Mongolia wasting an opportunity to become China’s largest source of coal supply - News.MN

Mongolia wasting an opportunity to become China’s largest source of coal supply

Mongolia wasting an opportunity to become China’s largest source of coal supply

Demand for coal is skyrocketing in China, which is driving new mining, coal stockpiling and widespread power cuts. This year, analysts estimate China will burn about 4 percent, or 160 million tons, more coal than the year before. First of all, a jump in power demand – as China’s economy recovered, demand for goods produced there has surged. And second, COVID – to understand that, needed to zoom out and look outside China to Mongolia.

Mongolian coal is more needed than ever in China because China cut off Australia, its other source of coal imports, as political punishment. Mongolia replaced Australia as China’s largest source of supply, but the Covid-19 pandemic forced the closure of the two main coal truck routes in May. China has also shut its borders to Mongolia to stop COVID transmission. And to ferry coal to China, Mongolian drivers must first live in sealed quarantine bubbles, really just tent camps, to prove they do not have the virus.

Mongolian coal exports to China have plummeted to just a third of what they were last year, pushing Chinese coal prices even higher. China has also tried to boost its own coal production, but it spent years closing down smaller, dirtier, unsafe mining facilities, meaning it can’t just press a button and order more coal to be produced. The upside is, this year’s power shortages have made it painfully clear to Beijing it needs to accelerate power reform measures.

During 2020, Mongolia’s total coal exports  plunged by 22 percent to 28.6 million tonnes, well below the target set by Ulaanbaatar at the start of the year to lift exports to beyond 40 million tonnes last year. The outbreak of the COVID-19 pandemic was the chief reason for the plunge in Mongolian coal deliveries, Mysteel Global noted.

The coal trading between Mongolia and China was disrupted again from late November when a new wave of the pandemic hit both countries. As Chinese and Mongolian government authorities adopted immediate COVID-19 tests on truck drivers, coal transportation was disrupted again. Last year, the price trend of Mongolian coking coal price in China moved in almost the opposite direction to coal exports, according to Mysteel’s data. Through 2020, Mysteel’s price assessment for Mongolian processed coking coal with 10 percent ash, 27 percent volatile matter and 0.65 percent sulphur increased Yuan 180/tonne (USD 27.9/t) on year to Yuan 1,280/t at the border checkpoint and including the 13 percent VAT.

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