The bituminous coal extracted has different chemical compositions and quality depending on geological conditions of individual mined seams. The bituminous coal can be divided into the coal suitable for coking (CSFC) and steam coal (SC). Although the two types of bituminous coal are mined in the same way, using the same technologies, they have however completely different end-use and different customer base. The prices are different and the products are not interchangeable.

CSFC is defined as bituminous coal with the quality enabling production of coke in blast furnaces and it is not used for direct heating or energy production. CSFC is purchased solely by companies producing coke. CSFC is the only raw material for coke production and has no other application actually. The CSFC cannot be substituted by steam coal.

SC is the coal which cannot be qualified as coking coal. The SC is used in power plants as fuel for production of electricity, heat and technological steam, as part of the production process of industrial plants such as sugar refineries, brick plants, cement factories and limekilns, paper mills, etc. SC may be substituted by CSFC, but doing so would not be economically viable.

CSFC may be divided further into a few categories according to its quality. CSFC referred to as hard coking coal is of the best quality, followed by CSFC referred to as semihard coking coal and semisoft coking coal. However, the market for the individual types of CSFC is not separated and no such distinction will be made for the purposes of the assessment for the present decision.

In view of the above, and in line with the application, for the purposes of evaluating the conditions laid down in Article 30(1) of Directive 2004/17/EC, CSFC and SC are considered to constitute separate product markets and they should therefore be examined separately.

The Czech request considers that the relevant geographical market would be a market larger than the national territory, incorporating the territories of the Czech Republic, Slovakia, Austria, Poland and Hungary for CSFC. In the case of SC, the applicant considers that the geographical market should be defined as comprising the Czech Republic, Slovakia, Austria, Poland, Hungary and Germany. It is argued that the main reason for this market definition is the important mutual cross-border supply, the customer switching and the non-existence of administrative obstacles (customs barriers, quotas, etc.).

Although the applicant states that the coal produced by OKD in the Czech Republic – whether CSFC or SC – is competitive for a radius of 500 km, it is noted that the customers of OKD are located on a radius of approximately 350 km from the place of production of the coal, in Ostrava.

In respect of CSFC sales, OKD has one important customer in Slovakia, which purchased around 26 % in 2007 and 30 % in 2009 of OKD production and another important customer in Austria, which purchased 13 % in 2007 and 19 % in 2009 of the OKD production. The applicant lists also among its main customers outside the Czech Republic one company in Poland but its purchases account for only around 8 % of OKD production.

In respect of SC sales, apart from Czech customers, OKD lists one important customer in Austria, which accounted for around 12 % in 2007 and 21 % in 2009 of OKD sales and one customer in Germany with around 5 % in 2007 and 3 % in 2009 of SC sales.

In view of the above factors, for the purposes of evaluating the conditions laid down in Article 30(1) of Directive 2004/17/EC, the geographical market is considered to be confined to the Czech Republic and Poland, both in respect of SC and CSFC. Due to the abovementioned differences between those regions which can be easily supplied by sea borne coal and those which might be too far away from any coast, the market could even be smaller comprising only the Czech Republic and the south of Poland. The question can, however, be left open, since the larger market definition is the one more favourable to the applicant. Under both market definitions, the analysis does not lead to a different outcome.

It is considered that, in respect of bituminous coal mining, one indicator for the degree of competition on national markets is the total market share of the biggest three producers.

OKD and two Polish suppliers of CSFC are by far the most important suppliers in the relevant geographic market. OKD is the largest supplier of CSFC in the Czech Republic (75,5 % market share in the Czech Republic in 2008). The two Polish suppliers of CSFC are the largest suppliers in Poland (60,2 % and 19,3 % market share in Poland in 2008). In the geographical market encompassing the Czech Republic and Poland, the aggregated market share of the three biggest producers in 2008 was around 93 %. It is also worth noting that the biggest competitor of OKD has on its own a market share of around 49 % of the market.

As recalled in recital 22 the security and the stability of supply play an important role in the contractual relationships. The information provided by the applicant on the customer switching for CSFC shows that there is virtually no switching for this product. The contracts for CSFC supply are long-term contracts and no evidence has been provided to show that any of OKD customers changed from OKD to other suppliers. It can consequently not be assumed that a CSFC customer would be willing or indeed able to easily switch in the event of a small but significant increase of price by OKD.

OKD and two Polish suppliers of SC are the by far most important producers of SC in the relevant geographic market. OKD is the largest supplier of SC in the Czech Republic (61,6 % market share in the Czech Republic in 2008). Two Polish suppliers of SC are the largest suppliers in Poland (52,5 % and 17,7 % market share in Poland in 2008). In the geographical market encompassing the Czech Republic and Poland, the aggregated market share of the three biggest producers was around 72 % in 2008. It is also worth noting that the biggest competitor of OKD had on its own a market share of around 50 % of the geographical market, encompassing the Czech Republic and Poland.

As is the case for CSFC, the security and stability of supply of SC play an important role in the contractual relationships. The information provided by the applicant on the customer switching shows that a number of OKD customers of SC are interrupting their supplies from OKD, in certain years, or that some 1-year contracts or on-the-spot contracts were never renewed. However, given the fact that the applicant did not, as requested, provide information on the volumes of supplies concerned or of their proportion of the OKD production, it would be difficult to conclude that a customer of OKD would easily switch, following a small but significant increase of price by OKD.