Russian coal loses markets as even discounts fail to attract buyers
Photo: Russian companies are already offering discounts (Getty Images)
Russian coal exporters are rapidly losing ground in key foreign markets. In particular, shipments to China are declining, while competitors are increasing their exports, according to the Foreign Intelligence Service of Ukraine.
Among the reasons for the decline in coal exports are higher logistics costs, import duties, and the near-impossibility for Russian companies to lower prices any further.
According to the Foreign Intelligence Service of Ukraine, Russian coal shipments to China fell by 10.8% year-over-year in January–August 2026, to 53.15 million metric tons. As a result, Russia lost its place among the largest suppliers to the Chinese market.
At the same time, coal imports from Mongolia during this period rose by 48.9% to 78.39 million metric tons. Indonesia supplied 121 million metric tons to China. In total, China imported approximately 310 million metric tons of coal over the eight months.
Russia already offers discounts
One of Mongolia's main advantages is significantly lower logistics costs. The country shares a land border with China, whereas Russian coal from the Kuznetsk Basin is transported via the congested Eastern Railway.
In addition, Russian coal is subject to import duties of 3–6% in China. Mongolia, Australia, and Indonesia enjoy zero tariffs under free trade agreements.
Russian companies are already offering Chinese buyers discounts of about 10%. However, the scope for further price reductions is virtually exhausted. Larger discounts could mean that exporters would have to operate at a loss.
As a result, even at the current discount levels, Russian suppliers will find it difficult to maintain their share of the Chinese market. Instead, Mongolia is emerging as the main beneficiary of the situation.
Russian exports face rising costs
The biggest challenges in the near future may arise with thermal coal exports. These exports are under pressure from competition from Chinese mines, import duties, and rising transportation costs.
Starting in October, rail rates in Russia are rising again. At the same time, growing demand for open-top railcars is driving up the cost of using them.
From the beginning of the year through September 11, the cost of transporting coal from the port of Vostochny to China rose by 45.5%. In September, the profitability of thermal coal exports from Kuznetsk Basin via Far Eastern ports was 30% higher than in August and three times higher than last year's figure.
Problems are also arising in other markets. Over the past seven months, Russian exporters have cut coking coal shipments to Türkiye by 30%. In July, not a single shipment was sent there. Among the reasons cited are difficulties with navigation in the Black Sea.
In July, coal shipments to southern Russian ports fell by 33% compared to June. Additional pressure is coming from rising rail tariffs and the high cost of transshipment through ports in the Northwest region.
As a result, Russian coal producers are simultaneously losing their competitive edge in foreign markets and facing rising domestic costs. They can no longer lower prices further without risking operating at a loss, and rising shipping costs are eroding their already limited margins.
In Russia, one in five coal companies could close over the next five years due to the crisis in the industry.
Russia was selling coal from the Donbas to Türkiye and Poland even before the full-scale invasion of Ukraine.
