Mongolia to resume coal exports to China

Market: Coal, Coking coal
21/02/20

Mongolia will resume coal exports to China on 3 March, restoring a key source of coking coal imports after a four-week halt.

The border has been closed after a 10 February decision to halt all commodity border crossings in a bid to prevent a further spread of the coronavirus within Mongolia.

All truck drivers delivering coal and other commodities must take all necessary precautionary measures to safeguard their health, including disinfecting after their shifts, authorities stressed yesterday. Arrangements must also be made in advance for quarantine and observation of drivers who are suspected to have contracted the coronavirus.

"We have understood that most logistics services in China are also currently not operating fully because of the coronavirus," said Mongolia's deputy prime minister Olziisaikhany Enkhtuvshin. "We have made this decision to resume coal exports based on the fact that most major industries in China aim to return to full operations starting 2 March."

The reopening of the border was expected by market participants.

"The export of natural resources is a very big contributor to Mongolia's economy," a Beijing-based trader said. "I doubt they could have kept up this export halt for much longer, unless they can bear the damage to their economy."

The reopening of the border should help to ease at least some of the supply tightness that China's steel-producing industries are facing with coking coal, market participants said. The continuing wet season in the main coal-producing region of Queensland in Australia, bad weather and activist protests in Canada, as well as the slow restart of China's domestic coal mining have contributed to supply shortages in China in the past few weeks.

The tighter supplies has driven import coking coal prices higher, with hard mid-volatile coal up by 14pc at $153.85/t cfr China this year and premium hard low-volatile coal up by 11pc to $168/t cfr China.

China obtains about 30-50pc of its coking coal imports each month from Mongolia, making Mongolia an important source of readily available coal for Chinese steel producers. This import growth outpaced Australia last year. Mongolian coking coal imports rose to 33.8mn t in 2019 from 27.7mn t in 2018, while Australian imports rose to 30.9mn t from 28.2mn t in 2018.

By Rou Urn Lee

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