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Mine over matter: Russia’s coal industry is collapsing — and no one is ready for it
Last year, Russian investors rented fifteen coal mines in occupied eastern Ukraine. After proving unprofitable, nine of them are now being returned to the authorities of the so-called Donetsk and Luhansk “people’s republics,” which are set to shutter the enterprises. This failed attempt at reaping the spoils of captured Ukrainian industry is just one element of a broader crisis that has gripped Russia’s coal sector over the past year. More than half of Russia’s coal companies were unprofitable by the end of 2024, and the country’s coal strategy has long ignored the global energy transition. The drop in demand for Russian coal began with the European Union’s embargo in 2022. Without the full-scale invasion of Ukraine, this shift would likely have come much later — possibly even a decade down the line. Had Russia focused on preparing for change rather than waging war, the fallout could have been far less devastating. Instead, the industry is collapsing.
Content
The first year of crisis
Price drop, cost growth, and China’s blow
Russia stubbornly bets on coal
And what about the miners?
A leap instead of a transition
The first year of crisis
On Aug. 10, 2022, the EU completely ceased buying Russian coal. The decision to put such an embargo in place was made back in April of that year, and at the time, it failed to cause panic among Russian officials. In the spring of 2022 — because of the full-scale war Russia had just unleashed, global prices for coal and other energy resources were at their peak. Moreover, it seemed that redirecting coal shipments from the West to the East would not be particularly difficult. Before the war began, Russia exported slightly more than 20% of its coal to the EU, though those exports had already been declining for years as Europe shut down coal-fired power plants in an effort to cut greenhouse gas emissions. For comparison, in 2014–2015, the EU received about 40% of Russia’s exported coal.
During the first years of the full-scale invasion, the Russian coal industry seemed to be feeling surprisingly good. However, major problems began in 2024, a year in which the net losses of Russia’s coal sector amounted to 112.6 billion rubles — compared to a net profit of 374.7 billion rubles in 2023. Nationwide, over half of the coal companies (53.3%) turned unprofitable, whereas a year earlier less than a third (31.5%) were operating at a loss. Discussions began about the risk of bankruptcies among individual coal mining companies. According to the Ministry of Energy, 27 firms — accounting for about 10% of all Russian coal production — are close to bankruptcy. Another 62 companies, responsible for nearly 30% of production, posted losses that were “above average.”
During the first years of the full-scale invasion, the Russian coal industry felt surprisingly good thanks to the energy crisis in Europe.
In Russia’s main coal-mining region, Kuzbass (short for “Kuznetsk Basin”) — which produces about half of the country’s coal — 57% of coal companies became unprofitable. Some of them are delaying salary payments, laying off miners, and mothballing production. Particularly alarming was the situation around the “Inskaya” mine. In the past year, its miners not only staged strikes but also hunger strikes. By the end of 2024, more than half of the workforce had been laid off. There is evidence that miners who publicly voiced their dissatisfaction have faced difficulties finding any new employment.
Kuzbass had already declared its situation to be dire back in the first half of that year, when tax revenues from coal companies in the region fell by more than half compared to the same period in 2023. Previously, coal had accounted for about 40% of the region’s tax revenues.
Price drop, cost growth, and China’s blow
A look at coal price charts leaves little doubt as to why the Russian coal sector suddenly deteriorated. At certain points in 2023, coal rose to nearly $450 per ton due to Europe’s energy crisis. At such high prices, Russian coal miners could afford to offer massive discounts to their customers in Asia — up to 50% below regional benchmarks.
Moreover, it often still made economic sense for them to haul coal across half the country by rail to ports in the northwest and south, and then ship it by sea to Asia — essentially moving coal back and forth across multiple time zones instead of via a direct route.
But in the second half of 2023 and early 2024, prices fell to about $150 per ton, and by the end of 2024, they dropped below $100 per ton. In essence, this was a return to pre-pandemic price levels, when the cost of coal had been stagnant for several years. Notably, this most recent decline has not yet been fully reflected in company losses or in the Kuzbass regional budget, meaning more turbulence is still ahead. With recent cuts in demand from key coal buyers in Asia — China, India, Japan, and South Korea — thermal coal prices (5,500 kcal, FOB Newcastle basis) could fall to $69–76 per ton in 2025–2026.
Price of Newcastle coal futures, USD per ton
Source: TradingEconomics
Low prices are compounded by soaring transportation costs for Russian coal producers, limited railway capacity to the East, import tariffs introduced by China in January 2024 (3% for coking coal and 6% for thermal coal), among other factors. It’s telling that “friendly” China introduced these tariffs exclusively against Russia, further undermining the competitiveness of Russian coal.
Russia stubbornly bets on coal
Europe’s rejection of Russian coal can hardly be called sudden. True, no one expected it to happen as early as 2022 — when Russia’s invasion left Western former buyers little choice — but it had been clear since at least the 2010s that the role of coal in the EU economy was destined to diminish. By the 2020s, it was increasingly obvious that a coal demand decline was also looming in Asia.
For instance, in 2014 the EU set a goal of cutting greenhouse gas emissions 40% by 2030 (compared to 1990 levels), and in 2020, this goal was raised to 55%. Achieving it would require improving energy efficiency and expanding renewable energy use, with the projected share of renewables in electricity production set to rise from 32% in 2019 to 65% by 2030. According to Ember data, by 2024 the EU’s renewables share had reached 47.5%, while coal’s share fell from 30% in 2000 to 10% in 2024. Given these numbers, the EU seems well on track to meet its targets (at least when it comes to renewables).
