and 1 75 million tons in the United Kingdom, where the undistributed stock level was very low at the beginning of the year.

TABLE 14

>PIC FILE= "T0012232"> The steel industry in the Community of Six is expanding its carbonization capacity, which in 1973 should reach 32 million tons as against only 23 million tons five years ago. This is the result of investment programmes decided in 1969/70 at a time of high economic activity which had led to certain supply difficulties over coke. Covering the coke requirements of the steel industry from its own coking plants will then reach 60 %. Since coke supplies are provided as a priority from coking plants linked to the steelworks, the steel industry is thus transferring demand fluctuations chiefly on to the coal industry coking plants, where the surplus capacities are to be found ; this will be all the more so as the coke requirements of the miscellaneous industries and domestic users continue to fall.

In the United Kingdom the structure of coke supplies is different from that of the Community of Six. The steel industry relies for its supplies of coke, about 13 million tons, almost entirely on its own coking plants. The output of the coal industry's coking plants, with a capacity of about 4 million tons, goes to foundries and other industrial uses. No substantial changes in coke demand is to be anticipated for 1973.

TABLE 15

>PIC FILE= "T0012233"> In the Community of Six in the years between 1970 and 1972 the reduction in coking plant activity led to a reduction in the demand for coking coal, which chiefly affected the availability from the Community coal industries. After a recession in 1971, imports from third countries in fact nearly regained in 1972 the level they had had in 1970. The price difference between imported coal and Community coal favoured the former due mainly to particularly low sea freight rates, which lasted until September 1972. The position of Community coking coal has, therefore, deteriorated faced with the greater price divergence with imported coal, and this despite the aid measures for production according to Decision No 70/1. The reduction in the intra-Community volume of exchange, ie the deliveries of coking coal from Germany to the other Community countries, is significant in this respect.

The situation in 1973 will depend on the trend in sea freight rates, which have risen recently as a result of the heavy demand for grain transport capacity. At the time of writing there is also uncertainty about the introduction of aids to coking coal deliveries in the Community following Decision No 70/1.

In the United Kingdom, due to the trend in the quality of available indigenous coking coal and the need of securing good coking coals with a low volatile matter content by blending, the British Steel industry imported some 1 72 million tons in 1972 and will make purchases on a similar scale in 1973.

TABLE 16

>PIC FILE= "T0012234"> The Table in Annex 4 shows, for each member country, a breakdown of the trend in supplies to coking plants over the three years under consideration, giving indigenous coal, coal from other Community countries and from third countries. The figures are also reproduced in percentages in the diagram opposite.

COKING-PLANT COAL SUPPLIES ACCORDING TO SOURCE COMMUNITY - ESTIMATES 1972

>PIC FILE= "T0012235"> IV. COAL PRODUCTION AND FINANCIAL POSITION OF THE COAL INDUSTRIES

1. Coal production

In 1972, coal production in the enlarged Community stood at 251 million tons c.e., a reduction of 40 million tons c.e. over the previous year. The largest part of the cut-back was in the United Kingdom, namely, 26 million tons, of which 21 million tons c.e. were consequent on the strike at the beginning of the year.

In Germany, before pit stockpiling - and as expected - production is to fall below the 112 million tons c.e. level it maintained for five years, decreasing by 9 million tons c.e., 2 of these being due to unemployment.

In 1973, production in Belgium, France and in the Netherlands has been reduced, according to the contraction programmes, at rates of 5 %, 6 % and 30 % respectively. The trend in German production will depend on sales prospect, and the figure of 96 million tons (national figures) is given purely as an indicative one and with every reservation. Despite this new and substantial reduction, surplus availability is still expected in the form of additional pithead stocks.

In the United Kingdom, a production total of 126 million tons c.e. is expected, a reduction of 9 million tons c.e. over that of two years ago, the recession rate being less marked than for the other Community producers.

TABLE 17 >PIC FILE= "T0012236">

For the Community of Nine as a whole 1972 saw the closure of 18 pits representing an output of nearly 7 million tons. A breakdown of these closures according to coalfields will be found in Table 18.

In 1973 in the Community of Six the closure of a further 14 pits is planned, representing an output of 14 75 million tons. No information is available for the United Kingdom.

