Russian coal in the global market: difficulties and weak prospects

The EU's embargo on Russian coal and the consequent request to redirect its supplies to another markets have importantly exacerbated the problems of the coal sector in Russia, which is increasingly hard to derive expected export revenues. The low profitability of abroad sales affects the functioning of the industry, facing a crisis despite the comparatively advanced prices of natural material on the planet market. It seems improbable to break the negative trend – the insufficient competitiveness of Russian companies is due to structural reasons.

Export difficulties are indicative of the stagnation of the sector and the possible of defaulting on state assumptions regarding the increase in extraction and sales of natural material. At the same time, they show that a thorough transformation of the manufacture is necessary. expanding the competitiveness of Russian companies in the global marketplace requires long-term investment in infrastructure, which will not warrant the profitability of a crucial part of the sector. The position of coal companies besides complicate global decarbonization trends and the advanced competitiveness of another exporters in Asia. Negative dynamics besides has implications for the state, which raises questions about the appropriateness of subsidising the coal industry.

Industry crisis and stagnation of production

Since 2024, the Russian media have defined the situation in the coal sector as ‘crisis’, stressing the unprofitableness of mining in the Russian Federation. This became peculiarly acute after global natural material prices began to stabilise after a leap in 2022.^[1] The manufacture faces financial losses due to the inability to get a adequate margin erstwhile selling abroad. According to the Russian Statistical Office (Rosstat) data, in 2024 more than half of the sector reported a net loss, and 3 years ago the share of companies "down" was small little – 30%. Last year the full net failure of the full manufacture amounted to 112.6 billion rubles (about $1.3 billion).

Figure 1. Total financial consequence of the coal sector from 2021 to 2021

Source: Rosstat.

From 2023 it is besides possible to see a slight decrease in production, in practice meaning stagnation. Between 2018 and 2019, Russian companies reached their historical maximum production – a ceiling of 439 million tonnes per year. Since then, but for pandemic 2020, it has remained at around 430 million t/y.

Figure 2. Coal production by kind between 2020 and 2024

Source: Rosstat.

It's a small different for abroad sales. Over the last fewer years, the manufacture has seen a drop in exports twice – in 2022 and in 2024. Each time the volume of coal sold decreased by about 8% y/y. According to information from the Ministry of Energy besides natural material in the last year shrunk by 7.9%, to 196.2 million tonnes, which is besides confirmed by data from CDU TEK for the first half of the year.^[2]. The decrease is mainly due to the decreasing volume of energy coal sold – the volume of coking coal exports has not decreased.

Figure 3. Coal exports from 2019 to 2024

Source: CDU TEK.

The negative trend in exports announces the inhibition of further increase in production, which has gradually grown since the 1990s. abroad sales were the main driver of the full industry, as shown by the pace of expanding exported volumes. Over the period 2000–2023, the combined abroad carbon marketplace increased from around 38 million tonnes to over 200 million tonnes. At the same time, the interior market's importance for the sector was decreasing – in 2011, home supplies included around 65% of the full natural material utilized in Russia, whereas in 2023 only around 48%. The share of coal is decreasing mainly in the energy mix there – while in the early 21st century this natural material was liable for 20% of the energy generation, it has been produced from about 13% since 2020. Its consumption has decreased somewhat (increased usage in metallurgy) and is expected to stagnate in the future – especially in the case of energy coal^[3].

Russian exports are crucial for balancing the global coal market. According to IEA data in 2024, the companies there included around 13.5% of global trade in volumes sold^[4], which gave Russia the position of the 3rd largest exporter of this natural material – after Indonesia and Australia. This share has shrunk over the last fewer years – in 2019 Russia was liable for 18% of the planet market.

However, Russian decision-makers are constantly promising to increase the importance of their country as an exporter. In line with the state energy strategy published in April this year (Energy Strategy-2050)^[5] Russia is expected to grow its share of the planet coal marketplace by 2 stages: to 21–23% in 2036 and then to 24–27% in 2050. In the inertia scenario, and thus predicting the current trends without fresh investments in manufacture development, The Russians presume that by 2036 exports will scope 288 million tonnes (an increase of about 70 million tonnes compared to 2023) and production of 545 million tonnes (more by about 100 million tonnes compared to 2023). It can so be seen that decision-makers besides take into account home sales and so higher home consumption. However, these assumptions contradict the forecasts of Russian analysts, who announce the stagnation of interior request for coal and a possible increase in exports – mainly due to the increase in the sales of coking coal^[6].

