The Mongolian government recently said it has found a solution to end years of shady coal deals after people staged a massive anti-corruption protest in Ulaanbaatar last December.
Starting from February, Mongolia's largest state-owned coal enterprises, Erdenes-Tavantolgoi JSC, will stop signing direct sales agreement with Chinese buyers. Instead, the company's coal will be auctioned on the Mongolia Stock Exchange, which will increase transparency and ultimately bring higher returns to the country.
The move to sell coal through the exchange comes in response to the protest against widespread fraud in the coal industry, where much of the theft was allegedly conducted by off-the-books coal sales with Chinese buyers at the border.
The company's CEO Gankhuyag Battulga and several associates as well as family members have been arrested and face trial on charges of embezzling billions of dollars in coal revenue. In addition to Erdenes-Tavantolgoi JSC, the affected companies include Energy Resources LLC, as well as its parent company, Mongolian Mining Corporation, which is listed on the Hong Kong Stock Exchange.
The government had planned to start the bidding process later this year but expedited the process following public outcry over corruption.
Mongolia is one of key significant coal suppliers for China, especially for coking coal used for steel making.
Mongolia's coal exports came in at 31.69 million tonnes in 2022, surging 101.72% or 15.98 million tonnes year on year, showed data from the Mongolian Customs General Administration. A total of 29.77 million tonnes were exported to China, soaring 104.50% year on year, representing 94% of the total.
The introduction of new sales mechanism will push up the price of coal sold to China.
Earlier this month, the stock exchange organized a trial run trade to test the new system — 12,800 tonnes of coking coal was auctioned to a Singapore-based coal transporter. The final call price had increased 12.2% above the original asking price, from 1,150 yuan/t to 1,290 yuan/t.
(Writing by Alex Guo Editing by Harry Huo)
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