One of Russia’s largest raw materials industries is on the verge of financial collapse
28 June 2024 05:00
Russia’s coal industry, which is one of the country’s largest raw materials industries and includes more than 30 single-industry towns and employs 650,000 people (including related businesses), is rapidly approaching a deep crisis. This was reported by the Russian edition of The Moscow Times, "Komersant Ukrainian" reports
According to Rosstat, in January-April 2024, the balanced profit in the coal mining sector fell by 93%, or almost 15 times. Less than half of the industry’s companies finished the first four months of 2024 with a profit, up from two-thirds a year ago. Their total financial result fell threefold to RUB 72 billion.
Every second company, according to official statistics, became unprofitable (52.4%), with their cumulative losses over four months reaching RUB 58 billion. As a result, the coal miners’ balanced profit in January-April was only RUB 14.3 billion, down almost RUB 200 billion from the same period a year earlier.
Cut off from Western markets by sanctions, coal companies are rapidly losing customers in countries that the Kremlin calls “friendly”. In the first quarter, Russian coal exports fell by 13%, and in March the decline reached 17%, according to experts at Gazprombank’s Price Index Centre. Coal miners lost about 3 million tonnes of exports every month, and prices for Russian coal fell to a 3-year low:
- $95 per tonne in the ports of the Far East (-6% since the beginning of the year);
- $72 per tonne in Taman (-13% since the beginning of the year);
- $61 in the Baltic Sea ports (-14%).
India, which accounts for about a third of Russia’s coal exports, cut purchases by 22% to 6.76 million tonnes in March-May, according to estimates by Bigmint. Exports to Turkey, South Korea and Japan also fell.
The coal industry is approaching a “severe crisis,” the State Energy Council’s commission warned in April. According to its estimates, the industry is in a state of cash gap (when payment receipts are less than outflows from accounts), and by the end of the year its negative cash flow will reach 450 billion rubles.
China has added to the problems of coal companies: the largest buyer of Russian raw materials has imposed import duties on coal that do not apply to other suppliers, such as Indonesia and Australia, which are members of the free trade zone with China.
While coal miners’ revenues are falling, costs are only rising, Kuzbass Governor Sergei Tsivilov complained in April. The cost of coal, he said, had risen by 30% due to increased costs of imported equipment, rail tariffs, wagon rental, port transshipment, freight and insurance for ships, and loan servicing costs due to the sharp rise in the central bank’s key rate.
This situation demonstrates the deep problems in one of the key sectors of the Russian economy and could have serious consequences for the country’s overall economic condition.