Figure 4. Scenarios on Russian coal extraction according to Energostrategii-2050

Source: Ministry of Energy FR.

Figure 5. Scenarios on Russian coal exports according to Energostrategii-2050

Source: Ministry of Energy FR.

Impact of sanctions

The Russian coal sector, like its oil and fuel industry, has been facing western sanctions since 2022. Restrictions importantly hampered its functioning by influencing logistics, outlets and funding. By 2025, half of the manufacture was designated by the US Treasury Department^[7], including the largest coal producer, the SUEK company (in 2023 it was liable for 1 4th of home production). This made the acquisition of Russian natural material by third-country entities much little likely due to the threat of Americans imposing secondary sanctions, which would besides have caused problems with transactions.

However, the most crucial component of the Western regulation is the EU's carbon embargo, while reducing its imports by any Asian countries (Japan and South Korea). It was thanks to these restrictions that Russian sales of natural material have decreased importantly since 2022. Russia was thus deprived of access to markets which accounted for nearly half of its exports. In 2021, it delivered nearly 103 million tonnes of coal to European countries (including non-EU countries) and South Korea and Japan, with only 16 million tonnes (a decrease of about 85%) 2 years later. Sales to Europe were virtually zeroed, and the South Korea (a 50% decrease) and Japan (a 75% decrease) were importantly reduced.

As a consequence of the Western restrictions, the Russians, like oil and fuel, faced the request to redirect coal supply to another markets. The volume exported in 2021 and 2023 increased mainly in 3 directions: Chinese (by 40%), Indian (by 500%) and Turkish (by 240%). While 73 million tonnes of natural material were delivered to these countries in 2021, it was already 143 million tonnes 2 years later. This represented almost 75% of the full exports of coal from the Russian Federation.

Figure 6. Exports of coal in selected directions between 2020 and 2030

Source: own improvement based on CDU TEK data.

Transport restrictions: land...

The sanctions so forced the Russians to redirect supplies to fresh directions, which affected the financial situation of the coal industry. According to media reports, the Ministry of Energy has estimated its combined losses since 2022 at nearly 2.1 trillion rubles (about $23.7 billion), of which more than half are to have its origin in the western restrictions^[8]. The sanctioning government has importantly intensified the already existing problems that negatively affect export profitability. This is due to structural weaknesses, the most crucial of which are logistical problems.

A key origin reducing the competitiveness of Russian coal is the long export way to ports, which translates into advanced transport costs resulting in the final price of the natural material. Russia's most heavy exploited deposits are at a crucial distance from the sea terminals through which the vast majority of abroad sales are made^[9]. Mines located on the most crucial coal deposit – in Kuźnicka Coal Basin (the Kuzbas, which accounts for half of both mining and export) – are thousands of kilometres distant from ports. Depending on the final recipient, coal should be transported at a distance of about 4 1000 km (Ust-Luga port in the Baltic Sea), 4,6,000 km (Tupse port on the Black Sea) or 5.7 1000 km (Vostobny port over the Pacific). By comparison, the deposits of another key coal producers are respective twelve or respective 100 kilometres distant from ports.

Table. Comparison of the distance between deposits and coal terminals of key natural material exporters

Source: N.Trans laboratory own development^[10].

Furthermore, due to the fresh supply geography, half of the exported natural material is presently exported by Asian terminals in Russia – due to the shorter shipping distance to key coal customers in Asia. This affects the overload of the rail network – the distance between the deposit and the port must be overcome through Russian railways, whose insufficient capacity is another problem.

Although the process of expanding the handling capacity of coal terminals is ongoing, Russian Railways (GODs) do not keep pace with their modernisation, whose infrastructure constraints do not let the export capacity of their ports to be full exploited. According to statistic on their operation, only 45% of terminal capacity in the European part of Russia and 57% in Asia were utilized in 2024.^[11]. This is due to insufficient capacity of overloaded railway lines, which, despite investment, are incapable to meet the needs of the Russian coal sector^[12].

