Annual Report and Accounts 2010

Globally, coking coal is in short supply as China and other emerging economies continue to drive world demand. Our move to bring the pricing of most of our coking coal in line with the JFY has given us greater exposure to the positive changes in the global demand and supply balance for coking coal. Currently there is a notable trend towards quarterly pricing internationally and it is likely that the majority of our customers will look to price their coking coal contracts with us on this basis as we go forward.

Thermal coal continues to follow the regional trends in Central European markets and is priced on a calendar year basis.

In 2010 the robust recovery in the Russian and Ukrainian domestic markets resulted in a decrease in exports of thermal coal in the regional market, and the increased demand was largely satisfied by the Polish and Czech producers. As an emerging economy, the amount of energy required in the region continues to rise.

Despite the introduction of new legislation aimed at reducing carbon emissions, it remains the case that coal provides the only viable energy source for our customers to satisfy their requirements for the foreseeable future. Alternatives such as nuclear energy have long lead times and imported gas is not seen as being fully reliable. As these new regulations directly impact our customers, we will continue to monitor developments closely.