Jastrzebska Spolka Weglowa SA
WSE:JSW
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
22.01
44.91
|
| Price Target |
|
We'll email you a reminder when the closing price reaches PLN.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
Good afternoon, ladies and gentlemen. I am Wlodzimierz Herezniak, and I'm the CEO of JSW. I'm here with our CFO and I'm also with Artur Dyczko, who is responsible for production in our company.
So we would like to present to you the results of Q3, which was a quarter a little easier than quarter 2 because the situation linked to the pandemic has stabilized. In just a few words, I'd like to tell you some of the figures, the highlights that will tell you where we are in Q3 and in the first 9 months of the year.
The coal production is 10.6 million tonnes, which is down by 2.3% over in 2019. Our coke production is 2.4 million tonnes, which is down by 3.4% versus 2019. At the same time, the average price, this is the most important element of our presentation. If we look at met coal, it's PLN 457 per tonne. That's a decrease over the first 9 months of 2019 by more than 32%, to be precise, 32.4% down. The average coke price is a little over PLN 750 on an FCA basis. This is a decrease of 32.7% versus the first 9 months of 2019. Total coal sales is 9.968 million tonnes. This is down by 1.2% over the first 9 months of the year, last year. Our EBITDA was minus PLN 80.5 million, which is down by 104.4%. The net result is PLN 1,088.6 billion. This is decrease of 254.5% compared to 2019 at the same time of the year. If we look at corridor works, we're down by 1.1%. We did 53,465 running meters.
So a short commentary about what's happened in the most recent quarter. As you know, on the 17th of November, the Polish Development Fund, PFR, granted financial support to JSW in the form of a liquidity loan under a government program, and this is for large companies. And after the contract is signed and after JSW fulfills the conditions, the monies will be disbursed. We have the agreement between the creditors as well as between the PFR and the financial institutions. Decision to be made by PFR hasn't been made yet. So the talks are still underway.
On the 17th of November, we can say that 4,457 employees have fallen ill with coronavirus, 4,345 people have recovered. And at present, 321 people are still quarantined. As a result of this epidemic in Q2, we had production down and that was because of the northern mine, so in Budryk and Szczyglowice, we had some downtime. So JSW did receive support from the regional labor office to support employees. And we utilized that support from the Voivodeship Labor Office.
A few words about our external activity since we're in the southern part of the Silesian Voivodeship. So we've given a lot of support to local hospitals directly from JSW. But we also have a foundation, which has also given some material and financial support to these institutions. These are big donations, financial donations and nonfinancial donations. So 30 ventilators were financed under the program, which saved lives, ventilators to support local hospitals. So we do other campaigns on an ongoing basis. So our employees who have gone through COVID have donated blood and plasma. We do this regularly. We ask our employees who have recovered to participate in this campaign. And so we monitor these campaigns on an ongoing basis.
Perhaps Mr. Dyczko will talk about our employees have been doing on the technical and physical side of things for the local hospitals. But since Artur is the Head of our crisis management team, which is meeting on a daily basis, so perhaps, I'll ask him to say a few words about the campaign that's underway right now.
That's about it in terms of the preparatory remarks that I wanted to make.
So yes, ladies and gentlemen, perhaps, I'll begin with what we're very interested in hearing. And this is what Mr. Herezniak, the CEO, has said. At present, we're trying to support the region. But we're trying to stand firmly on our legs in terms of our own operations, our own business and COVID prevention. We're also helping the temporary hospitals. We have a group of rescue workers who've gone through the first round of medical training, which is needed to help medical personnel and hospitals. The management has made the decision. Next week, on Thursday, a group of our workers will go to Katowice to help people who fall in sick. We'll see what's going to happen in other temporary hospitals in [ Szczyglowice ] and [ Ustron ]. We also have temporary hospitals. So Mr. Herezniak and I always reiterate that we want to be strong here locally.
And the second group of rescue workers will help in some of the regular hospitals in [ Wodzislaw, Rudnik, Racibórz ] [indiscernible] anywhere our people have gone through the proper training. On top of that, we maintain regular contacts, and we have measures to support the battle against COVID. It's not the case that we have a lot of excess means. We know very well that it's necessary to lend a helping hand to medical personnel. We're all in a difficult situation, but we're a good example that if this threat is treated seriously, it can be handled.
So JSW is running a test project, a research project. We've done screening with 500 people who've survived COVID. We're working with the hospital. So since miners went through COVID without any real symptoms as we have a large number in them -- they have a large number of antibodies, 90% of them have a very high level of resistance. So research is being done. And so we want to do a conference in the beginning of December to talk about this resistance, this herd immunity. We prefer to call it collective immunity.
