Slumping global coal prices and sanctions have put Russia’s coal industry on the brink of collapse, forcing the government to intervene as it scrambles to protect both a key energy source and a major employer. Why is the Russian coal industry in crisis? Prices for both thermal coal, used in power generation, and metallurgical coal, critical to steel production, soared between 2021 and 2023 due to post-pandemic recovery and supply uncertainty stemming from the war in Ukraine. But that boom has since gone bust. Production has ramped up globally, particularly in China, India and Indonesia, while global demand has slowed. Consumption growth dropped from 4.7% in 2022 to just 1% in 2024, sending prices plunging from $400 per ton at the end of 2022 and beginning of 2023 to around $100 per ton by May 2025.

Russian coal, meanwhile, is selling at a steep discount. Russia, which sold around 22.6% of its coal to the EU in 2021, was hit by a European embargo that forced producers to redirect shipments to Asia, where buyers have leveraged the disruption to negotiate lower prices. Russian export prices fell to $69 per ton FOB at Far Eastern ports in late June — the lowest since 2020, according to the Vedomosti business daily. Under FOB terms, the seller covers delivery to the port but not sea freight. The cost of producing and shipping one ton of thermal coal along the eastern route is estimated at 6,000 to 6,500 rubles. This means that, given the current strong ruble, the sale price of $70 per ton (some 5,500 rubles at the current exchange rate) does not cover the costs for many firms located away from the Far Eastern ports. “At current prices, exchange rates, financing costs and rail and maritime logistics, thermal coal production in Kuzbass is unprofitable across the board,” said Roman Golovin, strategy director at the Siberian Coal Energy Company (SUEK), Russia’s largest coal producer. Four of SUEK’s 10 coal enterprises have already scaled back operations or are weighing closures, he added.

The share of loss-making coal companies jumped from 31.5% in 2023 to 53.3% in 2024, according to official statistics. Why is the industry important? Despite the challenges, the government is unlikely to let the coal industry fail. About half of Russia’s annual coal production is consumed domestically. Coal accounted for 12-13% of electricity generation in 2023 and plays an outsized role in regions like the Far East and the Kemerovo (Kuzbass) region of western Siberia, sometimes providing 50% or more. Yakov & Partners, a Moscow-based consultancy, predicts coal’s share in Russia’s primary energy mix will remain at 10% through 2050. When it comes to exports, demand for Russian coal could go up in the event of serious gas shortages amid geopolitical tensions. Similarly, increased manufacturing in countries like Vietnam and India can push coal prices up somewhat. The industry also has major social importance. Roughly 146,500 people work in the coal industry in Russia and about 30 towns, mostly in the Kuzbass, are economically dependent on coal. A collapse would be catastrophic for these communities.

Bolshevik coal mine in the Kemerovo region. Yaroslav Belyayev / TASS