Crisis in the Russian coal industry: loss of positions in the Chinese market

In 2024, Russia became the only coal exporter to China whose supplies decreased. This worsens the situation of the Russian coal industry, which is already incurring large losses. Mongolian coal is gradually taking the place of Russian coal in the Chinese market.

In 2023, China purchased a record 543 million tons of coal, which is 14% more than in 2022. The main suppliers were Australia and Mongolia. Australia increased shipments by 60%, and Mongolia by 19%. These countries have come much closer to Russia, whose shipments fell by 7% to 95.1 million tonnes, according to the China Customs Administration.

The reasons why Russia is losing ground are the high cost of coal, logistical problems and sanctions. The shift to Asian markets has led to difficulties in delivery. While Russia is losing markets, Mongolia is winning. Its coal is close to China, and the country is developing rail links with it. Mongolia supplies high-quality coal, which China needs. In 2024, it provided 60% of China's imports of coking coal used in the steel industry. Mongolia is also increasing its supplies of thermal coal. In 2024, Mongolia signed a long-term contract with Chinese companies for coal supplies. In the next five years, coal exports should reach 20 million tons per year.

The Russian coal industry is in crisis. After the loss of Western markets and a decline in demand in other countries, including China, companies suffered large losses. In the first nine months of 2024, the loss amounted to 91 billion rubles - a record among all sectors of the economy. Half of the coal enterprises, according to Rosstat, are operating at a loss. Many of them are located in single-industry towns, where the coal industry is the main source of employment. The Analytical Center at the Ministry of Energy warns that the industry may be on the verge of bankruptcy.

In response to the crisis, coal miners turned to the Russian president for help. In December, Vladimir Putin demanded that urgent support measures be taken for the industry.

In addition, coal production costs in Russia are higher than those of its competitors, which worsens its position.Rail capacity issues are driving up the cost of shipping coal, with Russian railways preferring to carry more profitable goods, making the situation even more difficult.