But as Mr Herezniak said in April, May and June because we remember that Budryk in the middle of July, we were combating and we were doing all the swabbing and trying to reinstate normal production operations. So our crisis management team meets on a daily basis. We make decisions. We notify the Management Board. We also notified the Ministry. We working hand-in-hand with colleagues from Bogdanka, PGG and other mining companies. We're very pleased. We've done some research with the mining authority and the Jagiellonian University. We're looking at the atmosphere of the mining pits as well as the shower rooms. We have a special vacuum, so like at the Pniówek mine. We can say that we've not found in the air, the virus.
And this confirms the theory that we've talked about since March that mines are not the source of infection. We're waiting for the analysis and the findings of the analysis to show that these places of work are very important places and a good place to work. But what miners have been capable of doing and how we've dealt with this threat. This is one of the many threats. Well, COVID is, along with methane as well as fire risk and to bump risk, things of that nature, and as you can see on this slide, and we're very pleased with this.
Q2, we have to understand and accept that, that period -- well, there was a bit of fear then, and this applied to everybody and there was a lack of knowledge as well as the CEO says, as you recall. And perhaps you don't remember this, but I'll remind you that we changed our organization, work organization. We had more shifts in order to minimize the threat to our employees.
After the initial period, as we were learning about it and developing procedures and specific actions to take, now we can say that our results prove how we're exiting this crisis. And I think at the end of the year Q4, we'll show how, in fact, we've overcome these problems.
If we look quarter-on-quarter, you can see that Q3 saw an increase in production of 52%. And what I would say here, of course, operationally, we're showing this year that 2020 is not a good base here because it's mixed up a lot of things.
So let's look at a year that didn't have COVID, which is 2019. We're pleased over the first 9 months of 2020 compared to the first 9 months of 2019. Basically, we can say production is close to identical. So after an initial period of decline, the fact that we did the 52% increase in Q3 over Q2, that the diminished level of production is only 2.3%, if you look at the first 9 months of these 2 years. So we continue to show that the jobs that we've been fighting for in June and July have been defended. We're very pleased.
If we look at the black rectangle, we have more met coal. So if we think about coke, according to the recommendations, we're not taking any prisoners and we're moving forward. We've defended our volume targets. And so I believe that Q4 will not be any worse. We don't talk about the future, but we're treating this very calmly, we're also very pleased by and we have the mining cash cost, which is on the side here. Please take a look.
According to our strategy, we concentrate or focus on the cost side of things. This is something we have to have in mind. And so our efficiency measures will deliver specific benefits. If we look on a quarter-on-quarter basis, we've been able to reduce our cost by PLN 133 even by more than PLN 133 in mining cash cost. If we look at the differences between 2019 and 2020, the first 9 months of each of those years, so we have to remember 2019 without COVID, we have a decrease in our costs by some PLN 23. I think we should note that these are actions we've taken based on our analysis of things that are happening in our midst. And I hope that in the future, they will also determine and drive our actions.
If you look at corridor works, this is where we see our future. This trend must be upheld. If we look at Q2, we did 13,800 meters, running meters. And now we did nearly 18.5 kilometers. That's an increase of some 33%. And if we look at the difference between the first 9 months of the 2 years, we're essentially at the same level, down only 1.1%. And this is a level which is safe for the company. As we talked about this, the CEO is aware of this. At the end of the year, I think we're going to be able to say that we'll achieve our business plan targets in terms of kilometers in corridor works. And so we don't have any threats to future year's production targets, we think.
If we look at the inventory of coal where you see the differences between 2019 and 2020. So you can see where we are at 2.4 million tonnes. When we talk about our sales results, we believe that at the end of the year, we shouldn't have inventory of coking coal because coke is selling well, and the production of coke has not been destabilized. We're very pleased with this.
If we look at this on a quarter-on-quarter basis, an increase of 16% and above year-on-year for the first 3 quarters of the year. But in March, April and May, all of Europe was in a standstill mode. So we had 3.4% decrease. If we look at the utilization of production capacity, our cokers, we played boldly, but I think we played the hand well. When you're first thinking what is going to happen, what the subsequent days of COVID will do, we basically fired up our batteries, coking batteries, within the balance of technical capacity in order to hold coke in our coke storage yards. And we were thinking about the Asian markets. Mr. Herezniak will talk about this, but they were open to us. Well, basically, those who act boldly are able to benefit. So we were able to increase our sales by 1 million tonnes.
And this shows you the sense of having a group that's based on coke production and coking coal production. And so basically, they helped -- the cokers helped us move through this crisis period with a relatively -- unscathed.
At the same time, we were able to find new markets where we could sell coke. I think in the ports right now, we're the only people who are present selling coke. What also pleases us, if we look at the cash conversion costs, we have a decline. This is that pleases us quite a bit. And if you look at the inventory of coke, right now, our coke is selling like warm buns. So we should just be pleased and we're elated. And we're doing everything we can to make sure that the miners can produce the coking coal to make that coke.
