Miners are vocally expressing their dissatisfaction.

Miners are vocally expressing their dissatisfaction.

Mining Equipment Woes in Russia: Soaring Costs, Sanctions, and Chinese Dominance

In 2024 and Q1 of 2025, the Russian mining sector has been hit hard by a surge in equipment costs, leading to a significant decrease in the demand for surface and underground mining equipment. This downturn is according to a survey by "Kommersant" that includes mining, leasing companies, and equipment manufacturers.

Maxim Agadzhanyan, Alpha-Leasing Group's managing director, highlighted a 30% year-on-year drop in leasing deals for medium and heavy equipment in 2024. He also reported a decline in semi-trailers, trailers, and dump trucks handed over for leasing during January and February. The reduction in equipment purchases is due to heightened costs, high interest rates, increased expenses for spare parts, maintenance, and fuel. These overall costs have reportedly soared by about 30% over the year.

Amid these challenges, mining companies are rethinking their equipment acquisition strategies. According to "Kommersant" sources, the industry is trending toward self-maintenance, with companies like Seligdar, Polymetal, and Polyus operating their own fleets. The shift away from contractors is primarily observed in drilling, blasting, and excavation. However, leasing might still be advantageous for some companies, especially when prices are high. This is because leasing companies can offer attractive conditions like no upfront payments, deferrals, and balloon payments (where a significant portion of the credit is paid off at the end).

The Russian mining equipment market is estimated to be around 200 billion rubles by the end of 2024. Typically, around 300 units that have broken down and cannot be repaired are replaced annually. However, with the lifespan of old equipment being extended, and Chinese and Indian counterparts wearing out faster, especially budget options, this proportion might be higher now. Ilya Makarov, director of the corporate ratings group at AKRA, estimates that approximately 10-15% of the mining equipment fleet needs to be replaced each year due to wear and tear, equating to an approximate purchasing cost of $2 billion.

Some key issues with heavy equipment (excavators, bulldozers, quarry dump trucks, drills) persist, making supplies through parallel imports more expensive and time-consuming, and not compatible with guaranteed support and spare parts supply. Meanwhile, equipment from friendly countries consists mainly of components that fall under sanctions. As of early 2025, the mining industry faced a shortage of bulldozers, dump trucks, and excavators, as reported by Alpha-Lizing Group.

Despite the anticipated economic slowdown, mining enterprises are maintaining their production plans, stimulating further moderate growth in the segment. russia's mining equipment market faces compounding challenges from geopolitical pressures, cost inflation, and shifting supply chains in 2024-2025, with Chinese suppliers increasingly filling gaps left by Western sanctions. These sanctions necessitate alternative procurement strategies, with localization efforts and Chinese machinery likely gaining market share due to limited EU/US access. The interplay of sanctions, cost inflation, and Chinese equipment reliance creates a constrained outlook for Russia’s mining sector, with production declines likely to outpace stabilization efforts.

1. Maxim Agadzhanyan, the managing director of Alpha-Leasing Group, agreed that there was a noticed decline in leasing deals for medium and heavy equipment in 2024, a trend that also includes semi-trailers, trailers, and dump trucks.
2. In an effort to combat soaring costs, heightened interest rates, and increased expenses for spare parts, maintenance, and fuel, the Russian mining industry is actively pursuing self-maintenance strategies, with companies like Seligdar, Polymetal, and Polyus moving toward operating their own fleets.
3. Leasing companies, despite the challenges faced by the mining sector, still offer attractive conditions such as no upfront payments, deferrals, and balloon payments, which might be advantageous for some companies due to potentially high equipment prices in 2024.
4. Ilya Makarov, the director of the corporate ratings group at AKRA, estimated that about 10-15% of the mining equipment fleet needs to be replaced each year due to wear and tear, equating to an approximate purchasing cost of $2 billion in 2024, a year when the Russian mining equipment market is predicted to be around 200 billion rubles.

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