Two of Russia’s biggest coal companies have posted huge losses as the country’s key energy sector faces a severe crisis due to falling demand in Asia and Western sanctions over Moscow’s full-scale invasion of Ukraine.
The firms Mechel and Raspadskaya released its figures for 2024, which were also reported by The Moscow Times, following a spate of bad news for the industry and reports of a bankruptcies in which the Russian government may intervene.
Newsweek has contacted Mechel and Raspadskaya for comment.
Why It Matters
Russia is the world’s sixth biggest coal producer and the sector is critical for around 30 single-industry towns and hundreds of thousands of workers.
While not the revenue generator of the more lucrative oil and gas exports, the coal industry’s worsening plight is a symptom of wider problems that Russia’s sanctions-hit economy faces.
The coal terminal at the far-eastern Russian port of Vladivostok on September 5, 2022.
The coal terminal at the far-eastern Russian port of Vladivostok on September 5, 2022.
KIRILL KUDRYAVTSEV/Getty Images
What To Know
Isaac Levi, from the Centre of Research on Energy and Clean Air (CREA) told Newsweek on Tuesday that the Russian coal industry is continuing to suffer in the early weeks of 2025.
In its financial results released on February 21 listed in U.S. dollars, Raspadskaya, which operates Russia’s main coal mine, revealed that it ended 2024 with a net loss of $133 million compared with a profit of $440 million the previous year.
The firm burned through a large chunk of its cash reserves too, which by the end of last year were $87 million, down from $332 million 12 months earlier.
In a statement, its board of directors noted how the industry faced serious challenges from declining prices, while high inflation had increased the costs of labor, logistics and equipment.
The downward price trend and increased pressure from sanctions do not generate much optimism for the sector, added the statement, which said that no dividends would be paid to shareholders.
Meanwhile, in results which listed in the Russian currency, the ruble, Mechel reported a 5 percent drop in revenue to 335 billion rubles ($4.1 billion) and losses for 2024 of 37 billion rubles.
Western Sanctions Crush Russian Coal
Unlike Russia’s oil and gas, Europe imposed a full embargo on the country’s coal in April 2022, which included a ban on imports.
It forced Moscow to turn to other markets in China and India, but these countries have been reducing their imports of its coal due to sanctions and a wish to diversify suppliers.
Levi, CREA’s Europe-Russia policy and energy analysis team lead, told Newsweek that 2025 fares no better for Russian coal, whose exports have already shrunk by 12 percent in the first seven weeks of the year compared with the same period last year.
Russian exports to its largest purchaser China continued to drop, as well as to South Korea and Taiwan.
Levi said the sector is facing logistical constraints worsened by issues with the railways, a key interest rate of 21 percent and 9.5 percent inflation. “The Western sanctions on Russian coal have proved rather successful at crushing the sector.”
What People Are Saying
Raspadskaya in a statement: “In 2024, the coal industry faced serious challenges from declining coal prices and rising coal costs.
“Key factors were the rise in the cost of logistics, labor resources, the cost of purchasing equipment and spare parts and an increase in the tax burden (…) increased sanctions do not add optimism to coal miners.”
Isaac Levi, from the Centre of Research on Energy and Clean Air: “The Russian coal sector is currently facing significant challenges due to a combination of international sanctions, declining demand from key Asian buyers, logistical constraints worsened by issues with the railways, and internal issues.”
What happens next
In January, Russian business newspaper Kommersant gave a bleak picture of Russia’s coal industry, reporting that state development corporation VEB.RF is poised to take control of failing assets.
It said the Inskaya mine in the Kemerovo region faced bankruptcy proceedings at the request of the Federal Tax Service due to a debt of 230 million rubles, adding that every mining company that is not in a large holding would not be able to handle the tax burden and social obligations the industry faces.
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