Mongolian miners plan coal output hikes as China demand rises

2017-09-12 14:42:00 Policy,  Production & Sales,  International reuters.com

Mongolia's coal miners are looking to ramp up production to meet growing demand from top buyer China, but longstanding transportation issues continue to hold back sales, Reuters reported on September 8, citing industry executives said at a conference.


Mongolia's mining-dependent economy grew at its slowest in seven years in 2016 as a result of declining commodity demand, but growth has picked up this year after a revival in cross-border coal trade with China.


Mongolian producers have been taking advantage of stricter environmental regulations that have closed hundreds of small-scale mines in China, their biggest market.


"As domestic production (in China) goes down, China buys from Australia and Mongolia to close the gap," said Gotov Battsengel, chief executive of Energy Resources, a subsidiary of the Mongolian Mining Corporation (MMC).


The miners have also sought to fill a supply shortage opened up by sanctions and China's ban on imports from North Korea.


They now intend to raise production further after a fourfold increase in coal exports from Mongolia in the first half of 2017 compared with a year ago.


Battsengel said his company aims to produce 9 million to 10 million tonnes of coking coal next year, more than double this year's output of the raw material for steel.


Energy Resources sold 2.3 million tonnes of washed hard coking coal in the first half of 2017, up from 600,000 tonnes in the same period last year.


"Our factory next year will run on full capacity because of market conditions," Battsengel said, referring to the company's coal washing plant at its Ukhaa Khudag mine.


Erdenes Tavan Tolgoi, the state company running Mongolia's giant Tavan Tolgoi coking coal mine, is also ramping up output. It has already revised its 2017 export target to 11.5 million tonnes from 10.7 million tonnes, up from 7.5 million tonnes shipped out last year.


Battsengel warned, though, that there were still limits to growth, with a rail link to China unfinished and road deliveries vulnerable to long border delays.


A backlog at the Gashuun Sukhait-Gants Mod land port brought trade to a standstill in July.


Jamiyan Ganbat, director general of mining policy at the Ministry of Mining and Heavy Industry, said officials were also being instructed to make more thorough inspections after Chinese customs discovered irregularities in shipments.


Ganbat also said the government planned to revive a railway line project from the Gobi coal region to the Chinese border, aiming to get $400 million in financing from China.


(Writing by Becky Du   Editing by Tammy Yang)
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