One of Russia’s top mining firms has become the inaugural coal producer to receive government assistance amid a worsening crisis in the coal sector, according to the company’s finance deputy director, who spoke to reporters on Monday.
Mechel has secured a three-year postponement on tax and social security contributions amounting to over 13 billion rubles (approximately $166 million), as stated by deputy director for finance Nelli Galeeva.
The firm anticipates saving an additional 500 million rubles ($6 million) monthly once industry-wide relief measures, such as deferred mineral extraction tax and social insurance contributions, are implemented.
“We were among the first to seek government assistance and the first to receive support from the commission led by Finance Minister Anton Germanovich Siluanov,” Galeeva mentioned.
Despite receiving this aid, the future for coal producers looks bleak.
Mechel’s CEO Oleg Korzhov has pointed out that the industry is encountering “serious challenges,” and coal producers are preparing for a drop in sales.
“Mechel aims to decrease coal shipments by about 25% compared to last year,” Korzhov noted.
He described this situation as a “pessimistic” outlook, acknowledging that “shifts in domestic or international circumstances could change the situation.”
Nonetheless, he admitted that the current environment for the coal industry remains challenging, with prices at multi-year lows, a robust ruble hindering exports, and escalating losses for companies.
Vladimir Korotin, the leader of Russian Coal, one of the largest coal producers in the nation, termed the crisis “the worst since the 1990s.”
In 2024 and the first quarter of 2025, coal was the only major sector in Russia where the proportion of unprofitable companies, 61.8%, exceeded that of profitable ones.
While production has increased by 1.4% in the first five months of this year, an increasing percentage of this output is being stockpiled rather than sold.
Production is already on the decline in the Kemerovo region, the country’s coal-mining center.
The Kremlin-aligned Center for Macroeconomic Analysis and Short-Term Forecasting has found that coal companies are under pressure across nearly all significant financial health indicators except bankruptcy, which many manage to evade through state assistance.
Industry stakeholders are hopeful that conditions may stabilize and improve in the latter half of the year.
“Almost all coal producers are encountering extremely tough circumstances, leading to cuts in both production and investment initiatives. Given the current exchange rate, coal sales are unprofitable,” Korzhov remarked.
However, he added that “prices are unlikely to drop further, as approximately 20% of global coal companies are already operating at a loss. Reduced production will likely elevate prices, while a potential decrease in the key interest rate could strengthen the dollar exchange rate and ease debt pressures for companies.”
These elements might facilitate a recovery in the third and fourth quarters of 2025, he said.
In 2023, Mechel’s EBITDA (earnings before interest, taxes, depreciation, and amortization) plummeted by 35% to 56 billion rubles, while its debt levels grew, with net debt reaching 4.6 times EBITDA.
To manage its debt, Mechel plans to divest some of its assets, primarily in the energy sector.
Despite this planned divestiture and government support, analysts at BCS World of Investments, a Russian financial services firm, maintain a negative outlook for Mechel’s stock.
Government aid for the coal sector has included deferrals on mineral extraction taxes and social security payments through December, with potential extensions under consideration.
Additional measures involve partial reimbursement for export shipping tariffs to northwestern and southern regions, as well as targeted subsidies to help cover some logistics costs for exports to the west and south.
Companies burdened with significant debt are eligible for restructuring, and some will receive additional tailored support measures.
