China's imports of Mongolian coal set to rise as transport improves

Mongolian Mining

11/01/2024 23:00

By Andrew Hayley and Chen Aizhu
       BEIJING/SINGAPORE, Jan 12 (Reuters) - China's imports of
Mongolian coking coal may rise to a record in 2024, after more
than doubling in 2023, on improving transport links and its
lower price versus domestic and international supplies, traders
and miners said.
    China is the world's biggest steel producer and coal
importer and a shift to abundant Mongolian supplies could come
at the expense of Australian imports of the steelmaking
ingredient. Australia, the world's second-biggest coking coal
miner, was China's largest supplier until a 2020 diplomatic
dispute. 
    This year's coking coal imports from landlocked Mongolia may
rise more than 10% as newly expanded road links enable more
truck traffic, a Beijing-based coal trading executive estimated.
China imports Mongolian coal mostly by truck through seven ports
along a border that stretches more than 4,600 km (2,858 miles).
        Beijing and Ulaanbaatar have simplified customs
clearances to bolster coal imports, which have been hindered by
transport bottlenecks, said several Chinese coal traders. More
truck lanes have been added at land ports and customs staff have
been asked to expedite document checks, while automated vehicles
are being deployed to move coal across the border to warehouses
on the Chinese side, said the Beijing-based executive. 
    "The expanding trade is very much driven by the two
governments," said a Singapore-based senior Chinese coal dealer.
    "During the Australian coal ban, the Chinese government
looked to Mongolia as a prospective replacement and has since
worked on improving the transport links," said the trader.
    Australian coking coal imports plunged when Beijing slapped
an unofficial ban on several commodities after Canberra called
for an investigation into the origins of the COVID-19 pandemic,
although trade resumed last year as relations warmed.
    To bolster Mongolian imports, authorities in the Chinese
border town of Ganqimaodu, the entry point for nearly 60% of
China's Mongolian coking coal, invested 40 million yuan ($5.58
million) in 2023 to improve infrastructure, according to Chinese
state media.
    As a result, in the first week of December, an average of
1,136 trucks crossed each day at Ganqimaodu, data from Haitong
Securities showed, up 39% from a year earlier.
    
    CHEAPER MONGOLIAN COAL
    Thinning margins at Chinese steelmakers caused by the
downturn in China's property sector have boosted the demand for
cheaper Mongolian coal, analysts said.
        "Both Chinese domestic and other major international
coking coals are unaffordable to Chinese steel mills, who have
been struggling to make ends meet," said Simon Wu, a consultant
at Wood Mackenzie.
    Mongolian coking coal was imported at an average of 974 yuan
 ($135.98) per ton last year, some 20% below Russian coal and
half the cost of Australian coal, a Reuters analysis of Chinese
customs data shows.
    China's imports last year of Mongolian coking coal likely
topped 50 million metric tons, traders estimated, doubling 2022
levels and dwarfing the 2.3 million tons imported from Australia
recorded by Chinese customs in the first 11 months of the year. 
    The import boom has boosted shares of top Mongolian producer
Tavan Tolgoi JSC  TTL.MNE  by more than double since the start
of 2023, and shares of Hong Kong-listed Mongolian Mining Corp
(MMC)  0975.HK  have more than tripled over the same period.
    MMC, with two mines in the southern Gobi, expects to operate
near full capacity this year, matching the 1.6 million to 1.7
million tons of coking coal it shipped to China each quarter in
2023, CEO Battsengel Gotov told Reuters.
    
    In 2022, Mongolia completed a 30 million to 50 million ton
per year rail line from Tavan Tolgoi to the town of Gashuun
Sukhait, across the border from Ganqimaodu, but it has not been
linked to China's rail network. 
    "The next important task will be to complete the
cross-border railway interconnections," said MMC's Gotov.
    New railway lines are expected to increase Mongolia's
railway export cargo volume of all types of goods from 8.2
million tons in 2023 to 80 million tons by 2030, according to
data cited by China's People's Daily in December.


($1 = 7.1626 Chinese yuan renminbi)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Imports of Mongolian and Russian coking coal have displaced
Australian shipments    https://tmsnrt.rs/3S7xeio
China is buying Australian thermal coal again, but coking coal
shipments remain minimal    https://tmsnrt.rs/3NUSUeY
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Chen Aizhu in Singapore and Andrew Hayley in
Beijing; Editing by Tony Munroe and Christian Schmollinger)
 ((Andrew.Hayley@thomsonreuters.com;))