TABLE 18 >PIC FILE= "T0012237">

2. Output and wages costs

For the Community of Six as a whole the output per shift underground rose by 4 71 % in 1972 as against 2 71 % in 1971. This more favourable trend is due especially to an improvement in the German pits, with 5 73 % against 2 71 %. In Belgium, on the other hand, output has remained stagnant for the second year running.

In the United Kingdom underground OMS had risen to 3 380 kg in 1971 only to fall below this figure in 1972 due to the strike. OMS has recovered strongly since then and should stand at 3 660 kg in 1973, which would be an increase of 8 % in two years.

For the Community of Six in 1973 the annual output increases follow the existing trend. They may have to be revised upwards if the expectations of recovery come about despite the high level of mechanization already achieved in the mines.

TABLE 19 >PIC FILE= "T0012238">

>PIC FILE= "T0012239">

3. Cost price - Receipts

The improvement in productivity noted for the Community of Six as a whole has not been able to offset increases in wages and equipment costs resulting in 1972 in a substantial increase in cost prices in mines. Similarly, cost increases have been only partly offset by increases in receipts from higher prices, leading to a worsening financial position of most undertakings. To this is added, especially in Germany, the accumulation of unsold pithead stocks, showing up as losses in overall receipts and in a worsening of the liquidity problems.

Table 20 contains no information for the United Kingdom, the available data not making an estimate of cost price and receipts for 1972 possible. There are also problems of comparability in calculating costs and receipts in the Community and the United Kingdom. Yet an abnormal increase in 1972 production costs can be noted as a result of the strikes.

TABLE 20 >PIC FILE= "T0012240">

During 1972 list prices for Community coals showed some increases, but of a scale and range which is less than those of the two previous years.

Annex 5 gives the list price without tax, ex-pit for the main categories offered by the main Community coalfields on 1 January 1972 and 1973. For certain coalfields this table shows a price stability, especially for industrial coals.

The increases which have occurred are between 1 and 2 % for anthracite, between 4 and 8 % for low volatile and between 2 and 5 % for high volatile coals and between 4 and 6 % for coking coals and blast furnace coke.

Table 21 below shows the divergences between the list prices in the Community for specific grades on 1 January 1973.

TABLE 21 >PIC FILE= "T0012241">

At the beginning of 1973 no significant price movement is announced by the Continental producers. British producers have published their first price lists applicable to the enlarged Community.

4. State financial interventions

Direct aid to the Community coal industry is based on Commission Decision No 3/71. This was followed by aid given to the production and delivery of coking coal and coke for the steel industry, based on Decision No 70/1, which came to an end at the end of 1972.

Indirect aid consists of various governmental measures, such as aid for deliveries to power stations ("Verstromungsgesetze"), subsidies for research, etc., which have to be notified to the Commission according to the provisions of Article 2, paragraph 1, first subparagraph of Decision No 3/71.

The total of these aids contained in Table 22 does not include financial measures of Member States in the field of social security in the coal industry (Article 4 of Decision No 3/71), provided that these are social measures of a general character or past charges having no direct connection with current production. The total of these latter measures reached approximately 1 76 thousand million units of account in 1972. Compared with 1971 this is an increase of 11 73 %, while in 1971 the rate of increase was 6 72 %.

The estimated total of the aids described in Table 22, which as a Community average had not increased by more than 0 713 unit of account per ton, has risen at a considerably greater rate in all the countries in 1972. For the Community as a whole this increase is 0 780 u.a./tons. This trend is very pronounced in Belgium where, as a result of a big increase in aids to cover mining losses, the total of direct aids per ton has risen rapidly from 6 724 u.a./tons in 1971 to 10 u.a./tons in 1972. Aids to German mines which, in 1971, were down to a figure of 1 779 u.a./tons have increased again in 1972 as a result of increased payments under the provisions of Decision No 70/1 and also due to the special measures taken to assist Ruhrkohle AG. In 1972 the combined total of direct and indirect aids to German mines went up to 2 746 u.a./tons.

In 1972, for the Community of Six, 1 791 u.a./tons, or half the total, represented aids intended to avoid serious disruptions in the economic and social life of a region not yet possessing adequate reemployment prospects (Article 9 of Decision No 3/71).

