If reports last year on the twentieth anniversary of the miners’ strike reminded us of the power once held by the coal industry, 2005 has laid bare the extent of the sector’s decline.
The list of press releases on the website of UK Coal, which on privatisation inherited the bulk of the state seams, reads like an obituary column. Last week’s announcement: “Production to be phased out at Wellbeck Colliery” followed January’s “Flood ends production at Ellington” and “Geology forces job cuts at Kellingley”.
Thirty years ago, Britain’s pits produced 130 million tonnes of coal and employed more than 200,000 miners. In 2003, UK Coal produced 17.9 million tonnes from its domestic mines, a figure set to shrink by a further 4 million tonnes as Wellbeck and Ellington join Selby in becoming brownfield redevelopment sites.
Compare UK Coal’s fate with that of BG Group, another former state-run energy business, which today revealed operating profits of £1.52 billion. UK Coal made an operating loss of £162,000 last year despite receiving £3.5 million in state aid.
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Until the late 1990s, UK Coal, then RJB Mining, was considerably more profitable than the operations from which BG would be formed. However, the “dash for gas” by electricity generators favoured BG at the expense of producers of soot-spewing, sulphur dioxide-belching, coal.
UK Coal was failed by a fall in prices and an inability to lower production costs to the levels of foreign competitors. In talking of growth, it now highlights its overground rather than underground prospects - by September last year, it was calling itself a “coal mining and property group”.
Today’s Drax dispute reveals quite how far the star of British coal-mining has dimmed. UK Coal says that it can no longer meet even the modest 2.2 million tonnes of coal or so it promised for the power station, its biggest customer, each year. The miner has invoked a force majeure clause protecting it from hiccups stemming from acts of God. It is the Almighty who UK Coal is blaming for the “geological problems” which have prevented it raising output at Kellingley colliery.
Drax has different ideas, and is poised to claim for the extra costs of making up its coal shortfall abroad at a time of robust coal prices.
Indeed, it is signal of UK Coal’s problems that is has, because of long-term contracts, been unable to profit even when strong Chinese demand has superheated the market. Compare its fate with that of Foundation Coal, a loss-making American mining company whose shares surged by 22 per cent in December on hopes for its potential.
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Still, American miners can rely on a sympathetic Government in a country which has the world’s largest reserves of coal, and uses it to fire more than half its power stations.
The UK industry has no such support. It has been forced to assume that, after being trashed by Conservatives and abandoned by Labour, it has now even attracted the wrath of God.