Russia Is Losing Ground in the Global Coal Market

Russian coal exporters are rapidly scaling back their presence in key international markets. This is due to high logistics costs, import duties, and increased competition; the decline in shipments to China is particularly noticeable.

 

According to the State Statistics Service, Russian coal shipments to China fell by 10.8% year-over-year in January–August, to 53.15 million metric tons.

“Russia has lost its place among the largest suppliers. Imports from Mongolia during this period rose by 48.9%, to 78.39 million metric tons, while shipments from Indonesia totaled 121 million metric tons. In total, China imported 310 million metric tons over the eight-month period,” the ministry noted.

Mongolia has become one of Russia’s main competitors, having significantly increased its exports thanks to cheaper logistics and the absence of customs duties. Its shared land border with China gives it an advantage over Russian coal from Kuzbass, which must be transported through the congested Eastern Railway.

In addition, Russian coal is subject to import duties of 3–6% in China. Meanwhile, thanks to free trade agreements, Mongolia, Australia, and Indonesia benefit from zero tariffs.

Russian companies are trying to retain customers by offering discounts, which already amount to about 10%. However, according to the Foreign Intelligence Service’s assessment, the scope for further price reductions has practically been exhausted. Increasing discounts would mean selling coal at a loss.

Thermal coal exports may face the greatest pressure in the near future. They are simultaneously affected by competition from Chinese mines, import duties, and rising transportation costs. Railway tariffs in Russia have been rising again since October, and increased demand for open-top railcars is driving up the cost of using them.

According to industry intelligence, the cost of transporting coal from the port of Vostochny to China rose by 45.5% from the beginning of the year through September 11. In September, the profitability of thermal coal exports from Kuzbass via Far Eastern ports rose by 30% compared to August and tripled compared to last year.

The problems faced by Russian exporters are not limited to the Chinese market. Over the past seven months, they have cut coking coal shipments to Turkey by 30%, and in July, they did not ship a single shipment to the country. The report cites complications with navigation in the Black Sea as one of the reasons.

In July, coal shipments to Russia’s southern ports fell by 33% compared to June. In addition to problems with Black Sea logistics, shipments are being affected by increases in rail tariffs and the high cost of transshipment through ports in the Northwest.

“Russian coal producers are simultaneously losing their competitive edge in foreign markets and facing rising costs domestically. They can no longer lower prices further without risking operating at a loss, and more expensive delivery is eroding their already limited margins. In the Chinese market, this is already resulting in a decline in Russian shipments, while competitors are increasing their volumes,” the report states.

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