Published Jan 24, 2025
By Brendan Cole
Senior News Reporter
NEWSWEEK
Russia's coal industry is in crisis as mines face bankruptcy against the backdrop of low world prices, it has been reported.
Business newspaper Kommersant said the Russian government is trying to tackle the industry's plummeting exports and revenues and that state development corporation VEB.RF is poised to take control of failing assets.
Isaac Levi, from the Centre of Research on Energy and Clean Air (CREA), told Newsweek that sanctions on Russia for its invasion of Ukraine as well as dwindling sales to China have hit the country's industry hard.
Newsweek has contacted VEB.RF by email for comment.
NEWSWEEK
Russia's coal industry is in crisis as mines face bankruptcy against the backdrop of low world prices, it has been reported.
Business newspaper Kommersant said the Russian government is trying to tackle the industry's plummeting exports and revenues and that state development corporation VEB.RF is poised to take control of failing assets.
Isaac Levi, from the Centre of Research on Energy and Clean Air (CREA), told Newsweek that sanctions on Russia for its invasion of Ukraine as well as dwindling sales to China have hit the country's industry hard.
Newsweek has contacted VEB.RF by email for comment.
An illustrative image from November 5, 2021, showing coal mining in Newcastle, Australia. Getty Images
Why It Matters
Russia is the world's sixth biggest coal producer and the industry is critical for dozens of single industry towns that depend on the sector. While a smaller contributor to Russia's GDP than its more lucrative energy exports of oil and gas, a slump in coal exports is the latest symptom of the sanctions-hit economy.
What To Know
After Russia's invasion of Ukraine, Europe announced sanctions in April 2022 that included a ban on coal imports from Russia, dealing a severe blow to the industry.
In turn, Russia looked to other markets in China and India but both countries reduced their imports due to sanctions and a wish to diversify suppliers.
Last year, Russia's seaborne coal export revenues fell 22 percent to $24.9 billion compared with 2023's $32.2 billion. Meanwhile, export volumes dropped 15 percent in the same timeframe, according to figures from the CREA.
It also said that export volumes to China have slumped by a "drastic" one fifth (20 percent) to 16 million tonnes and fell by over a third (35 percent) to South Korea, by magnitude of 8.4 million tonnes.
Citing a coal industry source, Kommersant reported that in 2024 all companies in Russia's coal industry had reported losses and that this year, assets that are not part of the largest holdings will not be able to cope with the debt burden.
All grades of thermal coal—used to fuel turbines and electricity—have fetched below $35 per ton for a year, which is only the cost of production.
It means that only producers of more expensive metallurgical coal—used in iron and steelmaking—as well as firms closer to ports and large exporters that have their own logistics can survive, the publication said.
Why It Matters
Russia is the world's sixth biggest coal producer and the industry is critical for dozens of single industry towns that depend on the sector. While a smaller contributor to Russia's GDP than its more lucrative energy exports of oil and gas, a slump in coal exports is the latest symptom of the sanctions-hit economy.
What To Know
After Russia's invasion of Ukraine, Europe announced sanctions in April 2022 that included a ban on coal imports from Russia, dealing a severe blow to the industry.
In turn, Russia looked to other markets in China and India but both countries reduced their imports due to sanctions and a wish to diversify suppliers.
Last year, Russia's seaborne coal export revenues fell 22 percent to $24.9 billion compared with 2023's $32.2 billion. Meanwhile, export volumes dropped 15 percent in the same timeframe, according to figures from the CREA.
It also said that export volumes to China have slumped by a "drastic" one fifth (20 percent) to 16 million tonnes and fell by over a third (35 percent) to South Korea, by magnitude of 8.4 million tonnes.
Citing a coal industry source, Kommersant reported that in 2024 all companies in Russia's coal industry had reported losses and that this year, assets that are not part of the largest holdings will not be able to cope with the debt burden.
All grades of thermal coal—used to fuel turbines and electricity—have fetched below $35 per ton for a year, which is only the cost of production.
It means that only producers of more expensive metallurgical coal—used in iron and steelmaking—as well as firms closer to ports and large exporters that have their own logistics can survive, the publication said.
Revenues To China Plunge
Russia's coal industry recorded a cumulative loss of 91 billion rubles ($1 billion) from January to September 2024. Nearly half its coal enterprises are unprofitable, prompting President Vladimir Putin to order emergency support measures in December, Interfax reported.
Levi, CREA's Europe-Russia policy and energy analysis team lead, said Russia's current infrastructure is struggling to cope with current volumes of the country's coal exports. Given that all companies in the industry reported losses last year, it is no surprise there is a lack of interest in bringing new assets to the market.
With producers facing small profit margins due to a number of challenges, "As a result, Russian exporters have been compelled to scale back shipments across all routes," Levi told Newsweek.
Earlier this month it was reported that bankruptcy proceedings are underway at the Inskaya mine in the Kemerovo region at the request of the Federal Tax Service due to a debt of 230 million rubles ($2.3 million).
The government is examining bankruptcy proceedings across the sector and an assessment of the state of the industry will be presented to Deputy Prime Minister Alexander Novak, Kommersant said.
Sergey Uchitel, a partner at the Pen & Paper law firm, told Kommersant that most bankruptcy procedures in the coal industry involve liquidation rather than rehabilitation as few firms restore solvency and assets can be redistributed through a sale.
What Are People Saying
Kommersant: "(Government) ministries are working on measures to support the coal industry, which is in crisis against the backdrop of low world prices."
Levi told Newsweek: "The decline in Russian coal export volumes is attributed to significant logistical challenges, international sanctions, low global prices and high production costs, leaving many producers exporting coal with minimal or negative profit margins."
What Happens Next
Russia is losing out because its coal is too expensive and new sanctions could make exports even less attractive to China this year, which is likely to put further pressure on the industry in 2025, industry outlet mining.com reported.
Kremlin says Ukraine conflict is about national security, not oil
A view shows buildings damaged during a Russian missile attack, amid Russia's attack on Ukraine, in Zaporizhzhia, Ukraine January 23, 2025. REUTERS/Stringer/File Photo
UPDATED Jan 24, 2025,
MOSCOW - The Ukraine war is about Russia's national security and not about oil prices, the Kremlin said on Friday after U.S. Donald Trump called for a cut in the price of oil.
Trump on Thursday said he will demand Saudi Arabia and OPEC bring down the cost of oil.
Kremlin spokesman Dmitry Peskov, responding to a question about those comments, said the issues for Russia in Ukraine were about national security, threats to Russians living there, and the refusal of the United States and Europe to listen to Russia's concerns.
Ukraine and its Western supporters reject those arguments, saying Russia launched the war as an imperial-style land grab.
A view shows buildings damaged during a Russian missile attack, amid Russia's attack on Ukraine, in Zaporizhzhia, Ukraine January 23, 2025. REUTERS/Stringer/File Photo
UPDATED Jan 24, 2025,
MOSCOW - The Ukraine war is about Russia's national security and not about oil prices, the Kremlin said on Friday after U.S. Donald Trump called for a cut in the price of oil.
Trump on Thursday said he will demand Saudi Arabia and OPEC bring down the cost of oil.
Kremlin spokesman Dmitry Peskov, responding to a question about those comments, said the issues for Russia in Ukraine were about national security, threats to Russians living there, and the refusal of the United States and Europe to listen to Russia's concerns.
Ukraine and its Western supporters reject those arguments, saying Russia launched the war as an imperial-style land grab.
REUTERS
No comments:
Post a Comment