Rising Coal Prices Could Be A Lifeline For OKD


When Prime Minister Andrej Babiš (ANO) visited the state miner OKD in the Karviná region in July this year, he did not forget to brag.

“My decision at the time as Minister of Finance that we joined OKD at the beginning of 2017, bought the company, and saved it was clearly correct. It was a risk that paid off,” the prime minister boasted.

However, the reality is different. The prime minister says that the company pays billions of crowns a year in levies. But he forgot to mention that the only Czech black coal miner only tripled its loss last year, closing one shaft after another and preparing for the complete end of mining by the end of next year.

Still, everything could be different. Thanks to the growth of coal prices on the market, according to HN’s information, the extension of mining at the last ČSM Mine is on the table again. “It turns out that the economic situation has improved significantly, also due to rising coal prices. During the Prime Minister’s visit, it was thus a possibility to extend the mining of coking coal in particular,” said Ivo Vondrák (ANO), Regional Governor of the Moravian-Silesian Region, to HN. According to him, OKD was also given an informal assignment to prepare an analysis of whether it would be financially worthwhile to further extend mining.

This is also confirmed by the company’s spokeswoman Naďa Chattová. According to her, the company was asked for such a document by its owner Prisko, which falls under the Ministry of Finance. “We are processing an economic analysis related to OKD’s management. It will be ready and approved in the coming weeks, “Chattová wrote.

HN also turned to two of its former supporters, Prime Minister Babiš and Minister of Industry and Trade Karel Havlíček, with questions about the continuation of mining. Babiš did not react, according to Havlíček, the analysis is being prepared. Without it, it is still true that hard coal mining should end at the end of next year, as approved by the government last autumn.

Regional Governor Vondrák would support the extension of mining by two to three years. “However, there are limits given by the fact that no investment was made in further mining at the ČSM Mine. Now it would be an investment in completely different orders, it is not even possible,” he says. Regional Representative Zuzana Klusová (Pirates), who has been fighting against mining in Karviná for a long time, also reminds us that the EIA, the environmental impact assessment, has not been launched for its further extension. “So there’s nothing to talk about,” she says.

The question is whether the extension of mining also makes financial sense. OKD’s results for the last two years have been extremely poor. In 2019, it lost almost 900 million. Last year it was already an astronomical 2.4 billion. The amount of coal mined also dropped significantly, from 3.7 to 2.4 million tonnes. In 2015 it was three times more, and in 1990 it was even ten times more.

Mines have been in trouble for many years. In 2016, they went into insolvency and the state acquired the company as part of the reorganization. However, problems continued, the most critical situation being last summer. It was then that the complete end of mining at OKD was planned for 2022. And that is only at the aforementioned ČSM Mine, the others closed earlier: this year it was the Darkov Mine and ČSA, before that Lazy and Paskov. However, it was previously considered that if the price of coal increased significantly, the closure of the ČSM Mine could be postponed by a year or two.

And that’s exactly what happened. As part of the global rise in commodity prices from wood to oil to plastics and emission allowances, coal prices have also risen dramatically. When the mining company’s problems were talked about the most last June, a ton of thermal coal cost less than $ 50. Today, it is three times as much. Even the source of HN who is close to the negotiations on the closure of the mine, says that the outlook for the financial advantage of extending coal mining is not good: “We just hope that this will not become a policy before the elections. It could be quite expensive.”

Prolonging mining and preserving jobs could be a grateful topic in the elections in the Moravian-Silesian Region, where the second-highest unemployment rate in the country is. The number of OKD employees since the beginning of this year has dropped from about five thousand to about 2,800 people. According to Vondrák and Klusová, however, mining in mines is no longer a topic. “The decision to reduce coal has been made – it is more a question of ensuring social security for people who work at OKD. We solve completely different things now, Green Deal and the like, which are related to a completely new mechanism of functioning of this region,” explains Vondrák.

There is another reason why it is good to be very careful. Coal prices also rose in 2017 and 2018, and the company began to show high profits shortly after the insolvency: first 3.4 and then 1.3 billion crowns. At that time, OKD’s management discarded plans for a gradual decline, which was envisaged in the reorganization plan, and continued to benefit fully. This was also supported by Prime Minister Babiš, who spoke enthusiastically about the fact that mining in the Karviná region could continue until 2030.

But then followed the critical years of 2019 and 2020, a decline in mining, sales, profits. Last year, the situation was also complicated by the coronavirus pandemic, and OKD suspended mining for six weeks after one of the local outbreaks appeared. In addition, the final bill came – with the postponement of the decline in mining by several years, the costs of it jumped up. In 2017, there was talk of five to seven billion crowns. But last year’s government analyses already speak of 16 billion.