Collapse in Russia. The situation is dire

• The Russian mining sector is facing a serious crisis, with many companies facing bankruptcy.
• The main reasons include sanctions, falling raw material prices and rising transportation costs, which particularly affect Russian coal exporters.
• Despite these difficulties, the authorities in Moscow adopted a new energy strategy assuming a significant increase in coal mining.

In August 2022, the European Union stopped buying Russian coal , which was a serious blow to the local mining sector. "Before the war, Russia exported just over 20 percent of its coal to the EU, although these exports had been falling for years due to the closure of coal-fired power plants in Europe. For comparison , in 2014-2015, the EU received about 40 percent of coal exported from Russia," reports The Insider, whose article is published by Onet.

However, serious problems began in 2024. "The net losses of the Russian coal sector amounted to 112.6 billion rubles (5.14 billion zlotys). In 2023, it was a profit of 374.7 billion rubles (17.1 billion zlotys). More than half of the country's coal enterprises (53.3%) became unprofitable, while a year earlier less than a third (31.5%) incurred losses," we read.

The Russian Energy Ministry is warning that 27 companies responsible for about 10 percent of all Russian coal production are close to bankruptcy.

Another 62 companies, responsible for almost 30 percent of production, recorded losses above average, notes "The Insider".

The situation is even worse when you look at typical mining regions. "In Kuzbas [in the Kuznetsk Coal Basin] - which accounts for almost half of the coal reserves mined in the country - 57 percent of enterprises are unprofitable. Some of them have problems paying salaries on time, others are laying off miners and suspending production," we read.

Russian Mining Industry in Serious Trouble

Why is Russian mining in such a difficult situation? According to The Insider, one of the reasons is low coal prices. It is predicted that in 2025-2026 they could fall to $69-76 per ton.

Low prices are further exacerbated by rising transportation costs for Russian coal producers, limited rail capacity to the east and import tariffs introduced by China in January 2024, we read.

Meanwhile, the Kremlin recently adopted a new energy strategy to 2050, which predicts a huge increase in coal production – to 662 million tons in the target scenario. "For comparison, in 2024, Russia extracted only 443.5 million tons," the service notes.