Mongolian coal to sustain China market shares, despite recent slowdown

2017-09-07 18:36:00 Viewpoint,  Import & Export

Mongolia coal is expected to sustain or even grow its market shares in China this year, despite recent slowdown caused by prolonged customs clearance at border crossings, said W. K. Chan, vice president of Fenwei Energy Information Services Co., Ltd., at the 7th Coal Mongolia 2017 on September 7.

"The Chinese overcapacity reform and safety restrictions will continue to limit China’s own production. Increasing local demands can only be met with more imports," Chan said in an opening remark for the conference that co-organized by Fenwei and Mininfo LLC in Ulaanbaatar.

Export of coal in Mongolia has been increasing in past years and most of them go to China. Last year, 40% of China's total coking coal imports was from Mongolia. Mongolia is the second largest coking coal supplier to China, just behind Australia, Chan said.

Ganqimaodu border crossing, the most important window for China to import coal from Mongolia, has received a total of 12.92 million tonnes of coal by September 4 this year, beating its total imports in 2016.

However, prolonged customs clearance at the border crossing since mid-July has slowed imports of Mongolian coal into China. The August shipment may go down further from less than 1.7 million tonnes in July when the Naadam Festival reduced exports.

China and Mongolia have been actively communicating on the backlog. If can't be well addressed soon, it may impact coal export to China in the rest months of the year.

Sources said 500-600 coal trucks are allowed enter into the border crossing each day, nearly one third of the normal level. It takes 10-12 days for a truck to make a turnover from mine to unload coal at the crossing and back to mine, much longer than the normal which takes three days or so.

Mongolia is spectacularly rich in coal resources, with proven reserve totaling above 37 billion tonnes. The country has a lot of good quality coking coal that features low sulphur, low ash and strong caking index and is easy to wash, very suitable for producing high quality metallurgical coke used in the steel sector.  

The current high prices of coking coal benefited most of the Mongolian miners. Premium Australian hard coking coal prices spiked to $220/t CFR north China port on September 1, surging $37.2/t from the start of August, showed data from

"While everything looks positive for Mongolian coal industry, we also see some challenges ahead," Chan pointed out.

"To further increase export, Mongolian coals need to be more competitive in the international markets. For example, you need to improve your productivity, lower your production cost and build international brands," he said.

Besides, "infrastructure remains the major hurdle for Mongolia to expand its market share in and beyond China," the vice president said.

"If logistics cost goes down with the operation of railway to Chinese border, Mongolian miners would see a significant improvement on their profit margin and competitiveness," he added.

Such view was also made by G. Battsengel, CEO of Mongolian Mining Corporation, one of Mongolia's biggest coal miners.

Noting transportation and logistics bottlenecks need to be fixed by completing required infrastructure, Battsengel said better connections to railway networks would help Mongolian coal reach end-users in China.

In the longer term, Mongolian coals have to become more cost competitive to vie with lower-cost Australian supply, Battsengel said.

This is especially so when Chinese end-users do not need to pay 3% import duties for Australian coking coals due to a bilateral FTA, which Mongolia does not have with China, he noted.

(Writing by Alex Guo   Editing by Harry Huo)
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