Mongolian coal exports have rebounded after falling for the past two months to record a 17% M-o-M increase in Aug’18.
As per the data provided by the Mongolian customs, coal export by the country in Aug’18 has increased to 2.94 MnT against 2.52 MnT in Jul’18, which was also 23% higher on the year compared with 2.39 MnT coal in Aug’17. Notably, all the coal was delivered to China in Aug’18.
Market analyser-Fitch Solution has underlined in its report that Mongolian coal is ideally placed to cement its position as the leading Coking coal supplier to China in the coming years.
Proximity and High Quality Coal to Boost Exports to China:
Growth in Mongolia’s coal export to China is largely driven by coking coal projects as the country boasts high quality reserves of the steel-making ingredient.
Studies have revealed that Mongolian coal with medium ash, low sulphur and high caking index provides better value to the Chinese buyers than the coking coal imported from Australia, US and Canada.
Moreover, the stricter constraints on import into China often offer a hurdle for global producers, which is not the case for Mongolian coal given its close proximity to China.
Mongolia’s coal exports to China during the first 8 months of CY18 (Jan’18-Aug’18) have increased 2% Y-o-Y to 23.26 MnT compared with 22.85 MnT in Jan’17-Aug’17 period, which accounted for nearly all of Mongolia’s total coal exports.
Coal Production to see solid growth:
Mongolian coal sector is likely to witness robust production growth in the coming year driven by rising prices, a solid project pipeline and competitive operating costs, which would also be boosted by the governments drive to attract foreign investment.
For instance, Aspire Mining Ltd-a company run by Australian miner has invested an initial sum of USD 15 Million towards the Ovoot coking coal project.
Fitch Solutions has forcasted that the country’s production would increase to 107 MnT by CY27 from a mere 30 MnT in CY18.
Drawback to Sustainable Growth:
Despite the favourable outlook, lack of sufficient rail infrastructure remains a reason of concern which needs to be addressed for the sustained growth in coal exports.
Data from customs indicate that Mongolia had suffered a 36% Y-o-Y decline in exports to China during the first two months of CY18, as massive jam of trucks at the border between the countries had affected coal movement in the period.
In the preliminary stage, the Mongolian government has approved construction of a 267 km rail line from the Tavan Tolgoi coal mine to Gashuun Sukhait on the border with China. The line will allow coal from the mine to be transported directly by rail to markets in China, rather than by truck, also making a significant cost savings in the process.
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