Russian Coal Industry Prepares For Mass Bankruptcies
- 16.01.2025, 15:20
Sanctions are working.
Problems of the Russian economy, a sharp drop in coal export prices and tightening Western sanctions will lead to the bankruptcy of many players in the coal industry in 2025. Representatives of industry companies told Kommersant about this.
One of the large coal enterprises told the newspaper that this year Russian coal producers will not increase production due to the strengthening of international sanctions and problems with the export and transshipment of coal against the backdrop of falling world prices. At the same time, the consequence of growing costs against the backdrop of the Central Bank's tough policy and the lack of new sales markets will be the bankruptcy of small market players, the source said.
According to Lyudmila Eremina, deputy head of the AK&M agency, the problematic assets of bankrupt companies are unlikely to be of interest to investors. “The only possible buyers may be state-owned companies or regional government structures, and the deals will not be aimed at finding synergies or providing themselves with resources, but at preventing coal companies from going bankrupt,” the expert noted.
From January to November 2024, coal exports from Russia decreased by 9% to 179.76 million tons, according to a review by the Price Index Center (PIC). At the same time, export prices for Russian coal fell to multi-month lows and are unlikely to level out in the first half of this year due to accumulated reserves and increased production in China and India, where a significant portion of Russian coal is supplied.
According to PIC calculations, depending on the brand and port of shipment, prices for power-generating coals by mid-January were $60–87 per ton; coking coals were sold for $118–121 per ton. At the beginning of 2024, the cost of thermal coal was $101, at the beginning of 2023 — $135 per ton, specified the director of the CCI Evgeny Grachev.
Under these conditions, exporters are forced to sell products at a loss or with zero profitability and reduce investments, specified the managing director of the NRA rating service Sergey Grishunin. According to the director of corporate ratings at the Expert RA agency Maria Kolomiets, Russian companies are forced to give discounts to buyers in export markets due to the risk of secondary sanctions, which leads to a decrease in the profitability of coal mining.
Experts cite the complication of logistics due to constantly changing routes and rules for transporting products against the backdrop of tightening sanctions as a factor in reducing the profitability of the coal business in Russia. In January, the US Treasury included Kuzbassrazrezugol and Krasnoyarskkraigol, which together produced 15% of coal in the Russian Federation, in the SDN List, Grishunin noted. In addition, Russia is expected to reduce steel production, which will negatively affect domestic consumption of coking coal.
Vedomosti wrote in November, citing a review by Neft Research, that the consolidated revenue of Russian coal industry enterprises by the end of the year will decrease by 20% compared to 2023 (to 1.8 trillion rubles), and pre-tax profit — by 33 times (to 10.7 billion rubles).