Russian Railways (RZD) is not planning to prolong agreements with mining regions on export of coal eastward in 2025. The monopoly asks the Russian President to consider this initiative. Meanwhile, RZD is willing to make an exception, but only for Kuzbass and on the condition that the agreement will apply not only to coal.
In the event of approval, next year’s coal production and export volumes will plummet, with potential mine shutdowns and social upheaval in the mining regions amid falling budget revenues.
About 60% of the Eastern range capacity is used for coal transportation, owing to agreements with key coal-producing regions. Under the agreement for 2024, RZD is obliged to handle eastbound rail shipments from Kuzbass in the amount of 54 mio t, Yakutia (26.3 mio t), Buryatia (8.5 mio t), Khakassia (6.5 mio t), Irkutsk Region (3.3 mio t) and Tuva (0.65 mio t), totaling about 100 mio t.
However, the regions insist on the need to increase quotas for eastern direction. Kuzbass proposed to agree on guaranteed exports of at least 68 mio t of coal in 2025.
Moreover, because of the issues with the exports and the planned sharp increase in railroad tariffs by 22.7% in 2025, the heads of the three regions last week resorted to the chairman of the government asking to return the lowering coefficients and keep the adjustment of railroad tariffs within the official inflation rate.
The request is also being urged by coal miners’ losses, the ongoing drop in prices on the global market, tightening of sanctions, as well as the decline in production and export volumes.
It is estimated that every 1 mio t of coal that is left behind and not exported eastbound may cost coal companies up to 125 mio USD in lost revenue.
In January-September 2024, export rail transportation of coal dropped by 14.5 mio t to 140.8 mio t (-9.3% y-o-y), out of which the eastern direction accounted for 85.5 mio t, or 61%.
Coal production in Kuzbass fell to 146.9 m t in January-September 2024 (-12.9 mio t or -8.1% y-o-y).
Source: CCA Analytics
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