Mongolian coal is likely to spread its mark in the Chinese steel making industry, with the commencement of the new rail project.
Recently, Aspire Mining Ltd, a major coking coal producing company in Mongolia, and its rail subsidiary Northern Railways have entered into a memorandum of understanding (MoU) with China’s Gezhouba Group International Engineering Company (CGGC) to advance the Erdenet to Ovoot rail project.
The rail line would provide critical pathway for Aspire, who could then access the Chinese steelmaking market via rail.
The Rail Corridor represents a section of the Mongolian Government planned “Northern Rail Corridor”, which extends the national rail network from Erdenet to Aspire’s Ovoot coking coal project (both in Mongolia) and onto the Russian border at Arts Suuri.
The Russian Government has further plans to then link the rail from Arts Suuri to the Trans-Siberian Railway at Kyzyl, thereby creating an international rail link connecting Russia, and northern Mongolia with China.
Benefits of the Rail Project:
The construction of the rail line connecting Ovoot to the Mongolian and Russian rail networks will open up several markets for selling Mongolian coal into, which include China, Russia, Japan and Eastern Europe.
The coking coal from Ovoot project has been highly rated by the Aspire group, due to its high value in use as blending coal.
Based on the studies conducted by the company, it has been shown that when relatively small amounts of Ovoot’s coking coal are blended with low or non-coking, it can upgrade the poor quality coal to a coking coal equivalent, which in turn creates a better quality coke.
Mongolian coal market had become increasingly popular among Chinese buyers, when the Chinese government had imposed ban on North Korean coal last year. As per the data provided by Mongolian customs, the country had exported 32.99 MnT coal in CY17, up 28% Y-o-Y from 25.71 MnT in CY17, with China procuring nearly 98% of the total coal volume in CY17.
During CY18, the bottleneck at the Mongolia-China border had lowered the coal exports during Jan-Feb period. However, exports have recovered to 3.46 MnT in Mar’18, rising 184% M-o-M from 1.22 MnT in Feb’18, which was also 7% higher on the year compared with 3.22 MnT in Mar’17.
The construction the new rail line would ease the coal transportation between the two countries.
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