In December 1972, the British Government introduced the "Coal Industry Bill" to Parliament, providing a programme of financial aid for the coal industry limited to a period of from 3 to 5 years. The "Coal Industry Bill" consists of two types of measures covering up to a maximum of almost 1 200 million pounds. By means of a new assessment of assets and the writing off of accumulated losses, taking the form of a reduction of £475 million in the debts to the State, this operation will reduce the financial charges which form part of the production cost price. In addition, the National Coal Board will receive aid for either 3 or possibly 5 financial years, ending either in March 1976 or 1978, whose ceilings are £490 and 695 million respectively. This aid covers social and regional measures, coal and coke stocking and the supply of coal to power stations and coking plants.

TABLE 22 >PIC FILE= "T0012242">

5. Employment trends

The average total of employed in the Coal Industries of the Community of Six (workers, salaried staff and apprentices) was 384 000 in 1972, a reduction of 8 74 % compared with the previous year. Underground staff accounted for more than half the total labour force, the figures dropping from 225 700 to 207 400, a reduction of 18 300 workers. The reduction rates varied from 4 74 % for Belgium to 17 77 % for the Netherlands. It should be noted that, once the trend of diminishing numbers of men employed in the German coal industry had slowed down, this led the annual reduction rate in the Community of Six to go up to 8 72 % in 1972 as compared with 4 76 % in 1971.

TABLE 23 >PIC FILE= "T0012243">

The concentration toward the 40/50 age group among underground workers, a trend noted in previous years, continued in 1971 but at a slower pace. The foreign labour force in the Community has risen in absolute terms from 48 800 in 1970 to 51 800 in 1971 ; the latter being about 12 75 % of the total labour force.

More than 70 % of this foreign labour force consists of workers coming from Turkey and North Africa. The latter have remained stable in numbers and it is the Turkish workers who have supplied the main part of the supplementary foreign labour force required in mine working, 23 900 at the end of 1971 as against 19 800 at the end of 1970.

In the United Kingdom, the number of underground workers on the books will stand at 179 000 men in 1973. The annual reduction rate is about 6 %, a figure slightly below that of the Community of Six. For the two main producer countries, Germany and the United Kingdom, the breakdown by age for all mineworkers showed a different form in 1971: >PIC FILE= "T0012244">

In contrast with the situation in the Community of Six, the proportion of foreign manpower in the United Kingdom collieries is still small.

V. EXTERNAL TRADE

1. Imports from third countries

World trade in coal was maintained in 1971 and 1972 at about 145 million tons, a level slightly lower than 1970, which was a peak in steel activity. The Community of Nine had a share of 22 % in this trade with 31 million tons of imports. Japan is still the largest importer, whose imports went up to 49 million tons in 1972 after a reduction in 1971, following the pattern of renewed activity in the steel industry. For the countries of Eastern Europe imports total 31 million tons, made up virtually entirely by movements within COMECON.

With exports on the world scale the continued reduction of deliveries from the United States at the expense of Australia and Canada is to be noted. The United States, with more than 50 million tons in 1972, still makes up 45 % of total exports to free economy countries. Australian exports reached 24 million tons in 1972, mostly consisting of long-term contracts with Japan. In its search to diversify its outlets, Australia is beginning to make inroads in the European market. Canada has experienced considerable difficulties in launching its exports, which have only got under way since 1970. Particular problems are those of recruitment, geological difficulties in mining and difficulties in coal preparation, with all that this entails for the financial aspect. Nevertheless, Canada is promoting the expansion of its exports, which in 1972 stood at nearly 8 million tons, consisting mainly of long-term contracts with Japan and also some trial cargoes for Europe.

Poland is raising its production potential fast and output has risen to 150 million tons in 1972 as against 124 million tons five years ago. Exports are above 30 million tons a year, over half of which is going to free economy countries. Coking coal plays a growing part in these figures with some 7 million tons.

The USSR, with its production of some 500 million tons, will maintain its exports at the reduced level of 24 million tons, 10 million tons of which will go outside the COMECON area.

TABLE 24 >PIC FILE= "T0012245">

Table 25 shows, for the three years concerned and for the Community of Nine, a total import figure increasing from 31 million tons in 1972 to nearly 33 million tons in 1973, but this covers different headings depending on the countries. A distinction should be made between the Community of Six, traditional importers and the United Kingdom, a newcomer to the market. With the Community of Six the figures exemplify the different policies pursued by each of the countries. The actual figures of 1972 and the forecasts for 1973 show a growth of imports in Belgium, in Italy and the Netherlands, most of these being coking coals. In Germany, imports kept at a level below the 5 75 million tons authorized as a tariff quota. In France, the volume of imports is reduced compared with the two years under consideration.