That would be it from my side.
Let's take a look at the market situation, the market environment. I'm going to try to talk about the relations, the differences between the first 9 months of 2019 and the first 9 months of this year. It's not any real success to talk about the differences between Q2 and Q3 of this year because the -- well, we've never seen such a quarter in the history of the company as in Q2.
So if we look at steel production across the world, we can see that this has shrank by 3.2% steel production. If we look at how much it shrank in the EU, it fell by nearly 18%. If we look at steel prices on the European market, which has always been the key market for us, so we have different types of products. So the decline is somewhere between 9% and 11%. And again, this is for comparing the first 9 months of 2020 to the first 9 months of 2019. If we look at the spot prices of met coal, we can see the decline for the Premium hard. So we see it's down by 31.7%, the spot price. Whereas if we look at semi-soft the price is down by 30.3%. If we look at coke pricings on the European market, we can see that the decline is 30.6%, whereas on the Chinese market, the decline is around 13%. That's the difference between the Chinese market and the European market.
I won't talk so much about the steel market. The situation is pretty well known, especially if you look at the European market. The European market is -- Europe in crisis, but there's, of course, growth over Q2. But if you look at the first 9 months of the year, we don't see growth. The decline is long term. Here, we see the market trends. This is what Artur mentioned. This does not allow us to plan on a long-term basis. If we think about coking coal and coke because the volatility is enormous.
Here, we have a number of the factors. So in my lengthy career working on this market, this is an unprecedented event. This is the first time we've seen anything like this where coke prices are on the rise. If you look at the spot prices, where we have spot prices going downwards. So this is not something that's happened. These 2 lines were somehow parallel to one another. Of course, there were shifts in time, time shifts. But generally speaking, the mines were going in parallel or close to one another. This is linked to what's happening in the Far East. So the biggest partner for steel production, coke production, this being China.
Well, basically their relations with Australia, very important. And since there's discord there, it's hard to say as long it's going to last the politics and technical parameters. But this does have an impact on the European market, the discord that's there. And that means that coking coal isn't priced the way we had anticipated. Not only the way we anticipate it, but also professional publications had said that prices at the end of this year would be substantially higher. The situation is what it is, and it's hard to discuss it.
This is a matter of the politics that are being played, and we don't have any impact on that. But as you know, in the Chinese market, we're selling more and more coke. So I think that this market is something that we'll be able to uphold over the longer term.
If we look at the prices of steam coal. Over the next few years, we're going to be reducing our steam coal production, and we're going to ramp up production of coking coal in a variety of configurations. This work is in progress. We want to complete this work by the end of November.
We're aware that we've had to reduce steam coal production for a variety of obvious reasons. Of course, this is linked to some additional CapEx, but this program will show us the direction in which we can go. So we're going to be investing above all in our wash plants at all of the mines to make sure that the -- we can have as much coking coal as possible. This is a process that will last many years. It's not a 1- or 2-year, 3-year program. You all remember our investments in the wash plants in the northern mines, Budryk, Knurów-Szczyglowice. This is work that lasts for years. We're wrapping that up now. And Mr. Dyczko talked about that. We're increasing the percentage of output that's actually coking coal. We talked about that last year. That's the direction we're moving in.
And so in the next few months, decisions will be made. And so big investments to be made in the washing plants but not only there, but there are other investments that will be made in parallel.
So if we come back to coal sales and what happened with prices. So the decreases in steam coal were there, but they don't have as big of impact as in coking coal. So I won't cite all of this right now. But in terms of what Artur told us a few moments ago, the key issue right now is the sale of coke. Basically, we're trying to utilize our coking plants 100%. Of course, there are certain technical difficulties linked to the challenging production. We don't see any threats or constraints for our ability to produce coke.
Right now, the main bottleneck is the differences between coke prices and coking coal prices. This is the first time in history that the divergence is so large. And this is not something that's helping us in rationally planning our production. We don't assume that we'll have any real quantities of coke in our inventory or stock yards besides the technical amounts that we need.
We've been talking about overseas. We talked about making this change. So we're gradually reducing the quantity of coke sold in Europe and moving to overseas markets. In recent months, we found those markets, and that will be for the cost of transportation and the logistics related to that is -- they're all much more difficult if we're talking about sending it thousands of kilometers away. It's easier for our local buyers like voestalpine. We're talking about 600, 700 kilometers away and we send coal to them by trains, that's easier. So the situation is quite dynamic. But in terms of coke, it seems that we've mastered the logistics.
