The resurgence of coal demand in 2022 led many participants to rethink their teams and recruitment strategy. The year 2023 is expected to be another strong year for coal demand, as the Russia-Ukraine war reshaped the dynamics of coal trade, prices, and supply and demand patterns. But in uncertain market conditions and with climate-driven pressures, the picture on the talent front is mixed and the focus remains primarily on optimizing current operations.
In recent years, the ESG agenda led many companies to reduce their exposure to coal, in turn redefining their talent needs. But coal demand came back with a vengeance in 2022 as global markets have been scrambling for energy supplies, notably to fill the gap caused by reduced imports of Russian gas in Europe and sanctions on Russian coal and oil.
In December 2022, the International Energy Agency reiterated its expectations to see global coal consumption rise to an all-time high for 2022. The agency anticipated global coal consumption to rise by 1.2% in 2022 to more than 8 bn tonnes, which would match the annual record reached in 2013. The IEA warned that it could remain at similar levels in coming years if stronger decarbonization efforts are not made.
In China, where coal still accounts for 60% of power generation, an increase in economic activity after the relaxation of Covid-19 restrictions could support coal import demand further in 2023. Germany, Europe’s largest economy, has created a ‘gas replacement reserve’ with a total capacity of 11.6GW, which include 1.9 GW of lignite and 4.3 GW of hard coal power plants which are allowed to return to the market until 2024. Elsewhere, the closure of coal-power plants in nations like the United States, the UK, Spain, Greece, North Macedonia or Denmark was delayed in 2022.
Rising coal demand in Europe is also generating opportunities for alternative exporters seeking to route more coal to the region.
Kazakhstan for instance is expected to boost its coal supplies by 3% to 111 mn tns by 2025, according to the IEA. Producing countries stepped up output efforts, with Indonesia, the world’s biggest exporter of coal, committing to boost production to help meet demand from countries that lost supplies from Russia. In 2023, China is expected to receive more coal from Australia following an easing of diplomatic tensions between Beijing and Canberra since 2020.
But at this stage, the rise in transactions is not necessarily synonymous with increased demand for trading talent. “The main participants are very well placed to capture the opportunity as they have been optimizing and consolidating their operations in the face of climate-driven pressure in recent years,” says Premesha McDonald, Portfolio Director for the Metals and Minerals practice at HC Group. “As is the case for crude trading, coal trading is probably the most sophisticated and well-established type of traded minerals in terms of liquidity and maturity of the traders,” she adds.
Furthermore, smaller- and medium-sized coal participants are still operating within their existing financial and operational capacities. ESG-driven pressures are still weighing on banks to finance new coal deals, thus reducing the possibilities for new investment in trade and headcount. As an alternative, many have turned to private credit providers to move cargoes to energy-hungry European buyers, as previously covered by HC Insider.
With market trends shifting rapidly across all products, the focus has been on specialized talent such as operations and freight talent to handle and move cargoes in the most efficient manner. This is particularly true as participants must manage stocks that they built up over the past months. In the coming weeks, they will need to find a market to absorb these volumes despite limited infrastructure and logistics resulting from the phase-out of coal and reduced investment in facilities in the recent past.
Even before the Russia-Ukraine war, mounting ESG pressure and supply chain disruptions caused by the global coronavirus pandemic led many mining and coal companies to optimize and redeploy their operations teams closer to production and demand centers in the region. But depending on locations, employers have come up against a shortage of talent.
This applies to a considerable extent to Singapore, which is not a resource and mining location. For example, trading house Trafigura closed its operations over the past years in Singapore and moved its operations employees to regional offices in Mumbai, Indonesia, Shanghai, or Brisbane. Now its Singapore office predominantly consists of commercial teams. Similarly, BHP moved its operations teams to the Philippines, away from Singapore.
These strategies to rationalize companies’ operations have redefined the job descriptions and remit of operations employees.
As part of the back-office resources, operations talent in some large coal and mining companies would typically be split into two different types. One type would usually deal with sales operations and trade operations. Another one would typically cover trade and deals’ execution – also referred to as ‘contract execution’ and related to managing the logistical needs to execute the trade in physical terms, including negotiating with the vessel owners, port authorities, etc.
So, fewer operations talents are now able to handle such a wide range of tasks as more of them have become specialized in specific tasks. For instance, small trading businesses often expect their operation employee to take care of all tasks outside of trading. “But sometimes you may need two people to cover these tasks,” said Zoe Zhou, Associate, Metals and Minerals practice at HC Group. “Hiring one person is already expensive and you may need to increase headcount,” she explains. “One person is often not enough and that creates a gap,” Zhou explains. “It is challenging to find the right candidate and not everyone is suitable.”
Consequently, many employers are choosing to focus their hiring efforts on junior candidates with a view to train them internally. This is the case for some mining companies whose pool of customers is limited. They are often not necessarily in need of senior individuals to engage with clients. Such an approach can be less expensive for recruiters who can rely on more experienced operations talent to train newcomers, tapping on their extensive experience in marketing and risk management on the ground.
In this context, candidates have been taking advantage of the talent shortage by requesting high compensations, sometimes way above market benchmarks. In response, employers have also been innovative by casting the net wider and hiring talent with transferable skills from other industrial or manufacturing businesses.
For queries related to HC Group’s insights into the global coal talent market, please contact:
Zoe Zhou, Associate, Metals and Minerals