In the United Kingdom, since the freeing of import restrictions in December 1970, the imports are not established ones but purchases intended to complement the supply to the two main consumers, the steel industry and power stations, and to a lesser extent the domestic sector. In 1972, purchases were affected by the coal strike and rose to 4 75 million tons. They should be reduced considerably in 1973, under 2 million tons, intended mainly for the steel industry with small tonnages for power stations.

TABLE 25 >PIC FILE= "T0012246">

The breakdown by source and importing country is given in detail for the year 1971 in Table 26.

TABLE 26 >PIC FILE= "T0012247">

In terms of quality, coking coal represents half the imported tonnage, the remainder being made up of steam coal for power station use and anthracite for the domestic sector.

Among the supply movements, deliveries from the United States continue to be reduced at the expense of those from Poland and Australia. Deliveries from the USSR are also going down now that the requirements for anthracites are reduced.

TABLE 27 >PIC FILE= "T0012248">

At the time of preparation of this report there is uncertainty for 1973 with regard to Community coking coal and its competitive position in relation to imported coking coals. Decision No 70/1 terminated on 31 December 1972 and discussions are continuing with a view to agreeing a new decision. The abolition of aids to Community coking coal deliveries is likely to alter the share of imports in supplying coking plants.

There is also some uncertainty about the amount of English coal suitable for delivery to other Community countries following the opening of frontiers, with the possible effect this increase in trade might have on tonnages imported from third countries, as for example in North Germany. In either case, the possible trade movements should be fairly limited in scale.

The competitiveness of imported coal is still greatly influenced by variations in transport costs which, in certain cases, make up a considerable percentage of the ultimate delivered cost at a European port. Sea freights were at a particularly low level at the beginning of 1971 and remained so for a rather long period. The rates did not go up until September 1972, following extensive grain purchases by the USSR, among other causes. The increase was in spot freighting initially, but after a few weeks, and faced with persistent increases, the time charter deliveries did follow the trend. At the beginning of 1973, the spot freights on the Hampton Roads/Rotterdam run exceeded $5 as against only $2 710 a year before. In the shorter term the growing importing role of the US in energy can only bolster the sea freight market.

2. Exports to third countries

In 1973 coal exports to third countries should reach 1 72 million tons, consisting mainly of German coal and of under 200 000 tons of United Kingdom coal (going to Ireland and Norway), whose main exports are directed towards the countries of the former Community.

German exports will remain at the reduced level of about 1 million tons, going mainly to Austria and Scandinavia.

Coke exports will rise to 2 75 million tons in 1973, following the pattern of previous years, 40 % of these being met by Germany and the remainder by the other Community countries including the United Kingdom. The destination of these tonnages is within Europe, mainly to Sweden, Switzerland and Austria.

VI. INTRA-COMMUNITY EXCHANGES

In view of the changes introduced into the trade pattern with the new member countries as from 1 January 1973, any examination of trade trends over the 3 years under review should distinguish between the Community of Six on the one hand and the United Kingdom on the other, being the only producer among the new members.

In the Community of Six, the general trend in coal trade continues to decline, 1972 being the year of a marked cut-back compared with the previous year, or 2 million tons less. The main reason for this downward movement lies in the reduced deliveries of coking coal from Germany to other Community countries due to the sharply competitive prices of imported coals with their unusually low freights throughout most of the past year. The amount involved is about 1 75 million tons and it primarily affects deliveries to coking plants in Belgium, Italy and the Netherlands. During 1973 the same trade pattern should be maintained at the levels of the previous year. As against this, lower deliveries are expected in other coal categories, especially in the Netherlands, due to production cut-backs.

In 1973 deliveries from the United Kingdom should reach a level close to that of 1971. This forecast contains a particular uncertainty factor, in that the trade now enjoys a freedom, which previously was up against quotas, as in Germany, and the granting of import licences, as in the majority of the Six Community countries. In any event, crossing the Channel, with breaking bulk twice and corresponding costs, represents a handicap for the extension of such trade.

Denmark receives only small tonnages from Community producers, while Ireland buys about 100 000 tons a year from the United Kingdom, overall imports being nearly one million tons.

