Mongolia eyes higher value coking coal exports; logistics key challenge
Mongolia’s coking coal exports remain an integral part of the country’s export income and increased efforts are needed to compete against other coal-producing nations and solve challenging transportation issues, senior executives from trade associations and mining companies said Thursday at the 9th Coal Mongolia conference at Ulaanbaatar, Mongolia.
“The government will fully support the coal industry as it has an influential impact on Mongolia’s economy,” D Sumiyabazar, Mongolia’s Minister of Mining and Heavy Industry said.
Coal represents over 90% of primary energy source of Mongolia, and provides one third of the country’s export income, according to Mongolian Coal Association.
“Over the years, Mongolia’s coking coal exports to China has increased significantly. It is a very influential industry for the economy,” Zoljargal J, Executive Director of Mongolian Coal Association, said.
“While Mongolia’s coal exports have increased over the years, we are faced with increased competition from the global markets,” he said, referring to Russia, China and Indonesia.
With China tightening regulations related to environment and energy efficiency, Zoljargal said that it’s important for Mongolia to shift from “quantity to quality” to generate higher export revenue from its coal exports to China.
Mongolia’s coking coal exports are largely raw and unwashed coking coal, which reduces realized price significantly, compared to Australia, where coal exports are washed and managed with extensive blending controls, Gan-Ochir.Z, CEO of Aspire Mining Ltd. LLC, said.
Furthermore, Mongolia has a broad portfolio of coal products and will be able to achieve blend advantages. This will also help in reserving coal mines, reduce waste products and supply low price products to the market, he added.
However, logistics and transportation would be a key challenge for Mongolian coal exports.
“There are existing logistic and transportation hurdles to overcome,” Li Zhongmin, Vice President, General Secretary of China Coal Transportation and Distribution Association said.
The Mongolian coal trades hands between four to five parties before it is consumed by a northern China end-user, according to market sources.
The distance from coking coal mines to the Mongolia-China border at Ganqimaodu is estimated to be around 240-250 km.
However, efforts are being made to improve logistics and transportation. Tavan Tolgoi to Ganqimaodu railway link is expected to be completed in 2021 and Trans-Mongolian Railway is being expanded to increase coal throughput volume to 34 million mt/year by 2020.
Almost all of Mongolia’s coking coal is exported to China, which imported 64.2 million mt of coking coal in 2018 of which Mongolian coal imports accounted for 43% of the total volumes. From January-July 2019, China imported 44 million mt of coking coal with 43% of imports coming from Mongolia.
S&P Global Platts assessed Premium Low Vol coal at $170.50/mt CFR China on Wednesday.