The Russian coal industry is going through difficult times right now. More than half of the companies ended the past year with losses due to falling product prices, the strengthening of the national currency, as well as a reduction in exports. There have been crises in the industry before, but such a huge number of negative factors have not been observed at the same time, therefore, additional government support measures are simply necessary in the current situation.
At the end of May, Prime Minister Mikhail Mishustin announced a number of decisions to support the coal industry, and it was decided to create a sub-commission headed by the country's finance minister to provide targeted subsidies and other support.
What are the prospects for the industry? Will the targeted approach proposed by the government help? What will happen to coal prices? What are the ideas in the sector? Finam dealt with these and other issues together with experts.
Severe challenges
According to Rosstat, in the period from 2021 to 2023, Russian coal miners earned about 1.9 trillion rubles before taxes, but 2024 was unsuccessful for them. According to the results of last year, they received a net loss of 112.6 billion rubles, the share of unprofitable coal companies was 53.3%. At the same time, according to estimates by the Ministry of Energy, the loss of the coal industry in the first quarter of 2025 may exceed 70 billion rubles. This was announced to TASS by Deputy Energy Minister Dmitry Islamov.
The industry faced serious challenges back in 2022 due to sanctions, falling global coal prices, and rising logistics costs, but the real crisis came only last year, when many Russian companies recorded a decrease in production volumes, as well as a lack of profitability. The situation in 2025 remains difficult – prices for thermal coal are falling due to the recovery in global exports and production growth in China and India, while prices for coking coal are also declining due to weak demand for steel in China. In addition, competition between coal exporters in Asian markets has increased, including Russia. In order to maintain their position in Asia, Russian exporters have to increase the discount on coal, which leads to zero or even negative profitability. Moreover, the return of Australian exports and China's protectionist policy towards local thermal coal producers are putting pressure on the cost of coal.
According to estimates by the Kept consulting company and calculations by Vedomosti, both energy and coking (metallurgical) coal will become cheaper in 2025. It is expected that the average quotations of Australian energy coal, which are an international benchmark, are based on FOB ("ship loading") In 2025, Newcastle prices will decrease by 21% compared to the previous year, to $108/ton. The Kept review says that the main factors of the decline will be an abnormally warm winter, growing coal reserves in China, as well as the development of renewable energy sources in the world's largest economies. The minimum level of these quotations this year, according to Kept's forecast, will be in the 2nd quarter – $103/ton. At the same time, prices will begin to recover in the second half of the year, although their growth will be slow, and by the end of this decade the average annual cost of coal will not exceed the level of 2024.
Meanwhile, according to Kommersant, citing data from analysts at NEFT Research, the cost of Russian thermal coal in the Asian market has dropped to a four-year low amid oversupply and reduced imports from key consumers. Thus, energy coal with a calorie content of 5,500 kcal per 1 kg, including the cost of delivery to the port (CFR) in Southern China, fell to $77.5 per ton by May 23, and to $82.6 per ton in Western India. At the same time, prices for this coal in the Far Eastern ports (FOB Vostochny) fell to $63.5 per ton, which turned out to be 30.6% less than a year earlier and 19.5% lower than at the beginning of this year.
The authorities are rushing to the rescue
Under the circumstances, the Government's commitment to support the coal industry is absolutely logical. A number of decisions were announced on May 30 by the country's Prime Minister Mikhail Mishustin. It is known that a targeted approach will be used in providing support measures, while the Ministry of Finance and the Ministry of Energy have until June 5 to determine and approve the criteria on the basis of which decisions will be made when considering applications for state support. In addition, a special subcommittee will be created to provide financial measures of state support to individual organizations, and it will be headed by Anton Siluanov, Minister of Finance of the Russian Federation.
Among the approved measures, in particular, a deferral in the payment of mineral extraction tax and insurance premiums, targeted subsidies to compensate for part of the cost of logistics costs when exporting coal products over long distances, the ability to restructure credit indebtedness to companies experiencing a serious debt burden, as well as cost optimization and restrictions on the payment of dividends. According to Peter Bobylev, director of the Department of the Ministry of Energy, who spoke at the international exhibition Coal of Russia and Mining, restrictions on the payment of dividends by coal companies to receive government support will be temporary, but he did not announce the exact timing of such restrictions. "Today, the issues in dividends are one of the factors that are proposed as an integral part of the process to obtain a measure of support for the company. Of course, this will be temporary," RIA Novosti quoted him as saying.
Should we expect improvements?
Nikolay Dudchenko, an analyst at Finam, believes that measures to support coal miners will not be able to fundamentally improve the situation in the coal industry, as there are other (external) factors. For example, these are coal prices in the markets, which continue to remain quite low, as well as import duties from China.
"On the other hand, it cannot be denied that support measures have been in demand for quite a long time, since the crisis in the industry did not begin this year. Therefore, the adoption of this approach is welcome. We think that more intensive work is needed in the diplomatic area, and negotiations with the largest importers of Russian coal should be intensified. It is possible that additional measures to support workers in the coal industry may need to be developed in case of optimization of operating costs by individual companies," the expert says. As for the cost of coal, Dudchenko does not expect a significant increase in prices this year and expects that the average price in New Castle this year will not exceed the mark of $ 110-115/ton.
Analysts at Gazprombank Investments also believe that the Russian coal industry will continue to experience difficulties due to rising costs and low global prices. Experts emphasize that the price dynamics of Russian thermal coal in Asia is influenced by several factors, including large reserves in China accumulated due to increased domestic production, as well as a high level of coal production in India. In the first five months of this year, China reduced seaborne coal imports by 12% YoY, to 127 million tons, while in May, the National Development and Reform Commission of the People's Republic of China called on the management of power plants to prioritize purchases of local coal amid lower domestic prices.
At the same time, the announced government support measures, in their opinion, can mitigate the negative effects of the current economic situation for Russian coal miners. Nevertheless, Gazprombank Investments analysts warn that, given the current situation in the industry and global trends in the coal market, the shares of Mechel and Raspadskaya are not currently investment-attractive for long-term investors.
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