“Clear decisions are needed to support the coal industry” – Kommersant

The deputy governor of the Kemerovo region for the fuel and energy complex, transport and ecology told Kommersant about the reasons for the decline in the profitability of coal companies and the possible consequences Andrey Panov.

— What factors have a greater impact on Kuzbass coal companies: prices, sanctions or railway carrying capacity?

— These factors are interconnected. Although the historical rise in fuel prices provoked by the West has certainly increased the income of our companies, the refusal of EU countries to purchase Russian coal has led to the need for an urgent redirection of significant volumes. At the same time, the domestic market has always been supplied according to needs and has not experienced a deficit; significant growth is impossible here.

Companies could replace lost market sectors by exporting coal to the east. But the shortage of carrying capacity of the Eastern range of Russian Railways and the growth of freight traffic from enterprises in the western part of Russia to Asian countries do not allow the export achievements of previous years to be fully restored. And even more so – to fulfill the instructions of President Vladimir Putin to ensure annual growth in the export of coal exports from Kuzbass to the east from 2021.

As a result, in 2022, instead of at least 58 million tons defined in the order, 47.9 million tons were exported, and in 2023 – 52.8 million tons. In 2024, the level of coal export was supposed to be at least 68 million tons, but Russian Railways OJSC assumed obligations for only 54.1 million tons.

Moreover, over the past two years, only the tariff for railway transportation for coal has increased by 44.6%. Taking into account the abolition of the reduction coefficient for distance and the coefficient for transportation of thermal coal for export from June 1, 2022, the tariff increase relative to December 2021 (depending on the direction) was: for thermal coal – 73–107%, for coking coal – by 50–80%. The rate for coal transshipment in the port of Taman in 2019 did not exceed $14 per ton, but has now reached almost $50.

— China has introduced import duties on coal. The Ministry of Energy stated that the duty would fall on the shoulders of the buyer. Is that what happened?

— I am sure that the duty will affect Russian suppliers, because buyers will demand that exporters lower prices.

— How much will the export duty cost Kuzbass coal miners?

— The decision to reinstate the export duty and all calculations for the corresponding economic effects were carried out at the end of 2023 – January 2024, while in the first quarter of 2024, world coal prices decreased by more than 20%. A reduction in revenues from export sales will force most companies, in order to preserve their teams and the efficiency of their mining facilities, to increase prices for their products on the domestic market, which will affect such important sectors of the economy as electricity, heat and power and steel production. Following the decline in export shipments, as a consequence, the revenue of stevedores, railcar operators, Russian Railways OJSC, as well as revenues to the consolidated budget of the Russian Federation will fall.

Kuzbass, as the main coal-mining region, suffered the most – the decrease in total regional budget revenues in 2023 amounted to 13% (42 billion rubles), and in corporate income tax – almost 30%. At the end of 2023, Kuzbass entered the top five Russian regions with the largest budget deficit. A number of medium and small companies, with a total of more than 30 thousand employees, are reducing production and shipments.

— A modification of the export duty is being discussed, including the introduction of a cut-off price, below which the duty is reset to zero. At what stage are these discussions?

— At a meeting held in the Ministry of Energy on March 29, representatives of the Ministry of Economy and the Federal Antimonopoly Service confirmed the feasibility of establishing cut-off prices and agreed on their level for thermal coal through the ports of the Far East – $110 per ton, ports of the south – $126, ports of the northwest – $110. For coking coal, anthracite and PCI energy concentrate, the cut-off price level has not been agreed upon. The repeatedly discussed decision to exclude logistics costs (railway transportation, transshipment in ports) from the basis for calculating duties has not been adopted.

That is, coal producers pay a fee, including for logistics services, the price of which has increased over the past three years in various areas by 70–95%. Consistent, clear government decisions to support the coal industry are needed.

— Kuzbass reduced coal production by 2% in January-February. What are the main negative factors?

— A decrease in the level of coal production in the first two months of this year was recorded using the underground (mine) mining method. This is due to technological processes.

Igor Lavrenkov, Kemerovo