Russia will increase by Rb380/mt ($6.50/mt) the mineral extraction tax for coking coal, while coal miners are also bracing themselves for an additional export duty the ministry of finance is currently drafting.
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Register NowThe new severance tax rate will take effect on Jan. 1 until March 31, according to an official document seen by S&P Global Commodity Insights.
According to a formula that has been in effect since January, the coking coal mineral extraction tax is defined by the monthly average price of coking coal, based on the SGX TSI FOB Australia Premium Coking Coal OTC Futures/Options index, multiplied by the same month's average dollar-ruble exchange rate.
The current MET is linked to the global coking coal price, but miners' actual revenues do not match it as Russian coal is traded on the foreign markets at 20%-30% discounts to international benchmarks.
From Jan. 1, the coking coal MET will rise by Rb380/mt, with the new rate applied to volumes mined in the January-March quarter, according to the official document.
Additionally, the Russian finance ministry is working on an additional customs export duty for coking coal, according to information circulated in the media and confirmed by several industry sources familiar with the matter.
"So far, there is no exact data on what the coking coal export tax will be, but I have come across estimates of as high as $10/mt," an industry source told S&P Global. "That's a lot, in my opinion. If one does it right, then the tax rate should be pegged to Russian FOB prices, or set as a fixed number, the same for all, in which case it should be minimal."
With the fiscal burden comprised by the increased MET and export levy, coal production may decline and threaten the existence of smaller companies, the source suggested. "It is already limited [by insufficient rail freighting capacity] due to the impossibility of shipping the entire output to foreign markets," he said.
"Coal miners, of course, will say that investments will be reduced, and potentially to nil," the source added. "Successful, apparently, will be businesses that have access to railroads and captive transshipment facilities in ports."
Russia is about to nullify its excise duty on steel by raising by about 70% the cutoff price of slab below which excise on a ton of steel produced and cast into slab will not apply. And the fiscal measures it is drafting for coking coal are seen as compensatory for the loss in budget income ensuing from that steel tax-lapsing amendment.
In 2023, additional Russian budget revenues from the upcoming export duties on coal and fertilizers are estimated at Rb135.6 billion, Prime news agency reported, citing a note to the Russian federal draft budget for 2023-2025.
Mining upheld, but washed output stagnating
Russian coking coal production in August grew 9.2% year on year and 2.7% month on month to 8.3 million mt. In January-August, output increased 6.2% year on year to 66.6 million mt, according to Russian federal statistics service Rosstat.
Washed coking coal production in August slipped 0.2% year on year but grew 2.7% month on month to 4.8 million mt. The January-August volume declined 0.6% year on year to 39.1 million mt.
Platts, part of S&P Global, assessed premium low volatility hard coking coal at $308/mt CFR China Sept. 29, unchanged on the day. Its assessment of the same quality coal on an FOB Australia basis increased by $4/mt on the day to $270.50/mt. Compared with early January, prices have declined by 9% on a CFR China basis and by 25% on an FOB basis.