In recent months, Russia's seaborne coal exports to Asia have experienced a notable decline, encompassing lower shipments of both thermal coal grades and metallurgical coal utilized in steel production. The total exports of all coal grades amounted to 8.48 million metric tons in February, marginally surpassing January's 8.37 million metric tons. However, this slight uptick followed six consecutive months of decreases, and February's exports were significantly lower, down by 21.6% compared to February 2023's 10.81 million tons.

The shift in coal export dynamics can be traced back to Russia's strategic redirection from European markets to Asian ones in the aftermath of Moscow's invasion of Ukraine in February 2022. This geopolitical event triggered sanctions from Western nations against Russian energy exports. Notably, Russia's seaborne coal exports to Asia reached a peak of 14.69 million tons in April of the previous year, nearly doubling the levels observed before the Ukraine conflict erupted.

Much of this surge in exports was fueled by Russia's intensified shipments to India, the world's second-largest coal importer after China. Russia managed to capture a significant market share in India by offering substantial discounts, particularly on thermal coal, predominantly utilized for electricity generation. However, Russian thermal coal has encountered challenges in competing against rival grades from major Asian exporters such as Indonesia and Australia, as well as South Africa, a key supplier to both European and Asian markets.

The dwindling competitiveness of Russian thermal coal is evidenced by the drop in exports to India, plunging to 557,935 tons in February, a decline from 1.06 million tons in January and marking the lowest month since November 2022. At the Coaltrans India conference held in February in the western state of Goa, Russian delegates expressed growing concerns over the profitability of shipping thermal coal to India. Rising freight costs have severely eroded profit margins, with some shipments becoming economically unviable.

Moreover, the broader coal trade between Russia's European ports and India faces additional threats stemming from attacks on shipping in the Red Sea by Yemen's Iran-aligned Houthi group. Although Russian shipments have not been targeted directly, shipping companies and insurers have grown apprehensive about transiting the Suez Canal and the Red Sea. Consequently, vessels are being rerouted to the longer and costlier route around the Cape of Good Hope.

One of the primary factors contributing to the decline in Russian coal exports to Asia is the reduction in the number of buyers willing to engage due to Western sanctions. Additionally, the decrease in prices for competing grades further compounds the challenges faced by Russian miners in maintaining profitability in the Asian market.