Image credits: Hunter So
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News Article

CFE To Sign Multi-Year Contracts with Coal Mining Companies

By Paloma Duran | Tue, 05/31/2022 - 11:45

The Federal Electricity Commission (CFE) will sign contracts with 60 Mexican coal companies to guarantee the supply of the fuel for Coahuila-based thermoelectric power plants. In addition, CFE announced that the price of coal will depend on the market. Therefore, the resource’s price has the potential to increase.

Between 2020 and 2021, the state utility acquired 60 contracts from medium and small-sized coal producers in Coahuila, totaling 1.5 million tons of coal, for MX$1.5 billion (US$73.36 million). CFE explained that although some mining companies did not comply with the agreement, most performed excellently. Consequently, it wants to renew these contracts in 2022.

Last week, Eduardo Aguirre Jiménez, President of the National Union of Authentic Miners (UNAM), announced that CFE had already notified 60 producers in the region that they had been selected to sign 2.5-year contracts.

Aguirre highlighted that for 2022 ,CFE set a base price of US$61.9/t, which is higher than 2021’s US$57.2/t. In addition, CFE highlighted that this year coal prices could increase significantly, depending on the market. The news has been well received by coal producers who hope to increase their profits that had been dwindling for years. “The contracts are for a period greater than one year and the price has a great opportunity to increase. The news has amazed all producers as it will bring more investment and stabilize the regional economy," said Aguirre.

Faced with criticism that coal is a highly polluting energy source and that Mexico should promote cleaner electricity, Miguel López, Deputy Director of Contracting and Services, CFE, said that the utility has been buying coal since the 1980s. In addition, he highlighted that the percentage of electricity produced with coal is only 4 percent, leading to minimal pollution. Pierre Gilly, Manager of Social Development, CFE, said that the new coal scheme has proven to be very beneficial for both producers and the government and that opposers are against it are because their private interests have been affected.

Although López Obrador’s government has pushed to strengthen coal production, experts agree that the end of coal is in sight. According to a Fitch Solutions mining report, the decarbonization megatrend is turning all industries greener and dooming environmentally unfriendly industries like coal. Additionally, some countries have agreed to curb coal-based power production due to environmental concerns. In 2021, G20 countries agreed to end public funding for coal-fired power generation abroad.

The data used in this article was sourced from:  
MBN,Mining Mexico
Photo by:   Hunter So
Paloma Duran Paloma Duran Journalist and Industry Analyst