If we look at the rest -- or if we look at coal. And this is what my colleague said, we're not adding coal to our stock yards, but we have to replace that coal. As we all know, coal loses its coking properties over time. So we have to keep shifting or aerating that coal, and we're doing that on an ongoing basis that it's constantly being replaced. Of course, thankfully, the transportation problems aren't too tremendous. So we're thinking about putting coal cars there. But this is a little bit something that's outside of our control interest of being able to bring in sufficient number of coal cars.
That's more or less it in terms of what I want to tell you about sales. All of the remaining bits of information you have in the materials. I don't want to talk so much about Q2 because it was a historically atypical quarter. But as I look at the 9 months -- first 9 months of the previous year, we can see that there is a lot of instability. The main factor is the fact that the epidemic hasn't stabilized.
In July, we didn't anticipate the second wave being so large as it is and the forecast for upcoming months. Very -- it's hard to say what's going to happen in the next few weeks, not to mention in the next few months. So it's hard to predict long-term trends. The trend that is predictable is uncertainty. This will accompany us for many months, and we don't have any impact over that whatsoever.
Thank you very much for your attention.
So now we can move on to investments. Ladies and gentlemen, we have the comparison between Q2 and Q3. But we want to show you what's happened, what's grown. I think we should focus on the 9 months of the 2 years. Based on this slide, you can see that things are happening in the -- in KOKS. We're building the power unit in Radlin. So the CapEx is up 0.4%. So we're looking at a reality that we haven't seen in the past.
It's very difficult to say to what extent the COVID situation impacted the softer prices. Basically, our problem is not production, but the level of prices. We don't have any impact on that. If we look at CapEx in JSW in production, please take note that in the first 9 months of last year to the first 9 months of this year, we have a decline of some 11%. But if you look at the main groups of investments, so if we look at in terms of the mining pits, in terms of investment production, we're investing more to produce. We're monitoring the situation closely, and we're tracking it very closely. We're following what's happening in the environment and to make sure that we can stimulate these investments in order to ensure that we wouldn't have any destabilization in terms of the quality, but at the same time, we want to maintain liquidity.
I'm sure you observed the investments in the various mines. As I always mention, I inform you that in Borynia-Zofiówka in building the level 1,020, the progress is around 10%, it's 8%, in fact. If we look at Zofiówka [ section 80 ], we're 54% progress. If we look at the [ Bzie ] mine, this is the most important investment. We're very pleased. I think you're following our press releases. This year, the mine -- the [indiscernible] mine in terms of building the new region called Bzie-Debina, we have some 500 people working there now. We have 5, basically, years to open up the layer there. So we have the high-quality mine there, the most expensive mine. So we'll be extracting winnings there over the next 1.5 years. And so we want to open -- within the next 1.5 years. So we want to open up that investment as soon as possible.
So the progress at the end of this year was going to be 21-some percent in Budryk. This is the level 1,090. We've been able to overcome the situation at the deepest longwall we have had a fire. And now the longwall or the mine itself is normally, mining. Then we also have the wash plant at the Budryk mine. Mr. Herezniak mentioned that. We're modernizing that wash plant. And so this is something that's going to be ongoing on a permanent basis. It has to follow what the market wants.
Last year in December, the management made a decision. I think the market understands that in the CEO's decision, we have what we call the quality office. This is an internal department that takes care of quality. We have 23 parameters that we're following. In 13 line items, we've seen substantial growth. So we've improved our qualitative parameters. And so the coal from JSW has stable parameters. We have stable parameters. We want to make sure that the quality is predictable. We're very pleased with that outcome. So this quality office is working closely with the coke production plants as well as with the coal mining plants. And so we can see that everybody is fully engaged.
If we look at Szczyglowice -- let me come back to the wash plant at Budryk, we're at 95.1%. If we look at Knurów-Szczyglowice, we're modernizing the washing plant there. We're at 99% completion. We're at 6% advancement in Knurów and we're starting in Szczyglowice to build the level 1,050. We're -- why? Because we're going to be extracting the highest quality coking coal in order to produce the highest quality coke. So our best mine with the best quality coal, is Pniówek with some 71% completion progress. What we're very pleased by, we have the coal coming from that mine. We have very good coal coming out of that mine. And the production of this mine is at a level we hadn't seen before. Pniówek in July had a record-breaking level of net production, more than 18,000 tonnes of coal. So we can see what's happening around us. We're working on our methane investments. I know you're interested in how we're building these methane-driven engines. So COVID hasn't stopped us here.
So in Budryk, right now, we have started our investment, 14% advancement in Szczyglowice. We're 79% completed and Szczyglowice, we're just a little bit lower. We have a special team that's been appointed there that's intensified the work and the utilization -- commercial utilization of methane, and we can see how efficient that is. We're pleased as we're looking for money that we can save. So our investment.
