Russian coal companies’ investments fell by 4.4% to USD 1.21 bln in H1 2024 (-USD 0.07 bln y-o-y), which is the first six-month drop since 2020, leading to a further decline in coal production.
However, in Russia’s mining industry, only coal sector showed negative dynamics due to lower global prices, high costs, sanctions and limited railway infrastructure capacity.
Many Russian producers are revising their plans and abandon the implementation of new projects in 2024, reducing equipment purchases and production.
Thermal coal accounts for more than 80% of export supplies, and in early April prices fell to their lowest level since 2021, but the downward trend persists.
The rising cost of production and logistics amid falling prices led to negative profitability of supplies and increased losses, which jumped 3.4 times in H1 2024, resulting in a total loss of USD 0.07 bln compared to a profit of USD 3.09 bln in H1 2023. China exports profitability deteriorated since January 1 due to import taxes reintroduced by the Chinese government.
Additional pressure on the investment activity of exporters is exserted by high interest rates, which the Central Bank of Russia keeps raising. Thus, the combination of negative factors leads to underfunding of the industry, affecting mining output.
By the end of 2024, investment volumes in the coal industry are expected to drop by 33.3% to USD 2.2 bln (-USD 1.1 bln y-o-y).
Coal production in Kuzbass, Russia’s main coal mining region, where high-quality material is produced, plunged to 132.3 mio t in Jan-Aug 2024 (-10.1 mio t or -7.1% y-o-y).
Source: CCA Analytics
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