Infrastructural restrictions on coal exports constitute an nonsubjective obstacle to exports despite the preferential treatment of this natural material by the Russian authorities, which impose reductions on the government for these services. The national carrier classifies it as a precedence good, so coal enjoys the lowest reduced tariffs. Furthermore, part of the regions that extract it receives annually, under a rail contract, funds for its export for exports to the east^[13]. This preferentiality makes the natural material liable for a crucial part of rail transport (approximately 44% of the full in 2021)^[14]. For comparison, the volume of Russian mineral fertilisers, i.e. the commodity which competes with coal in terms of availability to the rail network and is besides further transported from ports by bulk carriers, is respective times lower than the tonnage of exported coal^[15]. The mineral fertiliser manufacture so does not overburden Russian railways to the degree that the coal sector, while generating a higher profit per exported volume^[16].

According to manufacture representatives, the cost of transporting coal, depending on where it is mined, can be up to 2 thirds of its final price^[17]. Both the physical distances from ports and the limited capacity of railways influence this. Under conditions where global coal prices do not warrant a advanced margin for operators selling it abroad, the profitability of the sector is questionable, despite preferential treatment by the authorities. For this reason, the manufacture is demanding further relief^[18].

...and the sea.

Western sanctions besides hampered coal exports at the next phase of transport, i.e. erstwhile exporting natural material from Russian ports. Unlike oil, shipping coal is simply a much little profitable business – due to the difference in the price of these 2 natural materials and the physical condition of their transport. It is akin with another bulk loads that can be transported by the same units as coal – e.g. wheat or mineral fertilizers. With maximum burden of massage kind Capesize the transported coal is worth much little than the corresponding tonnage of another bulk goods, which affects the exporter's final margin.

The restrictions imposed by the West have increased transportation costs and increased the competition to be faced by Russian suppliers. The EU embargo and the resulting failure of the marketplace have increased supply routes – limited rail capacity forces the Russians to export coal to customers in Asia besides through European ports. Compared to the erstwhile sale to European countries, transport for far greater distances, specified as India, affects the final cost of freight transport. The supply to final customers is so longer, reducing the full number of courses made by the bulk carriers operating this trade and at the same time reducing the final volume of the transaction. In addition, in the case of the western direction, i.e. the European ports, the coal sector does not receive backing for the reduced transport of natural material, as is the case for supplies to Asian ports.

The Russian sector shows that export profits can only be achieved in sanctioning situations if it is realised by the largest masseurs of the kind Capesize. However, only large companies have specified ships that are able to accumulate capital on the freight of their own natural material by specified an entity^[19]. Moreover, not all terminals have the infrastructure to accommodate bulk carriers.

The sanctions besides hampered cooperation between Russian companies and abroad shipowners and shipyards. Problems are generated by insufficient size of its own fleet of bulk carriers, which is mostly made up of smaller units – exports from Russia through them over long distances are not profitable. According to the 2022 data, bulk carriers belonging to Russian companies account for 30% of all abroad sales of bulk cargo – not only coal, but besides metallic ores, fertilizers or grain. besides fewer specified units force exporters to bear the costs of freighting ships from another countries, which affects the eventual profitability of coal sales from Russia. Conscious of these difficulties, the authorities have so directed additional budgetary resources to build fresh and get utilized vessels. However, concrete results should be awaited due to, among another things, advanced competition among shipowners purchasing units and production restrictions in Russian shipyards^[20].

New export relationships

The EU embargo and the request to redirect supplies besides deepened Russia's dependence as an exporter from 2 countries – China and India. Between 5 December 2022 and February 2025 they were liable for – successively – 45% and 18% of all Russian coal sales.^[21]. Theoretically, it could be assumed that these countries are reasonably safe directions for further disposal. They forecast an increase in consumption driven by, among others, the expansion of coal blocks and the energy-intensive manufacture – although it should be noted that the rate of increase in request for natural material varies in both countries. However, last year's decline in Russian exports in these directions shows that these affirmative circumstances are incapable to offset another factors that negatively affect the possible of this exchange.

