The Russian coal industry is facing the risk of massive bankruptcies. Due to Western sanctions, Russian companies have lost premium markets, and the search for alternatives in Asian markets is forcing them to sell products at a serious discount, which hurts revenues. Moreover, the ban on the import of coal from Russia by the European Union, which came into force on August 10, has already effectively stopped sea shipments of coal from Russia, land transport capacities simply cannot accept such volumes of supplies. On Thursday, August 25, Izvestia and Bloomberg write about the problems of the Russian coal industry.
Severe risks for the entire industry are mentioned in the minutes of the meeting of the State Energy Council, to which Izvestia refers. Officials admit that sanctions have significantly increased the costs of Russian companies, against this background, the Ministry of Energy even proposed to recalculate the rates of mineral extraction tax (MET) for the entire industry in order to reduce costs. The agency proposes to stop using the Australian SGX TSI FOB Australian Premium Coking Coal OTC index when calculating this tax for coal, returning the flat tax rate that was before 2022. The changes will reduce the load by about 4 billion rubles a year.
In 2021, the volume of coal supplies to Europe was estimated at 48.7 million tons, which is approximately 21.8% of Russia's total coal exports, or €8 billion per year. After the imposition of sanctions, this market was finally closed for Russian manufacturers, moreover, there are problems with supplies to Japan, South Korea and Taiwan - these countries are afraid of sanctions and are not ready to cooperate with Russian companies.
As a result, Russia has to compete for the Asian markets with Australia and other leaders in the coal market, offering a significant discount on its products. Discounts helped to increase the share of deliveries to China by 22%, the newspaper notes, but does not give a share in monetary terms.
Bloomberg also notes that the sanctions have actually stopped the supply of coal from Russia, because international sea carriers and insurers are not ready to violate the sanctions regime. As an example, the agency cites Russia's largest coal company, SUEK, whose water supplies have literally stalled: since mid-August, the company has not been able to send a single tanker with its own coal.
The problem is that the EU has banned insuring ships with Russian coal. The international insurance market, as the agency notes, is divided between American, European, British and Swiss companies that comply with Western sanctions. Finding alternatives will take time, and the cost of insurance services will be clearly more expensive due to increased risks.
The Russian oil industry may face similar problems in December 2022: the oil embargo involves a ban on energy insurance by sea. In the meantime, the Russian authorities are trying to convince partners to enter into long-term agreements on oil supplies in order to avoid the possible consequences of Western sanctions.