You can look at the monies, the amounts that have been stated here. So this is quite important for the region. We've emphasized this on many of our meetings. And I think we should highlight that the companies that have cooperated with us were all very well aware how much we stimulate growth in this region, and we want to continue being that stimulator. But of course, this has to be aligned. That's why we count and recount all the money to make sure that we invest well and efficiently.
Then we have our investments in coke. So you can see the 32% increase in our investment, our capital expenditures in JSW KOKS. And so you see the rationale for having a coking and cokes group -- coal and coke group. So we're dynamizing, speeding up the investments there.
Thank you very much for your attention.
Now I'd like to tell you a little bit about our financial results. We've heard about our production results, what's happening on the steel market, the coal market, the coke market. And so of course, what we do is important to the steel market. And all of this has affected our financial results. And in Q3 of 2020, we had revenue of PLN 1.7 billion. Well, this is an increase of 16% over Q2 of 2020, but that's because we've had lockdown being loosened up in Q3. But of course, the lockdown that affected us and our business partners in Q2.
If we look at the first 9 months of the 2 years, which is corresponding period of last year, we see a decline of 24.5% where it's down by like PLN 1.5 billion. Of course, prices are down. So we are price takers and not makers because of what's happening on the global markets. And so our revenue was driven down as a result. And since we had lower revenue, this affected our EBITDA and so we've had -- so we had an EBITDA net of nonrecurring events of PLN 80.5 million. So then if we had PLN 80 million -- if we talk about the net of nonrecurring events. So our net result was negative because of what was happening on the markets, minus PLN 1 billion.
Let me tell you a little bit about how the individual drivers affected our EBITDA in the main areas of our activity. So we increased the volume of coal. This is the waterfall graph and shows you the bridge that shows how we move from the result in EBITDA in the Q2 to the EBITDA results in Q3. So coal sales volume had an impact -- a positive impact. So we sold 10% more coal. Unfortunately, steam coal sales volume was up 82.7%, but the price is not so important here. So on -- we are able to sell a large amount of product here, and that was a good result. That may have the impact of the coal price change. So this was a negative impact of PLN 135 million. So the met coal price was down almost 18%, average steam coal price was down 1.9%. So this was a negative impact in total on our EBITDA.
We have a big green bar showing the adjustment, positive adjustment, positive change that took place. If we look at operating result, net of appreciation -- depreciation. So we didn't have any -- we didn't have the impairment loss that we had in Q2. And of course, the guaranteed employment fund had an impact on our results in Q2 -- in Q3, if we look at EBITDA.
If we look at our various operating segments, you can say that the coking coal segment had a very big impact as well as the steam coal segment. And the lack of the impairment loss that I mentioned previously was quite important in the coke segment, maybe didn't have a big impact on our results.
So the consolidation eliminations were very small. They didn't have a major or a large number of events, but they offset one another. So ultimately, this did not have a major impact. But if you eliminate the nonrecurring events, we have an EBITDA of PLN 13 million. Then we had some support of PLN 190 million to combat the repercussions of COVID.
Maybe a few words about our liquidity. As you've heard and listened, this year, we haven't generated cash flow that would enable us to cover the gap between operating flows and investment flows, which we need because of our investment needs and the expenditures we had planned and carried out. As you can read in our current reports, our closed-end investment fund has been triggered. So PLN 1.4 billion has been used. So that means PLN 400 million is left in that.
So we've talked about our achievements. We have the consent given by PFR to our application of 15 July. The application has been approved and not much remains to be done to meet the conditions in order to improve our liquidity position. But because of this gap, and in terms of having CapEx needs and our fixed expenses and the revenue that we have in this challenging COVID year, we had to utilize. 1 year ago, we had major cash cushion or pillow. Since we have a negative EBITDA, our ratios were diminished and deteriorated.
Since a lot of time has passed, we'd like to go on to the question phase. We've seen some questions come in during the conference, and we'll ask for the questions to be read out. We're sad that we can't meet with you face-to-face in normal working environment in every single quarter. We say that we hope that we're going to be able to meet face-to-face live. But for now, the situation doesn't allow us to be overly optimistic. So we have to cope with the situation.
So if you could read out the questions.
So ladies and gentlemen, I'll read out the first 5 questions that Andrzej Rembelski post from the brokerage house of PKO BP.
What is the current situation on the coking coal and coke market? And have you been able to reduce your inventory in any of these categories in Q4?
Thanks to [ Pawel ], taking over. Purchase orders of the clients of your Czech competitor.
