Europe’s miners head for deep crisis

Date: 25/02/1999

By Peter Chapman

IN 1984, British coal miners marched to the edge of a field in Rotherham, South Yorkshire.

Egged on by their fanatical union leader Arthur Scargill, they became locked in one of the most vicious battles of their year-long strike with police officers who were trying to separate them from lorries feeding a coke processing plant with stockpiled coal hoarded by the authorities.

The miners knew that UK Prime Minister Margaret Thatcher was hell-bent on closing their 'uneconomic' industry, which could no longer compete with cheap imports from abroad. They feared that they would suffer the same fate as the country's steelworkers, many of whom had seen their jobs disappear four years earlier. Defiantly, they chanted their mantra: "Coal not dole."

But Thatcher did not listen. Five years later, the marchers' worst fears came true when most British mines were shut, with only a handful sold on to the private sector. Most of these, scattered around the Midlands and South Wales, were gobbled up by the private mining venture RJB Mining. But the rest of the miners faced another undignified march, this time to the dole office.

Elaborate schemes to retrain redundant workers or encourage them to start small businesses were set up. But despite these efforts, whole communities and their shops and amenities ground to a halt as those who had once earned a good wage could no longer afford to buy clothes, run cars, drink beer or smoke cigarettes.

That was the British model - and it was one which most other EU member states were determined not to follow. There was no way, insisted continental politicians, that miners in Germany, Spain or France would be forced down the British route so brutally and so quickly.

Instead, their governments pumped billions of euro in subsidies into both deep-mine coal production and coal mining areas to either keep mines alive or prepare for the day - a long way off - when they would have to close down.

In 1997, Germany announced that it planned to subsidise its industry to the tune of €36 billion over the following eight years, while Spain declared its intention to pump €800 million into the country's mines in that year alone.

Ironically, today, what remains of the 'dead' British mining industry is now seen as the most viable in the EU. RJB Mining argues that it can deliver profits and long-term jobs, but claims that its efforts to do so are being undermined by the subsidies which go to its Union rivals.

"We have the cheapest deep-mined coal in the EU. Our costs are one-third those in Germany and we are not subsidised. But we are shut out of the market by these subsidies," said company spokesman Stuart Oliver.

A fierce battle is now being waged at EU level to get such subsidies overturned; only this time, it is being fought not on picket lines but in the chambers of the European Court of First Instance.

RJB has taken its case to the Luxembourg-based Court to try to force the European Commission to overturn its decisions to allow the German and Spanish governments to pour billions of euro in subsidies into loss-making pits in both countries. At the very least, it wants Bonn, and to a lesser extent Madrid, to agree to take some of its coal exports to offset the damage done.

Even more ironically, its cause has been taken up by the UK's current Labour administration - a party which firmly supported the striking miners of the Thatcher era.

British Energy Minister John Battle announced in a recent speech that the government had boosted its coal policy unit in a bid to strengthen its hand in the battle to get the subsidies overturned. "We do not pay state aid to our industry in this country, and we are not prepared to have our market distorted by unfair competition from subsidised producers overseas," he warned.

The Commission's stance hinges on the EU's 1993 state aid rules to the coal industry. According to the letter of these rules (which are due to be reviewed in 2002), state aid can be paid either as part of a plan to restructure the industry so that it can cut its costs and bring them closer to the world level, or it can be given to prepare an area for the inevitable day - adhering to a strict timetable - when mines are shut.

The Commission says most German and Spanish pits are using the money to pursue the first of these two options: ie to get costs down while at the same time reducing output and employment in the sector. Bonn has promised to ensure that the workforce in its newly consolidated industry is slashed from 80,000 to 36,000 by 2005.

But the British government and RJB, whose costs are below €50 per tonne of coal produced, reject this argument. How, they ask, even with the best will in the world, can German and Spanish pits hope to get their costs down from their current €140-143 per tonne of coal to the global level of around 33 euro?

Rulings from the European Court on the cases, which could ultimately force the member states concerned to claw back the aid, are expected any day now.

Meanwhile RJB, along with its opponents in Germany and Spain, are calling on the Commission to clamp down on steam coal dumped on the EU market at the 'unsustainable' price of €25.4 a tonne from Poland.

The Commission has sent a team of experts to Poland to gather information about the level of state subsidies to the sector and to warn Warsaw that they must be limited.

Realistically, whatever the result of the Spanish and German aid case and the latest Polish spat, many analysts believe there is only one way for the European coal industry to ensure its long-term survival.

Experts at US investment bank Merrill Lynch claimed last week that even RJB Mining might be forced to buy mines in Malaysia and the Far East in order to survive.

They pointed out that European coal is mostly far underground at depths of up to 1.5 kilometres, while in the US, Africa, South America, the Far East and Australasia it can be skimmed from the surface in massive opencast pits at a fraction of the cost of EU mines, and even below the average world level, at prices which can fall below €10.

What is more, say the pessimists, there are enough of these supplies to last 300 years. "Coal in Europe is becoming no longer an energy issue. It is a social issue," said one commentator.

EU coal imports

From third countries: 1998

millions of tonnes % of total imports

USA 31.321 20.70

Canada 6.084 4.02

Australia 18.975 12.54

South Africa 36.948 24.41

Poland 18.311 12.10

CIS 3.222 2.13

China 1.514 1.00

Colombia 22.294 14.73

Others 12.676 8.38

Article looks at the state of coal mining in Europe and, in particular, at the ECFI case brought by RJB Mining.