russian Coal Is Rapidly Losing Markets

russian coal exporters are losing ground in key markets due to higher logistics costs, import duties, and the inability to further lower prices.

From January through August, russian coal shipments to China fell by 10.8% year-on-year, to 53.15 million tons. russia has lost its place among the top suppliers. Imports from Mongolia during this period rose by 48.9%, to 78.39 million tons, while shipments from Indonesia totaled 121 million tons. In total, China imported 310 million tons over the eight-month period.

Mongolia is increasing its shipments thanks to significantly cheaper logistics and zero tariffs. Its shared land border with China gives it an advantage over russian coal from the kuzbass, which is transported via the congested Eastern Railway. Import duties on russian coal in China remain at 3–6%, while Mongolia, as well as Australia and Indonesia, enjoy zero rates under free trade agreements.

russian companies are already offering discounts of about 10%, but there is virtually no room left for further price reductions. Larger discounts would mean selling at a loss. Therefore, even with the current price concessions, it will be difficult for russian suppliers to maintain their share of the Chinese market, and Mongolia remains the main beneficiary of this process.

Thermal coal exports may be hit the hardest in the near future. They are facing simultaneous pressure from competition with Chinese mines, import duties, and rising transportation costs. Starting in October, russia is raising railway rates again, and the demand for open-top railway wagons is driving up the cost of using them.

The cost of transporting coal from the port of vostochnyi to China rose by 45.5% from the beginning of the year through September 11. In September, the profitability of thermal coal exports from the kuzbass via Far Eastern ports increased by 30% compared to August and tripled compared to last year.

The problems are spreading to other destinations as well. Over the past seven months, russian exporters have cut coking coal shipments to Türkiye by 30%, and in July, they did not ship a single shipment there. One of the reasons cited is the increased difficulty of navigation in the Black Sea. 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 squeezed 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, while higher shipping costs are eroding their already limited margins. In the Chinese market, this is already reflected in a decline in russian shipments, while competitors are increasing their volumes.