Well, a little bit of time will pass before we can take over the orders from the Czech competitor. Well, 2 of the 3 mines are to be shut down, they're only a few 10, 15 kilometers away from us. This is what took place in March, April. So this is something that will take place in the first quarter of next year. Well, this process is underway. Well, the coking coal market, that's south of [indiscernible] knocking at our doors. Sometimes these are customers we cater to jointly with [indiscernible]. And frequently, we're starting to sell them. And so of course, we're thinking over a period of many months, many quarters. So the market [ pours ] the vacuum. So the decisions that were announced have basically been made. And so in the next few months, those mines will be shut down.
What is the situation on the coking coal market and the coke market?
I've talked about the extraordinary situation we've encountered that coking price, coke prices are starting to move up and things are going decently well. But coking coal market, our ability to drive prices -- but the spot prices do affect price formulas in subsequent periods. So this is a nonstable environment -- unstable environment. It's unpredictable even over a period of upcoming weeks.
So I would say this situation is challenging. If we look at inventories. Basically, we're placing coking coal. Coking coal can't lie there for too long because it forfeits or loses its coking properties. So we'll be reducing coking coal inventories. But our intentions have been narrowed in terms of just steam coal in stockyards. We won't have major differences. But if we look at coking coal over the next few weeks and months and, of course, in December, we'll be working on that further.
Okay. Thank you very much. The next question is what do you think about the tensions between Australia and China? And the fact that there was a sharp increase that happened several times in import Chinese prices, which is unfavorable to JSW because of the benchmarking of prices in Australia? And are you aware -- are you considering any talks? Or do you have any knowledge about plans by other market participants about new price from this?
We've looked at this over recent months. And most of our business partners, we're talking with them. And for many months, we've seen -- at least since the time when I've been responsible for this part of the market. Well, price formulas have to be adjusted, have to be tweaked, and those talks are underway. We're talking about the upcoming year. And I think we'll have the opportunity to discuss this multiple times.
Well, our impact over what's happening between Australia and China. Basically, to be frank, we have no impact. This is something that's happening outside of our range of influence. But it does affect the coke market and the coking coal market on the international markets. I think we should anticipate a lot of activity in upcoming weeks and months, but trying to foresee using tea leaves would be very difficult because the volatility could be quite big.
What are your CapEx plans for Q4 2020 and 2021?
We never give our plans, especially if we have such a stable -- or unstable external environment.
You see where the prices are right now?
Well, the CapEx is linked to things that we're doing the actions we're following. It's controllable and it's being monitored in full. It's being tracked in full. So the CapEx is being aligned to what the market is offering us. We took the bold risk along with Mr. Herezniak, who is basically -- he's a salesman, and he's a person who's amongst us miners and coal producers in February and March, he stimulated us to make some bold decisions to sell and that helped us out quite a bit. We have to be very calm. And so we're looking at the major players on the market. And Mr. Herezniak has highlighted that many times, if you look at what's happening between Australia and China. And so I showed you in terms of our investments, I showed you the progress in the various mines. And so I would -- our investments won't be disrupted or disturbed. We don't want turbulence.
What's the specific levels of CapEx? We should have the optimum levels of CapEx, and that's what's going to happen.
The next question is, do you believe that the current cost structure and amount is -- can it be maintained in the meantime? And do you see any real areas to optimize outside of salaries?
Ladies and gentlemen, in respect to this question, we should accentuate as we mentioned during previous presentations of our earnings. We've done quite a bit in terms of methane drainage services, and they should have an impact on our costs. We have a special procurement team. We're trying to do a lot of analysis, which means that production can we buy on a wholesale basis. The bigger we are as a buyer, the more negotiating power we have, but that's not always true. There are certain factors of production, which we buy in smaller quantities, but we have more flexible suppliers, and they can be less expensive to us.
And the question is, which things should we buy for all of the mines together? Or should we buy in smaller quantities, because they don't have a lot of market power. And we can use that to produce our costs. And so this is our [indiscernible] that we have a high level of fixed costs. We're deep shaft mining company. Others are doing strip mining. So we're in a much more difficult position than they are. So we have to do a lot to make sure that we can keep our costs flat. As we said at the previous earnings conferences, sometimes it's not our -- we don't deserve the credit for that. We had smaller production in Q2 because of COVID, and that meant, of course, that we spent less on some of our costs, where we were trying to maintain pace with our capabilities. So there's a big change compared to the previous period of 12 months or earlier. Basically, we have no other way than trying to maintain cost control at a rational level.
We're price takers, not price makers. And so that means we don't have any real impact on the revenue outside of making sure that we have a quality product and that we properly select our business partners.
I would just add, we calculate our costs, but in terms of efficiency. Efficiency effectiveness is very important. Q2 was a very challenging period. We were looking at what's happening. We looked at our business plan, the technical parameters that we achieve by our longwalls. So we have more than 200 meters and 20 longwalls. We're not talking about having records, but we have to increase the efficiency on our longwalls in Budryk. We had 402 meters in August in Budryk. We have the longwall B1 -- BW1, we had similar levels in the course of a month. And so in this organization, how we organize work and our determination as staff to make sure this is where we have an impact.