Figure 7. Export of coal to selected countries in the first half of 2023 and 2024

Source: CDU TEK.

The competitiveness of Russian coal in the markets of India and China is alternatively low due to the problems described – the situation besides worsens the way the above mentioned natural material customers conduct energy policy. Both countries are increasing in mining^[22]which is simply a consequence of their intention to keep or increase energy security^[23].

Moreover, the protectionist measures taken by importers, specified as the re-establishment of the duties on coal from the PRC, besides contribute to the simplification of Russian exports.^[24]which resulted in a decrease in the volume sold to that country. It is besides crucial that China replaces Russian natural material from Australia – as a consequence of the abolition of the unofficial embargo on supplies from this direction in 2023^[25]. At the same time, the Russians must compete in Asia with another key exporters – Indonesia and Australia – much more than in Europe. This is due to the shorter supply of natural material from these countries.

Conclusion: painful transformation to keep export profitability

The hard situation of the Russian coal sector, due to the increase of its weaknesses due to western sanctions, was not revealed until 2023, erstwhile the profitability of the manufacture decreased importantly – even though the EU embargo had already been introduced a year earlier. In 2022, however, its effects were mitigated by record-high prices of natural material, which allowed to get a comfortable margin despite sanctioning difficulties, but this was an exceptional situation, which was the consequence of the Russian invasion of Ukraine - it exacerbated the energy crisis, causing chaos on parts of the natural materials markets. After the carbon prices stabilised – their level returned to pre-aggression levels in 2024 – the profitability of exports decreased significantly, resulting in a negative net consequence of the full Russian coal sector in the last year.

Figure 8. Average price of coal from Australia (Port in Newcastle) 2018–2026^[26]

Source: planet Bank data own development.

In average to long-term terms, it is hard to anticipate a re-increase in prices that would be structural and so long-term. Although there is simply a possible of an increase in coal request in developing countries, decarbonisation trends among developed economies make request for it decrease overall. This is why prices are forecast to fall gradually between 2025 and 2026^[27], as well as the flattening of the supply of natural material with a production highest in 2027. At the same time, the global Energy Agency notes that the rates will stay advanced adequate for a long time to let producers to derive gross from their activities – but the exception on the marketplace are Russian companies whose product is simply uncompetitive^[28].

The profitability of exports from Russia can be improved by trying to solve existing problems – especially the bottlenecks of infrastructure, but this would require investment from the state and the long-term implementation of specified projects, which would not warrant the reflection of the full sector. At the same time, it is hard to imagine that the Russians will actually accomplish ambitious assumptions about the further growth of sold volumes. It is already revealed that, at comparatively advanced coal prices, companies inactive gotta reduce exports due to the unprofitable export of natural material. The further decline in global request will make it a challenge for the manufacture to keep its share of global trade. Its increase, while maintaining the current dynamics in the applicable producers (Australia, Indonesia) and importers (China, India), is peculiarly unlikely.

The implications of these difficulties go beyond the condition of the companies themselves. Although the coal manufacture is liable for only about 0.8% of Russian GDP (oil and gas trades for about 16.5%), it is crucial from the position of 29 monocitys built around this industry, especially within the Kuźniecki Coal Basin. In 2023, the sector employed 142,000 people^[29], of which nearly 100,000 in Kuzbas. In addition, people working in companies whose business is based on the usage of coal (hutland, electricity), or engaged in logistics in its transport. Their number is estimated in Russia even for another fewer 100 thousand.

In this situation, it is not excluded that major changes can be made to the full coal industry, which will most likely besides be faced with decreasing request in the interior market, due, among others, to the gasification of Russia. Low profitability will entail closure of coal mines located distant from export markets – specified as those in Kuzbas. At the same time, large companies with adequate capital to manage deposits closer to terminals will sustain the sector^[30]. In the export markets, coking coal companies will besides remain, for which request will not fall as rapidly as in the case of energy coal. The underprofitability of the manufacture and the consequent request to put part of its activity to an end will be put before the Russian authorities a dilemma concerning the appropriateness of the subsidy.