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Mechel, a Russian coal mining company, has suspended some operations due to a crisis in the industry

Mechel, a Russian coal mining company, has suspended some operations due to a crisis in the industry

Mechel, a Russian mining company, reported Thursday that its losses had worsened and that it had suspended production at one of their mines. This is a sign of the deep crisis in Russia's coal sector.

Sector is facing a number of challenges, including the low price of coal, international sanctions, and the strength in the rouble which make its exports less attractive. About 30 companies, which produce a total of 30 million metric tonnes a year are said to be at risk of going bankrupt.

In May, the government approved a series of measures to support this sector. This included deferring taxes. The Rosstat statistics service reported that the combined losses of coal companies in the first six months of this year jumped to 185.2 billion rubles ($2.29 billion), up from 7.1 billion rubles a year ago.

Mechel's half-year report stated: "Under current circumstances, we decided to suspend the production of unprofitable products, redirecting some resources towards products that are in greater demand today."

The company announced that it temporarily suspended operations in one mine as well as certain open-pit coal mining sections. The company said that it would drastically reduce the output of coal grades that were not profitable as part of its plan to streamline production.

Mechel stated that the economics have been severely strained due to the declining prices of coking coal, the rising costs of operations, the appreciation in the rouble, and the sanctions-related restrictions.

The first half of the year 2025 saw a 28% drop in coal production, with sales of coking coal concentrate falling 15% to 1.7 millions tons. Thermal coal sales fell 21% to 1,37 million tonnes.

In a period of high interest rates the situation of the company is further complicated due to its net debt load of 252.7 billion rubles. It received a deferral of three years on the payment of arrears for tax, fees, and insurance premiums amounting to 13.8 billion roubles.

Mechel reported a loss of 40.5 billion rubles for the first half of its fiscal year, up from 16.7 bn roubles in the same period last year. The company said that it would continue to negotiate with its creditors about further deferrals regarding repayments.

(source: Reuters)