The Russian coal mining industry is gradually recovering after the 2008-2009 economic slowdown and a major disaster at the Raspadskaya mine in 2010. The sector is likely to reach the pre-crisis level of development already this year, according to analysts.

The resumption of operations at Raspadskaya and the launch of new mines by other companies are expected to be the key factors for the Russian coal industry’s growth, analysts noted, adding that coal production is likely to grow faster than domestic demand, and miners will focus on exports, as export prices have increased considerably because of recent flooding that destroyed mines in northeastern Australia.

Coal output in Russia increased about 5 percent on the year to 317 million tons in 2010, according to the Federal State Statistics Service’s report issued on January 27, 2011. This is still less than in 2008, when the output was at about 329 million tons, according to the data from the Energy Ministry.

Analysts said that one of the key factors that slowed the coal mining industry’s recovery after the economic slowdown was the major accident at the Raspadskaya mine in the Kemerovo region in May 2010, where two methane blasts killed 91 people, and after which coal production was suspended.

“(Coal output) recovery will already be seen in 2011; it will be strengthened by the resumption of production at Raspadskaya, the launch of the Elga coal complex (by mining company Mechel), and high prices for coal, which are accelerating the growth in output,” the Bank of Moscow analyst Yury Volov said.

Coal production in Russia has been growing recently and is likely to keep growing in the near future, as producers are seeking to satisfy the increased demand for coking coal on the domestic market caused by the Raspadskaya disaster, investment company Metropol analyst Andrei Lobazov said. The accident at the Raspadskaya coal mine had a big impact on the coal mining industry, as Russia’s coal production decreased because of suspended operations at the damaged mine and could not fully satisfy demand, Lobazov. In order to offset the shortage of coking coal in Russia, Mechel imported coal from its own mines in North America.

Immediately after the disaster at Raspadskaya, there were shortages of some types of coal on the domestic market, Volov from the Bank of Moscow agreed. “But this shortage had almost no impact on coal prices, as the accident occurred when the situation with exports was not as good, as it is now,” he added.

Raspadskaya in mid-December launched one of the longwalls at the damaged mine, at which point the company’s coal production rose 15 percent on the quarter in October-December, the company reported earlier in 2011. In 2010, however, the company’s coal output fell 32 percent on the year to slightly over 7 million tons because of the accident.

Now there is no serious shortage of coal because the Raspadskaya company managed to increase production considerably at mines that were not damaged by the accident and to increase supplies on the domestic market to levels close to those before the accident,” Volov said.

Lobazov from Metropol, however, noted that the shortage of coking coal on the domestic market has not yet disappeared completely. “As the Russian economy is growing and power consumption is increasing, domestic demand for coal is expected to rise,” Lobazov added.

Domestic demand for coal is growing alongside the intensified operations of power plants and metals companies, Volov from the Bank of Moscow agreed, adding, however, that “this growth in demand is hardly a booming one.” Moreover, the growth in coal output is likely to be bigger than the increase in domestic demand, because new capacities are being launched, according to Volov.

One of the examples is Mechel’s Elga coal complex in the constituent republic of Sakha (Yakutia), where the company plans to start coal production by the end of March and to produce about 1 million tons of coal in 2011, according to the company’s press office. The company initially planned to start production at Elga in late 2010, but delayed the launch, although it was ready to start production in December 2010, Mechel’s press office said without commenting on the reason behind the delay.

The company plans to build a railroad in order to carry coal from the Elga complex by the end of 2011, Mechel’s spokesperson said, adding that before the rail line is fully built, coal will be carried by trucks to those segments of the railroad already constructed.

Mechel is likely to be on a roll in 2011, taking into account that it will soon expand coal production in Yakutia and that global demand for coal is currently increasing, Lobazov from Metropol said.

Due to the accelerated growth in coal output and growing global demand, the share of exports in the total production volume of Russian coal miners is expected to show an increase, Volov from the Bank of Moscow noted. “At present, coal export supplies are more profitable than sales on the domestic market,” he said, adding, however, that the situation changes quite often.

Mining companies are expected to focus on exporting coal because coal export prices have grown significantly after the flood in Australia that damaged many coal mines in the country’s northeast, Lobazov from Metropol said. As export prices for coal have grown much higher than domestic ones, Russian coal producers are focusing on exporting coal starting from the beginning of 2011 and are likely to keep increasing exports until June, Lobazov said.

Global prices for coal are likely to keep growing considerably in 2011, as “the loss of 2 percent of the world’s coal supply because of Australia’s floods should result in coal prices’ rallying to a record high,” analysts from Alfa-Bank noted.

Volov from the Bank of Moscow, however, said that no further major increase in coal price is expected in 2011, as “the growth in coal prices attributable to the floods in Australia has already happened.”