(Corrects owner of Longannet to Scottish Power, removes
references to Scottish and Southern Energy)
* Closures expected to bring 1,000-plus job losses
* Daw Mill mine is major supplier for E.ON UK
By John McGarrity
LONDON, March 7 British utilities will become
more reliant on imported coal after two large domestic producers
complete mine closures announced on Thursday.
Power generators including E.ON UK and Scottish Power
will have to look to countries such as Colombia, Russia
and the United States to make up the shortfall in production
from the mines being closed by UK Coal and Scottish
The closures will result in the loss of more than 1,000 jobs
- about a sixth of the workforce in a once-mighty industry.
Demand for coal in British power stations is expected to
fall by half to about 28 million tonnes by 2016 because of
tougher environmental controls, but dwindling production at home
means that imports are likely to increase by 70 percent from
current levels, traders said.
UK Coal, which produces coal for about 5 percent of the
electricity generated in Britain, confirmed that it would close
its Daw Mill mine in Warwickshire with the loss of 540 jobs. Daw
Mill had capacity of 1.6 million tonnes a year capacity
A fire that erupted on Feb. 22 is still burning
ferociously, the company said, making the loss-making colliery
even less financially viable.
Daw Mill is a major supplier to E.ON UK's Ratcliffe power
station in central England.
"E.ON buys its coal from many different sources, so the
closure of Daw Mill won't have a major impact on its power
generation. It is likely to increase imports from all major
suppliers to Britain," one analyst said.
Scottish Coal, which supplies about 3.5 million tonnes of
coal a year, said that it would close some of its oldest mines,
mainly because of weak international prices.
The company, which is part of Scottish Resources Group,
blamed competition from cheap imports from the United States,
where lower gas prices have helped to displace coal on the
Current coal swaps prices of around $95 a tonne for 2014
delivery are about 30 percent below where they traded two years
ago, meaning that producers are grappling with slowing demand in
major markets and oversupply.
"Coal still consistently provides between 40 percent and 50
percent of the UK's electricity needs and demand remains high.
However, Scottish-mined coal is priced in relation to global
pricing trends, which have been at record low levels," Scottish
The company did say that some of the production cutbacks
would be temporary as it expects coal prices to improve later
this year, which would make some new opencast mines commercially
Though the company did not disclose how many miners would
lose their jobs, the National Union of Mineworkers (NUM) said
that 450 would be cut by the middle of the year.
The NUM said much of Scottish Coal's production is burnt at
Longannet, one of Europe's biggest fossil fuel-fired power
stations, which is owned by Scottish Power.
The future of Britain's coal mining industry, which in the
1980s employed more than 100,000 people, has looked increasingly
bleak as mines and producers struggle to stave off bankruptcy.
Relatively high labour costs, compared with foreign
producers, have made deep-shaft mining increasingly
unprofitable, underground deposits are dwindling and surface
mines are hobbled by expensive fuel and rising prices of rail
(Editing by David Goodman)