Why thermal coal isn't dead
SUEK is one of the world’s largest coal companies and the leading coal producer in Russia. Their competitive strengths include: large, high-quality coal deposits, modern quality-assured washing plants and highly cost-efficient production and distribution. Graham has worked at a senior level in the world's largest mining company (BHP Billiton) as Vice President Strategy as well as in smaller companies and start up, with significant fund-raising experience. Graham’s experience includes projects in Colombia, South Africa, Madagascar and Mongolia. He is now based in Moscow, leading the process to secure international assets as part of SUEK's growth strategy.
Graham Chapman, Advisor to CEO International Development, SUEK
Andrew Thake, Mines and Money
20th September 2018
Mines and Money LondonMines and Money (MM): Can you tell us a little about SUEK?
Graham Chapman (GC): We were formed in 2002 from the privatisation of the coal industry in Russia. SUEK originally included a number of mines and power generators. We have since grown through the acquisition of a number of assets so that we are the largest producer of thermal coal in Russia. Therma coal is our main focus - we don’t currently sell much coking coal.
Last year we produced 107.8 Mt of coal, exporting half of it.
MM: What opportunities do you see for SUEK the next 12 months?
GC: We see opportunities in the higher end thermal coal market. We are developing our coal assets in Far East Russia where we can draw upon our ports and infrastructure network.
Our primary focus is currently Asia which is where we see the biggest export opportunity, helped by our ownership of the Vanino Bulk Terminal which acts as our gateway to these markets.
MM: How have the last 12 months been for SUEK?
GC: We’ve reorganised our portfolio and consolidated the Siberian Generating Company (SGK). This enabled us to the increase in the operational and financial efficiency of the consolidated company and the ability to respond more flexibly to changes in market conditions and when making strategic decisions.
We’re also seeing the benefits of long-term investment and putting money back into the company. We’ve made significant investments in longwall mining and we recently broke the production record at our Yalevsky mine.
As a result, we are now operating as efficiently as we’ve ever been.
MM: What do you see as the key risks and challenges facing your company at the moment and how are you overcoming these?
GC: A key challenge is the long-term usage and price of thermal coal. We are meeting this challenge by looking at diversification, both internationally as well as producing more coking coal.
For coking coal, there are very different dynamics. We believe that hard coking coal will become scarce and will provide an opportunity for SUEK.
However, rumours of thermal coal’s decline have been exaggerated. Recent prices have bucked the trend. The UK recently reported and increase in coal usage due to complications with renewable energy.
An interesting development has been the rise of clean coal technology. We’ve seen a lot of R&D innovations in the treatment of coal. We need to accept that thermal cola can’t carry on forever in its current format.
We need to maximise the quality of coal we produce whilst lowering costs.
MM: What do you think the industry needs to do to improve its reputation?
GC: We fail as an industry of getting across the benefits of coal. We need to have a clearer message. The energy cost of coal is low, and it is conceivable that we could get to a zero-emission power station. Coal is also extremely reliable.
At a recent World Coal Association event I was at it was interesting to see a divide of people in the room between those older people such as myself who accept that coal is part of the energy mix, contrasted with younger people (including some activists in the room) who didn’t think there was a future for coal.
There isn’t really an organisation that sells the coal benefits story, although the WCA is improving its approach.
I’m not saying that coal is not without its challenges, but they can be and will be addressed.
MM: What are the books that have greatly influenced your life?
GC: I’m a fan of George Orwell’s 1984 and how prescient it was at predicting the future such as TV sets that could see you, or the fact that we are now constantly monitored, such as with CCTV or devices like Alexa.
The best business book I read was Jim Collins ‘Good to Great’ which takes a dozen companies and analyses what separates the good from the great. The book really demonstrates about the importance of knowing what you do, sticking to what you do well, and doing it well. At SUEK we are clear that we are not a coal mining company, but we are an energy company and the benefits that come with that.
MM: Which role model has inspired you the most in your career?
GC: From outside the mining industry I’ve always been an admirer of Richard Branson and his entrepreneurial philosophy. The work that Jack Welch did at GE was exceptional.
In the mining industry I learnt a lot from Brian Gilbertson. He wasn’t a hands’ on leader, but provided the freedom for people to develop themselves. I don’t like rigid ways of work – I prefer work environments which allows individuals to thrive.