In 2024, for the first time in many years, Russian coal companies faced a full-scale crisis. As a result of a combination of various factors, the industry finds itself in an extremely difficult situation, and there is no way out of it in sight.
Coal prices on the world market significantly dropped, even though global coal demand in 2024 continued to grow and according to IEA estimates is expected to reach an all-time high of 7.25 bln tons.
At the same time, the embargo on Russian coal supplies to the EU imposed after the start of the military operation in Ukraine in 2022 led to a shift of supplies to Asia, while railroad tariffs continued to increase.
The impact of negative factors intensified in 2024. The discounts to international benchmarks were compounded by a sharp rise in rail transportation costs, including the elimination of tariff discounts, as well as higher transshipment tariffs at the OTEKO terminal in Taman, which led to the collapse of exports through the port in winter and spring 2024.
In addition, in 2024, dollar-linked export duties in Russia were imposed as well as import duties in China, which became one of the main markets for Russian coal producers.
During the year, the U.S. put a number of Russian coal companies on the sanctions list (SDN), which implies the toughest blocking sanctions, complicating international settlements and access to international markets.
In 2024, the long-standing challenges with the capacity of the Russian Railways (RZD) network worsened.
Railroad operations were slowed down by a shortage of locomotive crews along with infrastructure constraints on the BAM and Trans-Siberian railroads amid the ongoing redirection of the cargo base in the eastern direction. Moreover, RZD also failed to handle cargo flows in the southern and northwestern directions.
All these factors caused a drop in coal exports and had an extremely negative impact on the industry’s financial performance. The share of unprofitable companies exceeded 53%, and the net loss in January-October 2024 amounted to 0.83 bln USD compared to a profit of over 3.09 bln USD a year earlier.
The last time such a situation was observed in 2020, in the middle of the COVID-19 pandemic.
In 2024, companies were forced to export coal at a loss or with zero profitability, as well as cut investments.
However, the government refrained from any measures to support the industry, except for the abolition of export duties, which is outweighed by a 13.8% hike in RZD tariffs for 2025.
Furthermore, in 2025 RZD will only ensure the transportation of 54.1 mio t of coal from Kuzbass, with coal from other regions to be exported on general terms.
Source: CCA Analysis
