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Over the past year, the Russian coal industry has been mired in complex difficulties, facing severe challenges from various aspects. Global fuel market prices continued to decline, logistics costs kept climbing, some companies were placed on sanction lists, and news of loss-making enterprises shutting down was incessant. The development path for the entire industry is full of obstacles. (Reported and translated from Russian Construction Machinery Network)
Mining: A slight increase in total volume, with significant regional disparities
In 2024, the total volume of coal mining in Russia reached 443.5 million tons, achieving a 1.3% growth compared to the previous year. Among the coal-producing regions, Kuzbass’s production was 198.4 million tons, which, although still at the top of the production list, had a year-on-year decrease of 7.3%. In stark contrast was Yakutia, where the volume of coal mining saw a significant increase of 28%, reaching 49.4 million tons and jumping to second place nationwide. This achievement was largely due to the development of the Elga coal field, injecting strong momentum into Yakutia’s coal industry.
As a traditional coal production region, Krasnoyarsk Krai, although only preliminary data have been published, is expected to have a mining volume of about 36 million tons, an increase of 6 million tons compared to the previous year, showing a certain growth potential. Additionally, the coal production in Khabarovsk Krai grew by 8.8%, while Rostov Oblast and Amur Oblast saw decreases of 5.7% and 0.48% respectively, indicating significant differences in development trends between regions.
Exports: Decline in both volume and price, profound industry impact
Russian coal exports have been on a downward trend for three consecutive years. In 2024, the export volume was between 195 and 196.2 million tons, down 8% compared to the previous year, with notable decreases in exports to key markets such as China, Turkey, and South Korea. In Kuzbass, coal companies failed to fully meet the export volume to Asia-Pacific countries according to the agreement signed with Russian Railways, with actual exports 500,000 tons less than the agreed amount. Yakutia, on the other hand, performed outstandingly by shipping all planned coal carriages for the year through railways, totaling 26.4 million tons, successfully completing the export task. Rostov Oblast saw an export volume increase of nearly one fourth, showcasing the region’s positive development trends in coal exports.
At the same time, coal export prices continued to fall. Since 2022, the profitability per ton of exports has decreased by more than 8,000 rubles. Thermal coal prices dropped due to reduced demand from China and India, while coking coal prices declined due to instability in the steel market. Furthermore, transportation costs have been rising continuously, with increased transit times for Russian Railways’ freight cars, fluctuations in freight rates, rents, and port transshipment costs, as well as temporary export tariffs, which have caused coal transportation costs to increase by 2 to 2.4 times over the past five years. These combined factors lead to a potential decrease in Russian coal industry revenue by 15-20%, with export earnings reduced by more than 400 billion rubles. Domestic market supply of coal also failed to bring about positive changes.
Costs and Dilemmas: Increased Investments, Rising Risks
The coal industry faces the challenge of rising equipment import costs. To maintain and develop production, investment in 2024 increased by 3.6%. However, this investment growth was not obtained from current profits but depended on reserve funds from 2021-2022 and loans, undoubtedly bringing great bankruptcy risks to enterprises.
Mining costs also continued to rise due to increased costs for equipment purchases and manpower. In the first half of 2024, the production cost for open-pit mined coal increased to 2,973 rubles per ton, a year-on-year increase of 7.5%; while the cost for underground mining increased to 3,606 rubles per ton, up 7.7% year-on-year. Some enterprises suffered heavily, such as the “Inskaya” mine which could only export 3,000 tons of the 150,000 tons of coal mined each month due to logistics issues, leading to debt difficulties. The “Orzhelaskaya – New Mine” also temporarily suspended production due to losses, highlighting the serious circumstances faced by the industry.
Outlook for 2025: Burden Reduction and Challenges Coexist
Entering 2025, the Russian coal industry has welcomed some positive policy adjustments. The floating export tariffs for anthracite, coking coal, and thermal coal were abolished, and a new taxation mechanism was established for brown coal, which is only taxed when the average price exceeds $63 per ton, to some extent reducing the tax burden on enterprises.
The Ministry of Energy proposed increasing transportation agreements and favorable policies. Although Russian Railways has only renewed with Kuzbass so far, all parties agreed to use innovative carriages, which carry 8 tons more than traditional ones, allowing an additional 2 million tons of coal to be transported, aiding in improving transportation efficiency and export volume. However, despite these positive changes, the coal industry is still unlikely to emerge from what is called the most severe crisis of the past 30 years in the short term, and the future development is still full of challenges.
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