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Hargreaves to halve Scottish coal production

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World Coal,

UK coal miner, Hargreaves Services, will halve production at its Scottish opencast mines in response to low coal prices and weakening demand for thermal coal from the UK power sector.

“Current prices represent a drop of […] £14/t since we acquired our Scottish surface mining assets in April and May 2013,” the company said in its interim results for the six months to 30 November 2014. “At current price levels, thermal coal produced in our serface mining operations is loss making.”

Demand for the company’s coal has also be impacted by a drop in gas prices caused by the global slump in oil prices. This has lead to a “significant and unexpected reduction in coal burn by UK power sectors”, with the possibility that some power plants will buy no coal during the remainder of 2015.

“If coal prices remain depressed and power station demand turns out to be as low as is currently indicated, trading from May 2015 to the end of the calendar year could be the most challenging period the group has experienced,” the company concluded.

Despite this bleak outlook, the company remains positive in the medium term as the building of new power generation capacity to replace existing coal capacity remains behind schedule – a situation that has been exacerbated by increasing uncertainty around regulation and government action. And with a General Election due in May, such political uncertainty is unlikely to be resolved soon.

“We therefore remain of the view that coal will continue to have a significant role to play for many years to come in the UK’s transition from unabated fossil fuel based generation to carbon capture, nuclear and renewable generation,” concluded the company.

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