The Ministry of Finance proposed to increase taxes on extraction of coal and other minerals from 2025. The new bill was submitted to the State Duma on June 3. With this initiative, the government seeks to compensate for the loss of income from the abolition of export duties, but the increased tax burden on the coal industry is threatening to reduce production and investments, as well as to further curtail exports.
According to the bill, for thermal and coking coal it is proposed to establish an additional surcharge to the mineral extraction tax (MET) rate in the amount of 10% of the price excess at seaports in the Far East. The threshold price for steam coal is set at 100 USD/t FOB Vostochny 5,500 kcal, for coking coal at 140 USD/t.
Amid falling prices on the international market, rising production costs and transportation expenses, exporters are already facing negative profitability in most directions. The tax burden on coal miners has been expanded several times in recent years. In 2023, MET was raised for anthracite, coking and steam coal to 380 RUB/t, and in autumn of the same year all coal exports were subject to a 4-7% duty linked to the USD/RUB exchange rate.
The additional increase in MET raises concerns, given the regular increase in Russian Railways (RZD) tariffs, higher production costs, freight and transshipment rates, as well as falling indices on the international coal market. Moreover, further pressure on Russian companies producing thermal coal in Q2 2024 will be exerted by the deflator coefficient to the mineral extraction tax rate, raised to 0.906, or by 8% q-o-q.
Coal production in Kuzbass, the main coal mining region of Russia, where high-quality material is extracted, decreased to 86.8 mio t in Jan-May 2024 (-4.8 mio t or -5.3% y-o-y). Railcar loadings bound for export in Jan-May fell to 78.8 mio t (-10.5 mio t or -11.8% y-o-y).
Source: CAA
