Mongolia hikes coal prices, points to recovery

sxcoal.com Policy,  Price,  International 2016-12-06 11:45:00

Erdenes Tavan Tolgoi (ETT), Mongolian state-owned miner of the world's largest undeveloped coal deposit, announced it had negotiated an 85% price jump in its average selling price to $50/t from December, rising to $60/t for 2017, Frontera News reported on December 5.


ETT had been selling its coal at only $32/t as part of a settlement for debt owed to the Aluminum Corporation of China, or Chalco.


In another part of Tavan Tolgoi, Mongolia Mining Corporation had already struck a deal to sell its premium washed variety of coal at $107/t.


The price hike, reached by a newly installed government in Ulaanbaatar, was regarded as a way to get the country out of the economic crisis it inherited. Mounting debt has driven Mongolian government into talks with the International Monetary Fund. It's been whacked with two credit rating downgrades in as many weeks.


Yet, sales of coal – coupled with rising earnings from the country's other main resources, namely copper, gold and iron ore – appear destined to rescue this nation of 3 million people, with or without foreign handouts.


It is reported that tailback of coal-laden trucks has been building for months, which sometimes stretches over 60 kilometers, the world's longest one, mainly shipping to China.


Around half – or 1,500 trucks – make it across the border each day, Frontera News cited drivers and border guards as said. That equates to around 135,000 tonnes every day, or 48.60 million tonnes annually.


This will bring over $4 billion of annual revenue to Mongolia – based on a mid-price between the $60/t and $107/t so far achieved at Tavan Tolgoi, the consignment at $83/t – just from coal.


For Mongolia's $12 billion economy, this would mean a 25% jump in GDP, returning the economy to the type of dizzying growth rates seen last decade, said Nick Cousyn, the Chief Operating Officer for BDSec, Mongolia's largest broker and investment bank, in a report with similar conclusion.


Coal prices have been rising entering 2016, especially coking coal used for making steel, mainly supported by China's government-led overcapacity slash drive. Amid the nationwide campaign, domestic coal supply fell short of demand from downstream sectors, boosting coal imports from coal-rich countries including neighboring Mongolia.



(Writing by Evie Feng  Editing by Harry Huo)
For any questions, please contact us by inquiry@fwenergy.com or +86-351-7219322.

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