Russia’s main coal industry on the brink of financial collapse

spring: Russian newspaper The Moscow Times, citing data from Russia’s Federal State Statistics Service

The details: It is noted that less than half of the industry’s companies closed the first four months of 2024 in the black, compared to two-thirds a year ago. Moreover, their total financial result was halved to 72 billion rubles (approximately $820 million).

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The Moscow Times adds that every second company, based on official statistics, became unprofitable (52.4%), with their total losses for the first four months of 2024 reaching 58 billion rubles (approximately $663.4 million).

As a result, coal miners’ profit in the January-April period amounted to just 14.3 billion rubles, nearly 200 billion rubles (roughly $2.2 billion) from the same period a year ago.

The coal industry in Russia is one of the largest raw materials industries in the country’s economy, covering over 30 monocities and employing 650,000 people.

Cut off from Western markets by sanctions, coal companies are rapidly losing customers in countries the Kremlin calls “friendly”. Russian coal exports fell by 13% in the first quarter of the year.

India, which accounts for about a third of Russia’s coal exports, cut imports by 22% to 6.76 million tonnes in March-May. Exports to Turkey, South Korea and Japan also fell.

China, the biggest buyer of Russian raw materials, imposed an import tax on coal that does not apply to other suppliers, such as Indonesia and Australia, which are members of a free trade area with China.

In addition, prices for Russian coal have reached their lowest level in three years: $95 per ton in Far Eastern ports (6% since the beginning of the year), $72 per ton in Taman (13%) and only 61 dollars in Baltic Sea ports (14%).

The Moscow Times noted that the Russian coal industry is currently in a state of a cash gap (when incoming payments are less than expenses), and by the end of the year, its negative cash flow is expected to reach 450 billion rubles (approximately US$5.1 billion). ).

In addition, the cost of coal increased by 30% due to increased expenses for imported equipment, rail charges, wagon rentals, port freight, ship insurance and loan servicing, all driven by an increase in sharp in the base rate of the Central Bank of Russia.

Background:

• Global fossil fuel consumption rose to a record high last year, pushing emissions to more than 40 gigatonnes of CO2 for the first time.
• Russian seaborne coal exports to Asia are falling due to low global prices and high transport costs.