The Russian coal industry could face the most serious in the last 20 years the crisis due to the compression of the foreign markets, analysts said PwC. They note that all of the current growth potential in Russia is associated with the increase in exports. However, in the coming years, the only growing market in the world, coal will remain India: delivery to less profitable than in China, and competition from Australian and Indonesian coal promises to be more fierce.The strong dependence of the coal industry from the export of Russia will be her problem, follows from the PwC study “On the demolition of the trends: what the future holds for Russian coal exports”. The authors believe that the industry will face a loss of demand abroad, as coal consumption in Asia stops growing, while in Europe significantly decreases. So, after reaching a peak of world coal consumption in 2013 (162 exajoules) over the 2013-2019 years, it decreased by 2.5%. In the baseline forecast, the IEA until 2040, coal consumption will decline in Germany, South Korea, Japan and even China and these countries in 2019 accounted for 45% of Russian exports.The only major growing market in the medium term will remain India (with average annual rate of 2.5%), which accounts for only 3.7% of the coal exports of the Russian Federation, and the largest suppliers are Indonesia and Australia. The overall stagnation in demand for coal, according to analysts PwC, will lead to long-term decline of the Asian price premium, namely, its presence did actual large-scale projects of modernization of railway infrastructure of the BAM and Transsib.As a result, Russia will find it difficult to maintain the share of world exports of coal, which by the end of 2019 was 16.6%, not to mention its growth. These statements are directly opposed to the expectations of the government outlined in the development strategy of the coal industry, approved this year. Its conservative and optimistic scenarios assume an increase in export supply by 2035, up 259 million and 392 million tonnes, respectively (compared to 205 million tons in 2019).The inability to increase exports will have a direct impact on the overall performance of the industry, considering that in 2019 for foreign supplies accounted for 51% of total extraction in Russian Federation. Russian domestic coal market is stagnating, down from 2000 by 13% to 181,3 million tons, whereas exports grew during this time, more than five times.At PwC noted that the Russian coal mining regions (primarily the Kuzbass) is located much further from the sea than those of its main competitors from Australia and Indonesia, which directly affects logistics costs. This factor for a long time, partly offset by a low railway tariffs due to cross-subsidize the transport of coal and other goods. However, the Railways in recent times openly raises the question of whether, Thu�� transportation of coal for monopoly unprofitable and encourages to subsidize it at the expense of the budget.According to Maxim Hudalova of an ACRE, the delivery of coal to India for large-tonnage ships from Russian ports of the Far East will cost $5-7 per tonne more expensive than on the markets of China or Japan. This difference really makes Russian coal unattractive in the Indian market, he admits. “However, we are aware that the qualitative characteristics of Russian products exceeds that of the coal from Indonesia and are broadly comparable with the Australian. In addition, the low prices will last a year or two, they will be removed from the market including the part of the Australian players, and Russian companies due to the depreciating ruble will for the most part, though with difficulty, survive the current bottom of the market”,— the expert believes.At the same time, Mr. hudlow agree that the current situation “should be used to update long-term plans of development of the coal industry” and by the focus on carbon neutrality further extensive development of the Russian coal mining should be avoided.Eugene Zainullin