Currently, China accounts for 80% of all coal power capacity under construction worldwide, with India responsible for another 12%. However, China produces a large amount of coal domestically and mainly uses it to meet its own needs. And even there, the China National Coal Association expects the country’s coal consumption to peak by 2028.
For decades, China has been actively developing renewables and is now the global leader in this sector, particularly when it comes to producing solar and wind energy equipment , as well as energy storage systems and electric vehicles (EVs). China is also aggressively rolling out energy transition technologies at home. The combined share of solar and wind energy in China’s electricity production surpassed 18% in 2024 — in Russia, it remains below 1%. Meanwhile, coal’s share in Chinese electricity production fell from 78% in 2000 to 58% in 2024.
Even before the pandemic, as major EU countries were adopting plans to phase out coal, Russia continued modernizing old terminals and building new facilities at ports near St. Petersburg and Murmansk in order to keep supplying coal to Europe. Russian coal producers simply did not believe Europe’s phase-out was real.
Russian coal producers simply did not believe Europe’s phase-out was real.
And Russia still shows no signs of changing course. On April 12, it adopted a new Energy Strategy through 2050, a document that had been in the works for several years. Remarkably, the strategy envisions a massive expansion of coal production: up to 586.4 million tons by 2050 under the inertial scenario, and up to 662 million tons under the target scenario. For comparison, Russia mined a mere 443.5 million tons in 2024.
Both the inertial and target scenarios are considered the most likely developments, but even the accelerated energy transition scenario projects coal production rising to 478 million tons by mid-century. As some analysts have noted, the document appears more like a blueprint for aggressively expanding the coal industry than a true national energy strategy.
Russia’s plans are so out of step with global economic trends that at times it appears the country is ramping up coal production out of sheer stubbornness. Over the past 25 years, coal has supplied 15–20% of Russia’s electricity, with domestic consumption remaining largely unchanged. Meanwhile, overall coal production has jumped by 90%, fueled entirely by export growth. But was coal a major revenue driver for Russia? Not really. As previously noted, In Kuzbass coal recently made up around 40% of the regional budget, but nationally, coal’s contribution to Russia’s GDP was just 0.5%, according to estimates from the Ministry of Energy.
And what about the miners?
All countries, regions, and mining companies that are trying to maintain or even expand coal production justify it with a noble stated motive — caring for the miners.
In reality, the most effective way to support miners would have been to prepare coal-producing regions for the inevitable energy transition. In Kuzbass, which is already plagued by severe environmental problems, it would have made sense to prioritize the development of renewable energy — not only through the installation of solar and wind power generators, but also by building up manufacturing for these industries. Abandoned coal mines could have been converted into sources of thermal energy using heat pumps. At the same time, serious investment could have been directed toward developing high-quality tourist services in Sheregesh, home to a ski resort.
In Kuzbass, it would have made sense to prioritize the development of renewable energy — both through power generation and manufacturing.
To be fair, it must be noted that there were at least the stated intentions to diversify the economies of some coal regions. In July 2021, the Ministry of Economic Development published plans for the economic diversification of the Komi Republic and Kuzbass, which would develop metallic ore and other mineral mining, metallurgical production, agriculture, construction, and tourism. However, judging by current discussions in Kuzbass, efforts to diversify the regional economy have so far yielded no real results, and no meaningful alternatives to coal have emerged — apart, perhaps, from increased participation in the war effort.
As a result, mines are now closing on their own, without any climate transition strategies or support policies in place. Miners are being left without jobs, often without financial compensation — and in some cases, without even receiving their back wages. They have virtually no opportunities for retraining and receive next to no help in finding new employment.
Russia’s coal regions, long marked by economic depression, remain entirely unprepared for the new realities. They are likely to face an even deeper decline.
A leap instead of a transition
The crisis in Russia’s coal sector vividly demonstrates what happens when there is no preparation for the global coal phase-out. For years, Russia ignored the global energy transition, denied the reality of climate change, and engaged in performative climate policies. Now, instead of a managed energy transition, the country is facing a chaotic “leap,” which will trigger new crises, much like the one currently unfolding in the coal industry.
Today, key discussions surrounding coal are centered on government support for the sector, which boasts a powerful patron: former governor of the Kemerovo Region, Sergey Tsivilev, who was appointed Minister of Energy in 2024.
Instead of a managed energy transition, Russia is now facing a chaotic “leap.”
Tsivilev is attempting to “save Russia's coal industry” and is pushing for state-owned Russian Railways to offer discounts on coal export shipments in order to keep deliveries to both the West and East profitable for producers. By mid-March, a draft anti-crisis program for the coal sector had been proposed, outlining measures to support coal-producing regions, towns, and enterprises.
However, fundamentally changing the industry's outlook through government support alone appears unlikely given persistently low prices and ongoing logistical challenges. Russian coal exports have steadily declined over the three years of war — by 1% in 2022, 4% in 2023, and 8% in 2024 — and are expected to drop another 5–8% this year. By the time logistical bottlenecks are finally addressed, China may already have reached its peak coal consumption, ushering in an entirely new era of global energy development..