Russia's coal industry, once a global powerhouse exporting over 200 million tonnes (Mt) annually, is grappling with its most severe downturn in decades.

As of late 2025, production remained relatively stable on paper, with Rosstat data showing a marginal 0.1% year-on-year increase to 389 Mt over January-November. However, this stability masks underlying turmoil: soaring losses, structural shifts driven by sanctions, low global prices, and escalating logistics bottlenecks.

Production & export challenges

Thermal and coking coal mines, particularly those involved in exports, face varied operating conditions. In the Kuzbass region, Russia's primary thermal coal hub, small-sized companies are suspending production amid the downturn, with little prospect of resumption in 2026. Major holdings, however, are stepping in to offset these losses, maintaining overall supply for exports, according to Metals & Mining Intelligence (MMI).

The industry is increasingly shifting eastward, away from central and western Siberia, as sanctions accelerate production relocation. The International Energy Agency (IEA) forecasts Russia's 2025 production at around 427 Mt, flat from 2023-2024 levels, with growth in the Far East offsetting declines in Kuzbass.

Major companies may adjust output at existing assets, while falling prices delay new thermal coal projects. MMI predicted that an optimistic scenario could spur M&A, with big players acquiring distressed assets if prices rise and logistics improve, but current conditions make this improbable.

Exports, which account for about half of Russia's coal output, are unprofitable in several directions due to falling thermal coal prices and rising logistics costs. Shipments via North-Western ports remained loss-making even after October-November price upticks, leaving the Far East (to Asia) and South (to Turkey) as the only viable routes, MMI disclosed.

According to MMI, thermal coal exports so far rose by 9% year-on-year in January-November, thanks to increased shipments to Far Eastern ports and Taman. However, coking coal saw a sharper decline earlier, with exports down 12% in the first eight months compared to 2024, but autumn recoveries, alongside the continued strength of the ruble against the dollar, rising global prices for coking coal, narrowed the January-October gap to about 5%. While the gap is projected to further narrow by the end of the year, rising railway tariffs from Russian Railways starting December 1 add uncertainties.

Russian Railways' push for a "ship-or-pay" principle could further lift costs and deter mining investments.

Russia's seaborne coal exports totaled 155.83 Mt in the first 11 months, up 6.89% year on year, Kpler's data showed. The IEA expected the country's total coal export to remain at a similar level to 2024. Russia is projected to experience a steep decline, with exports falling by 8% to 135 Mt by 2030, largely due to geopolitical constraints, meaning reduced access to European and some Asian markets, it said in the Coal 2025 report.

Financial losses mount, debt soars

The net loss before tax in Russia's coal sector reached 327.9 billion rubles ($4.15 billion) in the first ten months, up 6% from the prior month and a sharp worsening from a loss of 84.8 billion rubles in the previous year, Rosstat data showed on December 24.

Deputy Energy Minister Dmitry Islamov stated on December 11 that "the coal industry is the only major loss-making industry at present" and estimated that the sector's debt burden would increase by 1.5 trillion rubles by the end of the year.

The share of unprofitable companies has surged to 67.6% in January-October, from 53.4% a year earlier, though down slightly from 68.1% in January-September, according to Rosstat data. Without state support, the energy ministry warned production could collapse.

Government support & its limitations

The government has implemented measures like deferring Mineral Extraction Tax and insurance contributions until February 2026, aiding some Kuzbass firms to sustain domestic supplies amid high loan rates. MMI noted that the targeted support covers about 9% of total production and 9-10% of thermal coal exports.

A 63-billion-ruble ($775 million) relief package was unveiled in July, including subsidies and tax breaks. However, these are deemed insufficient against structural declines, with rising logistics costs consistently outpacing benefits. Full impacts will be assessed in 2026, but experts warn of potential mass bankruptcies without further intervention.

Outlook for 2026 and beyond

When asking about the prospect for export of Russian coal to China, MMI predicted that thermal coal exports could fall 6-11% in 2026 compared to the expected levels in 2025, though supplies to China might hold steady depending on demand and prices.

Meanwhile, coking coal to China has growth potential, driven by projects like Elga and Kolmar, which include dedicated rail and port infrastructure.

From China's perspective, Sxcoal expected the total coal imports may stay stable or rise moderately in 2026, but Russian volumes could struggle against growing Mongolian competition, especially in coking coal, which is poised to grow further due to infrastructure improvement and proximity.

If Western sanctions are lifted, Russia is unlikely to revert to Europe for thermal coal, given the EU's energy transition and declining imports, MMI said. The same applies to coking coal, with European steel production shifting from blast furnaces to electric arc furnaces, weakening demand. Instead, lifting sanctions could reopen Japan and South Korea as key markets due to logistical advantages.

The Ministry of Energy outlines scenarios through 2050: stress (continued decline), baseline (stabilization), and optimistic (growth via eastern expansion). The IEA anticipates further turmoil in 2025-2027, with production and exports declining until market conditions improve.