The increase in taxes in metallurgy may reduce the export of Russian coal

The tax reform in the Russian metallurgy will increase the cost of producing coking coal, which is used to smelt iron and steel. It is coking coal that has the greatest prospects to remain in demand on the world market even in the event of the final victory of the "green" agenda in the world and the widespread rejection of fossil fuels. No worthy and cost-effective alternatives to it have been found in metallurgy yet, and therefore it retains a high export potential. The price of coking coal is significantly higher than lignite or thermal coal used as fuel for power plants.

The Ministry of Finance plans to receive as a result of the entire reform of taxation of metallurgy, the mining industry and fertilizer producers in 2022-2024. more than 0.5 trillion rubles. According to RBC, about 130 billion rubles annually will be spent on ferrous metallurgy and coking coal producers from this amount.

Tie the mineral extraction tax (MET) to world prices, differentiate the profit tax relative to its volume and introduce an excise tax on steel. Coal miners affected only the first two innovations.

Against the backdrop of the global coking coal price, which has reached a ten-year high (for example, Australian coal is now quoted at over $ 500 per tonne).

The share of coking coal from Russia in the total volume of coal exports is slightly less than 14% (in 2020, 29.1 million tons out of 212.2 million tons, by $ 12.4 billion), but it increases annually. At the same time, the quality of Russian coal is lower than that of the world leader in coal production - Australia. In addition, the cost of delivering coal to consumers from Australia is at least 2 times lower than from Russia. This is due to the fact that the main coal basins are located inland and in Australia on or near the coast.

In 2021, China (the world's largest steel producer, 53% of global production) stopped buying Australian coal for political reasons and switched to coking coal from the United States, Mongolia and Canada. With these countries, Russia has a very tough price competition, as well as shipping costs. Infrastructure restrictions do not allow to increase exports to China, but the reconstruction of the Baikal-Amur Mainline is underway, and Russia plans to increase the volume of coal exports in the eastern direction. In this situation, any, even a slight increase in the cost of production can be decisive.