The government has returned to export exchange rates on coal

The abolition of exchange rate duties on coal lasted only two months – from March 1, the government decided to return them to replenish the treasury. Meanwhile, the Ministry of Finance’s proposal to increase the mineral extraction tax on coal, which initially arose as an alternative to the export duty, remains on the agenda. At the moment, it is unclear whether plans to increase the mineral extraction tax will be canceled. The return of duties will worsen the economics of thermal coal exports, which are suffering due to lower world prices. According to experts, the export of cheap grades of coal from the ports of the Baltic and Black Sea may stop altogether due to an increase in the tax burden.

Russia returns export exchange duties on coal. According to the government, the new duties will be in effect for a year – from March 1 to February 28, 2025. The duty will be from 4% to 7% depending on the ruble exchange rate, and at an exchange rate of less than 80 rubles. per dollar will be zero. Similar duties on coal exports were in effect from October 1 to December 27, 2023, but were canceled to support the coal export economy.

Decision to abolish duties was taken with resistance from the Ministry of Finance, sources told Kommersant. Already in January the ministry spoke with the initiative to increase the mineral extraction tax on coal from April 1 – raise the flat rate by 380 rubles. per ton. The Ministry of Finance explained this step by the need to compensate for the shortfall in budget revenues from the abolition of the export duty. “Kommersant” sent a request to the Ministry of Finance about whether it is planned to increase the mineral extraction tax along with the export duty.

The scenario of a simultaneous increase in the mineral extraction tax and the return of the export duty is realistic, taking into account the needs of the budget and the Ministry of Finance’s view of the coal industry as an industry with a low tax burden.

The increase in tax burden comes at a time when export flows have stabilized and the industry has largely adapted to the loss of the European market and sanctions. However, the current price situation is not on the side of coal miners. In the February review of the Central Bank on the regional economy (.pdf) it is said that the cost of coal exported through the ports of the Far East to the Asian market decreased by 10% compared to the fourth quarter of 2023 and by about a third by the fourth quarter of 2022. The review states that coal miners expect further price reductions due to reduced demand in key markets, as well as the introduction of import duties on Russian coal in China in January. Exporting coal through Western ports is unprofitable. Production figures in 2023 decreased by 1.1%, to 438.7 million tons, and coal shipments for export decreased by 3.9%, to 212.5 million tons.

The absence of linking the duty to the world market price could lead to a serious drop in thermal coal exports, comments Sergei Grishunin from the NRA. Now supplies of almost all thermal coal, with the exception of anthracite, through the northwestern and southern ports have zero profitability.

According to the expert, there is a high risk of a complete cessation of cheap coal exports through the Baltic and Black Sea ports, which will increase pressure on the already busy Eastern site.

“I would like to hope that the proposed duty will still take into account current prices in the final markets for coal sales, especially since we already have the ability to monitor world quotations after the departure of Argus – for example, through the Gazprombank Price Index Center,” the analyst notes.

Evgeniy Zainullin