If we mentioned that we're working very well with the commercial department as well as our cokers, we're all working hand-in-hand and that we're reacting quickly, then we can say that we're able to achieve good results. And then we should stimulate that to make sure that we don't get blocked anywhere. $95 per tonne, that's a difficult level, not just for us as a producer.
And question number 5. In the media, information has appeared that you're going to have 100% of your coal mix will be coking coal. What do you think about resizing your operations and thinking only about the quality of the winnings? Previously, you said that you don't want to be part of the process of restructuring the hard coal mining sector in Poland. Why aren't you considering the utilization of this opportunity to improve your mix?
Well, we have a question from Pawel Puchalski, and it's about the same question perhaps. So I'll look at Mr. Puchalski's question because he said, where is your idea in terms of spinning off coking coal from steam coal?
It's not just an idea. This is a necessity. I'm talking about an age, but I was once the CEO of this company many years ago from 2006 to 2007, and we started the process of taking over the Budryk mine. And I have to tell you that at that time, our idea was we had a relatively primitive wash plant at that mine. We wanted to invest a lot of money there at that time to make sure that we could produce coking coal.
It's now 2020. We're now completing the investment at the Budryk mine as well as the Szczyglowice and Pniówek mines. These are the time spans where you change technology. You have to mention that we're talking about doing changes on a living organism where these wash plants are processing thousands of tonnes of coal every day. So this is a major challenge. We've been facing that challenge. So of course, we convey information to you. So the percentage of coking coal is much bigger in the coal mix this year than it was last year. So this process is transpiring. We've placed a lot of emphasis on quality. I mentioned the team we have, it will complete its work at the end of this month, and we'll have certain conclusions. The work will be done over a period of years. I mentioned that 13-, 14-year period to redesign our operations, but this applies to the bulk of our mines, while conditions are changing. A good example, Pniówek today has the best quality coal. Up until now, we have more block there, and that's a big challenge to our washing plants. And this tells you a lot about the nature of our cost. Basically, all of our coal is being enriched.
And if you look at steam coal plants or steam coal mines, they don't always have these type of wash plants in their organizational structure. Of course, to me it's obvious. If we're going to be in the management team, we will move in this direction. The CapEx will be assigned to wash plants. But not only you have to do -- you have to selectively mine various mine seams. And so the work has been prepared and is being done. And at our next meeting, let's hope that we're all healthy and we're going to be able to say more about that because these plans -- we'll talk about the CapEx. We have to have funds to fund, underwrite the CapEx.
Sometimes, what does the author of these questions have in mind? All mines in JSW are producing coking coal, full stop. I think you, as our analysts know this. The fact that we have some production of steam or a product that can be utilized as steam coal. And I think Mr. Herezniak has aptly turned that phenomenon. There has to be consent to incur some additional CapEx. When you don't really know what the topic's about, we're talking about money. So our team will wrap up it's work next week. An analysis of how we should model the parameters of quality in a deposit and to build or to extract as much coking coal as possible as opposed to having any other type of steam coal.
So we have plans to how to cut up the deposit as we know more and more about the quality parameters of the overall deposit. We've purchased software, trained people. We're utilizing top quality professional work. We brought in Australians who act the same way to look at these deposits. So we're talking about a 10- to 15-year period that has transpired from the time when the decision was made until the decision -- the investment has been completed. So the whole organization is involved. We know the direction we're going to follow, but we have to be rational in the decisions we make. And everywhere we are, we're emphasizing. We don't see any ability to spin off assets. We're only talking about optimizing processes and doing strategic planning up until the year 2050.
One of the things that we talked about, we've launched work on the environmental strategy of the group. So next year, maybe in the middle of the year, we'd like to advise you of our update of the strategy. This will incorporate production data, and we'll have a full set of information, enabling us to plan the implementation of technology to reduce emissions, but also looking at what's the most difficult for miners. It's a challenge. So we're talking about a close cycle.
I think we're much closer to KGHM as a mine as opposed to the process that's used in a standard steam coal mine.
The next question we have from Pawel Puchalski. Does the company have access -- does the company have an access to financing in 2021? Are banks willing to give new loans or renew the old loans?
I think we've already responded to the previous question. I would like to say this has been well defined in our financial statements and what we mentioned the financing that we have accessible this year and next year. This is a syndicate loan that was given to us in April of 2019 and we're using it, as you know, based on the current report we published. During this 6-month period, we will no longer use the European Investment Bank loan according to the terms we had because we're accelerating the process of receiving support from PFR. And so we decided to terminate that agreement.
