Russian mining giant Mechel has temporarily suspended operations at one of its mines and certain sections of its open-pit coal mines amid escalating financial difficulties, according to recent reports.
The company has also sharply cut production of unprofitable coal grades as the sector faces a severe crisis.
In its half-year report, Mechel stated: “Under the current circumstances, we have decided to suspend production of unprofitable product types, partially redirecting resources toward products that are more in demand in today’s realities.”
The production cuts come as Russia’s coal industry grapples with low coal prices, international sanctions, and a strong rouble, all of which have undermined export competitiveness.
Coal output at Mechel dropped 28 per cent to 3.66 million tonnes in the first half of 2025, with sales of coking coal concentrate falling 15 per cent to 1.7 million tonnes and thermal coal sales plunging 21 per cent to 1.37 million tonnes.
Financial losses have deepened significantly, with Mechel reporting a half-year loss of 40.5 billion rubles (US$501.17 million), more than double the 16.7 billion ruble loss recorded in the previous year.
The company’s financial strain is compounded by a hefty net debt burden of 252.7 billion rubles, aggravated by high interest rates.
The Russian government has attempted to support the coal sector by deferring tax payments, including a three-year deferral Mechel secured for 13.8 billion rubles in tax arrears, fees, and insurance premiums.
Yet, the challenges persist.
Mechel attributed the industry’s woes to “declining coking coal concentrate prices, rising operational costs, rouble appreciation and sanctions-related constraints”.
The company is actively negotiating with creditors to obtain further deferrals on principal debt repayments.
Industry-wide, the situation is dire.
According to Russia’s official statistics service, Rosstat, combined net losses of Russian coal companies surged to 185.2 billion rubles in the first half of 2025, a steep rise from 7.1 billion rubles a year earlier.
Industry experts warn that around 30 coal enterprises, producing a total of about 30 million tonnes annually, face the threat of bankruptcy as the sector struggles to survive under the weight of current economic and geopolitical pressures.
Mechel’s production suspension and financial losses underscore the worsening crisis hitting Russia’s coal industry, with significant implications for the country’s energy and mining sectors.
