Russian economy meltdown as coal extraction plummets with Putin facing existential threat

Putin is facing a growing economic crisis (Image: Getty)

Russia's coal industry is facing an existential threat as output continues to plummet amid surging financial losses. Exports of Russian coal have steadily declined since Putin's full-scale invasion of Ukraine in February 2022.

They declined by 1% in the first year of the war, 4% in 2023, and 8% in 2024 — and are expected to drop another 5–8% this year. The industry has been hit hard by Western sanctions and is struggling to find new markets and clients. As a result production outputs have dropped, and companies face mounting financial losses.

Russian coal miners face an uncertain future (Image: Getty)

Experts from the Centre of Macroeconomic Analysis and Short Term Forecast noted in a recent report that coal extraction continues to fall in Russian mines.

Russian coal has become less competitive than Mongolian, Indonesian and Australian cargoes, analysts say. The industry has also been hit by a sharp fall in the price of the mineral on global markets.

In the second half of 2023 and early 2024, prices fell to about US$150 per tonne - having previously been around US$450. Worse was to come as prices fell again to US$100 per tonne in the second half of 2024.

With recent cuts in demand from key buyers in Asia — China, India, Japan, and South Korea — thermal coal prices (5,500 kcal, FOB Newcastle basis) could fall to US$69–76 per tonne in 2025–2026.

A double whammy of sanctions and falling prices saw losses at coal companies jump 4.1 times between January and September 2024 to a staggering US$1.9 billion (£1.5bn).

Furthermore, the share of loss-making companies amounted to 52% compared to 35% in the same period in 2023.

The coal industry is still a major employer in Russia, providing thousands of people with jobs.

Approximately 150,000 Russians work in 58 underground coal mines and 133 open pits.

Another half a million people are employed in coal-dependent sectors, including thermal power plants, transport, services and supply industries.

Although coal made up around 40% of the regional budget in Russia's largest and most important mining region the Kuzbass, it only contributes 0.5% to the country's GDP.