90 % of metallurgical coke comes from Germany. The amount going to France and Luxembourg follows the demand pattern of the steel industry and should recover in 1973. Greatly reduced deliveries to the Netherlands can be noted due to the launching of new coking plants and, to a lesser extent, to Belgium, for the same reasons. Total intra-Community coke trade will fall below 8 million tons in 1973.

Detailed information, by countries, of intra-Community coal and metallurgical coke trade is given in Tables 7 and 8 in the Annex.

VII. PITHEAD COAL AND METALLURGICAL COKE STOCKS - TRENDS IN THE COAL BALANCE

The trend towards undistributed stocks started in 1971 continued in 1972 with further stocking of 3 77 million tons c.e. of coal and 3 75 million tons of coke, virtually all of it in Germany and only small amounts in Belgium and the Netherlands.

In the United Kingdom the February strike caused a temporary reduction in coal stocks, which returned to their original levels at the end of the year.

For 1973, the balance again shows a surplus in Germany with 4 78 million tons c.e. (coal) and 2 79 million tons coke and half a million tons of coal in France, where surplus availability would be wiped out if the production programme as planned were not fully achieved.

In the United Kingdom, the estimated balance gives a surplus availability of 14 million tons c.e. of coal, a figure based on minimum deliveries to power stations. Any additional tonnages supplied to this sector as a result of the recent subsidies by the Government would have to be subtracted from this first surplus estimate. In addition, it should be realized that the level of undistributed stocks was fairly low at the beginning of the year, when it amounted to no more than 16 days of production. The 1973 balance also shows a 1 75 million tons coke surplus, but undistributed stocks could not be replenished during the past year.

TABLE 28

>PIC FILE= "T0012249"> CONCLUSIONS

The Community of The Nine includes the United Kingdom and Germany, both large-scale coal producers. As well as covering a considerable part of energy requirements, the coal industries of these two countries exhibit widely different features in terms of deliveries. In the United Kingdom, 98 % of output is consumed within the country while the German mining undertakings supply 22 % of their production to the other Community countries, more than two-thirds of this being made up of coking coal and coke for the steel industry.

All the coal industries of the Community have to face similar problems, in as much as labour-intensive industries have social problems and the geographical location of certain coalfields makes for regional problems. In addition, wage increases and equipment costs have been only partially compensated for by productivity increases over the years and to differing extents by coalfields. Nor have these costs been properly reflected in sale prices in the existing energy market conditions. This has resulted in a deteriorating financial situation of the undertakings and in the need for growing subsidies per ton.

Internally, the enlargement of the Community should not bring rapid or profound changes in the trade pattern, though the development of exchanges between the United Kingdom and the Continent should not be ruled out, despite the transport costs caused by crossing the Channel. On the other hand, if the pound sterling should remain at its lower rate, this could only facilitate the disposal of English coal.

In imports from third countries diversification continues, the total remaining unchanged. Deliveries from the United States are being reduced, their place being filled by other sources of supply : Poland, Australia and, to a lesser extent, Canada and South Africa. Increasing purchases in Poland, and the fact that Denmark is obtaining virtually all its coal supplies from East European countries, mean that half the Community's imports now come from these countries.

The delivered costs of coal imported from distant sources depend on maritime transport costs to a large extent. The recent increases in sea freight rates, both actual freights and time charters, which had admittedly reached abnormally low levels, can only make the price of these coals very much dearer.

The balance for 1973 shows a surplus of stocks in the two large producing countries : 9 million tons c.e. (coal, and coke converted to c.e.) in Germany and 10 to 15 million tons c.e. in the United Kingdom. According to our working hypothesis, total undistributed stocks at the end of the year will reach 30 million tons c.e. in Germany and 20 to 25 million tons c.e. in the United Kingdom ; these figures should relate to the level of production, under 100 million tons in Germany and 140 million tons in the United Kingdom, to give them their proper significance. In the other coal-producing countries availability and requirements are balancing out.

Any approach to the coal problem assumes options and choices among well-known elements of the problem but these should be weighted in an appropriate way. Above all it is essential in this study not to view the European coal system in isolation but to place it in its general European energy context, with due regard to the rapid advances in the world's energy supply structures.

ANNEX 1

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ANNEX 2

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ANNEX 3

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ANNEX 4

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ANNEX 6

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ANNEX 7

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ANNEX 8

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ANNEX 9

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ANNEX 10

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ANNEX 11

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