The Russian coal industry, one of the largest raw materials industries in the economy, including more than 30 single-industry towns and hundreds of thousands of employees, is rushing towards a severe crisis at full speed.
Having lost Western markets, faced with a sharp drop in demand in “friendly” countries and multi-billion dollar losses, coal companies have begun to sharply reduce production.
According to Rosstat, in July, coal production in Russia fell by 6.7% year-on-year, and its total volume of 31.5 million tons was the lowest since the 2020 pandemic. Compared to the peaks shown in December 2022, coal companies have lost about 12 million tons of monthly production, or 27%.
The production of hard coal, the main product of coal miners, which accounts for 80% of production, collapsed by 8.2%, and anthracite, the most valuable grade, by almost a quarter (by 23.7%). In August, according to Rosstat's operational statistics, the decline in coal production accelerated to 10.1% year-on-year.
The key problem for the coal industry has become Western sanctions, notes Janis Kluge, a research fellow at the German Institute for International Security Studies. Unlike oil and gas, which the European Union continues to purchase, albeit in small volumes, coal has fallen under a total embargo, and Asian countries that bought Russian coal last year have sharply reduced demand.
Supplies to China in the first half of 2024 fell by 8% and their growth is not expected, complained the head of the Russian Ministry of Energy Sergei Tsivilev in September. The fact is that Beijing imposed duties on Russian coal, the minister explained. At the same time, other suppliers - Indonesia and Australia - were not affected by them, since they are part of a free trade zone with China.
India has reduced coal imports from Russia by 55%, and Turkey - by 47%, according to CREA estimates. Russia's total coal exports fell by 11.4% in January-July, to 112.6 million tons. And since coal miners exported about half of their output, the blow was painful for them, Kluge notes.
The Russian coal industry is entering its worst crisis in 30 years, says independent energy expert Maxim Ivanov. In addition to sanctions, Chinese duties and forced discounts, the fall in global coal prices is having an effect: in the first half of the year, they fell by 34%, to $132 per ton on FOB Newcastle (Australia) terms — the largest coal hub in the Asia-Pacific region.
As a result: according to Rosstat, more than half of the coal companies became unprofitable, and the net financial result of the entire industry became negative. The total loss of the coal industry for January-July amounted to 7.1 billion rubles. At the same time, the losses of unprofitable companies increased by 3.4 times, and the profits of profitable ones decreased by 72%.
Coal miners are faced with blocked payments, unavailability of imported equipment due to sanctions, and are forced to offer discounts to customers who avoid "toxic" companies from Russia, Kluge lists. In addition, transporting coal to Asia is expensive: if one tanker holds $50 million worth of oil, and its delivery to India costs $5 million, then a ship with coal carries only $15-20 million worth of cargo, and transportation costs "eat up" up to a third of revenue.
The Russian government includes in its energy strategy a constant increase in coal production - from the current 438 million tons per year to 482 million tons in 2030 and 556 million in 2050. But there is unlikely to be demand for this coal, Ivanov believes: China is developing its own production, Asian countries are striving to switch to “green” energy, and metallurgists around the world are introducing low-carbon technologies.
“In this regard, the closure of a number of coal mining enterprises located far from export markets and specializing in the production of thermal coal looks inevitable,” the expert believes.
Having lost Western markets, faced with a sharp drop in demand in “friendly” countries and multi-billion dollar losses, coal companies have begun to sharply reduce production.
According to Rosstat, in July, coal production in Russia fell by 6.7% year-on-year, and its total volume of 31.5 million tons was the lowest since the 2020 pandemic. Compared to the peaks shown in December 2022, coal companies have lost about 12 million tons of monthly production, or 27%.
The production of hard coal, the main product of coal miners, which accounts for 80% of production, collapsed by 8.2%, and anthracite, the most valuable grade, by almost a quarter (by 23.7%). In August, according to Rosstat's operational statistics, the decline in coal production accelerated to 10.1% year-on-year.
The key problem for the coal industry has become Western sanctions, notes Janis Kluge, a research fellow at the German Institute for International Security Studies. Unlike oil and gas, which the European Union continues to purchase, albeit in small volumes, coal has fallen under a total embargo, and Asian countries that bought Russian coal last year have sharply reduced demand.
Supplies to China in the first half of 2024 fell by 8% and their growth is not expected, complained the head of the Russian Ministry of Energy Sergei Tsivilev in September. The fact is that Beijing imposed duties on Russian coal, the minister explained. At the same time, other suppliers - Indonesia and Australia - were not affected by them, since they are part of a free trade zone with China.
India has reduced coal imports from Russia by 55%, and Turkey - by 47%, according to CREA estimates. Russia's total coal exports fell by 11.4% in January-July, to 112.6 million tons. And since coal miners exported about half of their output, the blow was painful for them, Kluge notes.
The Russian coal industry is entering its worst crisis in 30 years, says independent energy expert Maxim Ivanov. In addition to sanctions, Chinese duties and forced discounts, the fall in global coal prices is having an effect: in the first half of the year, they fell by 34%, to $132 per ton on FOB Newcastle (Australia) terms — the largest coal hub in the Asia-Pacific region.
As a result: according to Rosstat, more than half of the coal companies became unprofitable, and the net financial result of the entire industry became negative. The total loss of the coal industry for January-July amounted to 7.1 billion rubles. At the same time, the losses of unprofitable companies increased by 3.4 times, and the profits of profitable ones decreased by 72%.
Coal miners are faced with blocked payments, unavailability of imported equipment due to sanctions, and are forced to offer discounts to customers who avoid "toxic" companies from Russia, Kluge lists. In addition, transporting coal to Asia is expensive: if one tanker holds $50 million worth of oil, and its delivery to India costs $5 million, then a ship with coal carries only $15-20 million worth of cargo, and transportation costs "eat up" up to a third of revenue.
The Russian government includes in its energy strategy a constant increase in coal production - from the current 438 million tons per year to 482 million tons in 2030 and 556 million in 2050. But there is unlikely to be demand for this coal, Ivanov believes: China is developing its own production, Asian countries are striving to switch to “green” energy, and metallurgists around the world are introducing low-carbon technologies.
“In this regard, the closure of a number of coal mining enterprises located far from export markets and specializing in the production of thermal coal looks inevitable,” the expert believes.
