Russia's Mechel halts some coal operations as industry faces crisis

By Anastasia Lyrchikova

MOSCOW, Aug 28 (Reuters) - Mining company Mechel MTLR.MM reported worsening losses on Thursday and said it had suspended output at one of its mines, a sign of a deep crisis affecting Russia's coal industry.

The sector is struggling with a host of problems including low coal prices, international sanctions and the strength of the rouble, which makes its exports less competitive. Officials say about 30 enterprises, producing a total of around 30 million metric tons a year, are at risk of bankruptcy.

The government agreed a set of measures in May to support the sector, including by deferring tax payments. But coal companies' combined net losses soared to 185.2 billion roubles ($2.29 billion) in the first half of the year from 7.1 billion roubles a year earlier, the Rosstat statistics service said.

In its half-year report, Mechel said: "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 company said it had temporarily suspended operations at one mine and certain open-pit coal mine sections. It said it was substantially cutting output of unprofitable coal grades as part of a plan to streamline production and investment.

Mechel said the economics of the industry have come under severe strain due to declining coking coal concentrate prices, rising operational costs, rouble appreciation, and sanctions-related constraints.

Its coal output in the first half of 2025 dropped 28% to 3.66 million tons, while coking coal concentrate sales fеll 15% to 1.7 million tons and thermal coal sales declined 21% to 1.37 million tons.

At a time of high interest rates, the company's situation is further complicated by its net debt burden of 252.7 billion roubles. In May, it received a three-year deferral on payment of arrears in tax, fees and insurance premiums totalling 13.8 billion roubles.

Mechel posted a half-year loss of 40.5 billion roubles, up from 16.7 billion roubles a year earlier, and said it was continuing to negotiate with creditors on further deferrals on paying back the principal on its debt.

($1 = 80.8455 roubles)