Well, it is a type of constraint. I'm going to try to replace that loan with some other type of loan. Well, we're talking about strategic investments in the coking sector. So we're going to try to replace that with a different source of financing or we'll try to get different funding from the European Investment Bank because we want to submit a different loan application there.
If you're talking about the desire of banks to fund us, well, we are associated with steam coal and the strategic shift we're talking about. Well, steam coal production, well, there's a lot of distaste amongst banks coming from Western Europe or the Western world. They're not interested in supporting our business. Of course, we regret that, but that's the situation. The conditions of the PFR loan, as we indicated in our current report. There is a limit to the ability that we can borrow money from them. And so that will have an impact on our financing limits.
Are there any talks underway about headcount restructuring?
At present, no.
And the next question is how long will the Chinese-Australian deadlock last? And will they last through all of 2021? Is China capable of surviving without Australian volumes?
Well, I talked about that. It's very difficult for us to read the future from the tea leaves. The situation is changing swiftly. Things can happen in the course of several weeks. We have no over -- we have no influence over that.
Can China withstand without Australian volumes?
Probably, yes. It always depends on the volume of -- production volumes in Chinese coking plants and their steel mills, but it's a political decision. I think China can easily survive.
And then we have questions from Mr. Robert Maj from IPOPEMA Securities. Please tell us What will the impact be of the decision made by ArcelorMittal to shut down its blast furnace and the steel mill and to cut CapEx in its other plants?
I'm sorry, I didn't use my microphone. Well, the response is very precise. The decision is to close a blast furnace, but the coke plant that works there continues to work normally. The volumes are predicted, and they will continue to buy the -- take the coke supply from the plant there.
If we look at CapEx in Mittal Group, based on what I know, it's in the processing section. The coking plant in Szczyglowice is working at full production capacity. So we don't see any -- in my opinion, we don't see any impact.
The next question is when do you anticipate PFR making its decision in terms of extending a preferential loan to you?
Once again, I have to mention our current report, we advised you that our expectation is that we're waiting for that decision. And as soon as we know that the consent is given what the amount will be from PFR and we'll negotiate with them, then we'll advise you in a current report. Right now, I wouldn't like to speak out about -- give any specific information about this.
Then we have a question by Mr. Tomasz Duda from Erste Securities. Why do you have a loss in your coking segment in Q3, even though you have a high capacity utilization ratio and you have lower conversion costs and there's a nice relationship between coke prices and coking coal prices?
This is a result of the outcome of the standstill in Western Europe from March and April. Basically, everybody else was thinking what's going to happen. We were thinking whether or not ships would be sailing into Europe. So we'd like to thank the rail workers because we were able to ship our product in May. Pniówek was just able to mine half and half, but we were able to ship product from our coal yards.
Well, basically, at the lower prices.
Well, this is -- all of this bore fruit in such a way that we're able to benefit from it because we're selling more and more coke on the production side because our cokers are producing coke and so that way we're selling the coal to them.
And the next question is from Mr. Jakub Szkopek from mBanku. When do you think the next funds will be admitted or given to PFR?
We're thinking about the COVID plans, we don't know what the plans of PFR or the government plans. In the public domain, you could find various concepts. But this doesn't pertain to us directly. We're trying to watch our costs and drive up our sales. We still have some inventories and we're going to try to liquefy those inventories to the greatest extent possible.
And the next question is, in Q4 2020, can we count on the discount in coking coal and coke sales prices being reduced? In October, China decided to stop importing coal from Australia, and this meant that overseas sales prices fell. Interim coke prices and coking coal prices are clearly growing in China. Which benchmark should we now watch or track as we try to predict sales prices at JSW in subsequent quarters?
In terms of Q4. I don't want to say anything because we're in the middle of the Q4 and things are happening right now. We had anticipated this situation. So we're now renegotiating The price formula, especially with respect to coal.
Right now, we're not sending coal so far away to the Far East, we are sending coke to China, Malaysia, Vietnam and India. These markets are now a permanent part of our sales strategy. We don't intend to sell coal there yet for now. So coal and coke are sold here in Europe, coke is sold elsewhere. And so there's a different approach to benchmarks pricing. I don't want to speak at length about this subject because Q4 is quite important for many of our business partners and the procedures are underway.
So I understand that, that was the last question. So I'd like to thank you very much for your attention. If you're going to have any additional questions or if any other new questions arise, our investment relations team is available. They'll collect the questions and provide responses as you like.
So I'd like to thank you for your attention. And I hope all of you are healthy. And of course, the contact data are available on our website. So if you have any questions, of course, we'll field your questions. It's part of our normal operations.
So once again, I'd like to wish all of you a lot of good health. We all need it. Thank you very much. Thank you very much for your attention. Bye-bye.