The Unexpected Crisis in Coal

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The Unexpected Crisis in Coal

On Saturday night, May 8, 2010, a coal mine in western Siberia was rocked by a methane explosion.  Officials of the Raspadskaya Coal Company, which operates the mine, confirmed 43 people dead, 7 in critical condition in the hospital, and 47 more still missing.  As described by Business Insider1at the time, about four hours later, 19 rescue workers were making their way through the mine when a second blast killed them all and incapacitated the deep-tunnel ventilation system.  Worse yet, the water level in the mine began to rise.  By the following week, the Russian news agency RIA Novosti2 was reporting 66 confirmed dead, 100 injured, and 24 people still missing. Shipments of coal from the mine were immediately cut by 70 percent and rescue attempts had been suspended in the face of high levels of methane gas.  That single mine represented 10 percent of all the coal in Russia.  Restoring the mine to its previous operating level was expected to take at least a year and cost $200 million.  The explosion took 65 percent of Russian coal off the market for steel mills and export clients.

This took place, according to The Financial Express,3 just as authorities in India were reporting a shortfall in coal mining output and predicting shortages at India's coal-fired power plants and subsequent summer blackouts.  At one point during the summer of 2010, 17 power plants in India had only a seven-day supply of coal on hand, while 15 others could run for just four days on available supplies.  The standard is to have enough coal in stock to run the plants for between two weeks and one month.  The authorities had the money to buy additional coal, but found that supplies were not available on the export market.

As reported by Bloomberg News,4India and Russia are not alone in facing coal shortages.  As the largest consumer of coal in the world, China has added so much capacity for generating electricity, producing steel, and processing metal in recent years that it couldn't get enough coal to meet the demands of the coldest winter in half a century in 2009.  China's $586 billion stimulus package, intended to encourage spending, also increased the demand for energy.  In the face of that demand, coal prices rapidly rose by 40 percent.

According to Business Line,5 China has been a net importer of coal for more than two years — and imports to China more than doubled in 2009...

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