Due to low world prices and high transportation costs, Russian thermal coal exports are suffering losses. And with it, the production regions. Experts believe the industry needs strong government support or it will have to wait for foreign competitors to go bankrupt.
“The profitability of Russian thermal coal exports through the previously unprofitable northwestern and southern directions increased slightly in the third quarter, according to data from the Center for Price Indices (CPI). Due to rising coal prices and reducing the cost of maritime logistics, netback on these routes became equal to netback when delivered through Far Eastern ports, reaching 23-25 dollars per ton . But this is still not enough to cover production costs, which are estimated at around $32 per ton.” – reports Kommersant.
“The situation is terrible,” said the deputy head of the State Duma Energy Committee at the Russian Energy Week Dmitry Islamovreports the Energopole telegram channel.
TC reports that the governors of Russia’s main coal mining regions, Kuzbass and Yakutia, admitted that the industry is suffering losses, coal production and exports are declining, and budget revenues are falling to a critical level.
“Thus, in Kuzbass in 2023 production fell by 12%, to 214.1 million tons, coal exports decreased by 12.3%. In 2024 the situation will be even worse. According to 8-month data, exports fell another 10%, to 69.3 million tons. Yakutia was able to maintain production and export volumes at the level of 2022, but only by commissioning a private railway in the Pacific. It will allow coal production to be increased to 80 million tons per year by 2028, but budget revenues will remain low. Budget revenues in Kuzbass fell in 8 months of 2024 by 33.7 billion rubles, the profits of coal companies in the region decreased 3.5 times: from 156 billion to 45 billion rubles, and losses increased 3.3 times: from 19 billion rubles. up to 64 billion rubles”, – writes Energopol.
Dmitry Islamov said during the Russian Energy Week, PortNews reports, that about 70% of the export price of coal comes from transportation and logistics costs, so it is necessary to offer discounts and reduction factors for rail transportation of coal.
“Supported the ideas of the heads of Kuzbass and Yakutia on the need to abolish export duties on coal and conclude agreements with Russian Railways (RZD) on the guaranteed export of coal,” – writes the agency.
Chief strategist of the investment company “Vector X” Maxim Judalov He cites CCI data that tariffs and coal loading in the Far East and Taman account for 67-68% of the export price.
“In addition, when coal is supplied to Taman, it is sold below production costs, which, in fact, explains the failure to meet volumes in August this year. Railway fares are a level higher than in 2022-2023 during the period of high prices in world markets, and railway workers do not even want to talk about discounts, scaring everyone with a 17 percent fare increase. If in the eastern direction the discount would really seem strange in the context of an excess export cargo base, then in the southern and northwestern direction tariff discounts would be very useful.” – believes the expert.
In general, the situation in the sector will worsen until the end of the year, since foreign players have not yet declared bankruptcy or reduced the volume of supply, the expert notes.
“Most likely, this will happen, but closer to the end of next year, until the moment when our coal miners will have to hold out somehow.” – adds Vector X’s chief strategist.
Previously, the new Minister of Energy also spoke about the need for state support for the industry and its subsequent adjustment. Sergei Tsivilev.
“The meaning of the exchange rate export duty is to withdraw excess profits from exporters due to the depreciation of the national currency. The key word here is excess profits. But in reality, the cost of coal in world markets is low, the profit of the coal industry before tax in the first half of the year fell by 97% and by the end of the year it could be reduced by almost 15 to 17 times.” — said the head of the Russian Energy Ministry in an interview with TASS.
