Coal industry consolidation in Russia is emerging as a key policy focus for the Ministry of Energy, which views it as essential to stabilising and strengthening the sector.
The Ministry of Energy considers consolidation around leading mining assets as a potential driver for stabilizing the coal industry.
According to Energy Minister Sergey Tsivilev, the implementation of such changes requires a comprehensive analysis similar to that carried out during the restructuring of the sector in the 1990s.
The key condition for consolidation is the presence of large coal companies with a diversified product line, geographically distributed mining assets, their own logistics infrastructure, including port terminals and railcar fleets, and, most importantly, a sustainable financial model.
The ministry is currently focused on drafting an updated development program for the coal industry through 2050.
Its approval is expected to enable practical discussions on consolidation mechanisms, including efforts to shift production eastward.
Ministry officials assess that current market conditions are objectively accelerating merger trends: less resilient companies will be forced to integrate into the structures of stronger market participants, leading to the optimization and shutdown of inefficient mining capacity capacities.
Despite the presence of leading producers, the industry remains quite fragmented, with a large number of small and medium-sized companies, reducing its overall efficiency.
Meanwhile, the stability of small and medium-sized enterprises is limited by high debt burdens. Currently, the volume of loans issued amounts to 15 billion USD and may spike to 17.5-18.8 billion USD by the end of 2025.
At the current key interest rate, it is difficult to carry out mergers and acquisitions using debt financing. For now, the main mechanism for asset redistribution is non-core bankruptcies and the transfer of collateral to financially stable structures.
Small assets may be bought out by large companies for nominal sums or on debt repayment terms. Thus, market redistribution, consolidation, and, in the long term, partial monopolization of the industry are possible.
Potential beneficiaries include major Russian coal producers and exporters. This may lead to a market structure led in the long term by a few major vertically integrated companies.
This potential consolidation aligns with global practices. Major international holdings like Glencore, BHP, and China Shenhua achieved synergies and cost reductions precisely through scaling and vertical integration.
Source: CCA Analysis
