Mongolian coking coal on track for a record 50Mt of exports in 2023
China’s demand for Mongolian coking coal remains robust even after Beijing removes import restrictions on Australian coal
Exports of Mongolian coking coal in August 2023 reached 6Mt, surging 85% year-on-year to 33.9Mt (Jan- Aug inclusive). Based on these volumes Mongolia is on track to reach the government target of 50Mt in 2023, which would comfortably be a record and will help address recent fiscal challenges and a weakening currency. Despite Mongolia’s economy stabilising from the difficult position in 2021 when cross border trade with China was severely impacted by Covid, inflationary pressures and recent fiscal increases in wages, benefits, and pensions will need Mongolia’s external sector to curb a budget deficit, debt, and off-budget expenditures.
While some coal producing jurisdictions are following a net zero narrative, resulting in significant challenges for supply expansions, Mongolia is ramping up production, exporting 27Mt in 2022 (a 22% year-on-year increase on 14Mt in 2021) and this year will surpass pre-COVID-19 levels.
Interestingly, the dedicated 230km railway connecting Tavan Tolgoi to the Gashuun Sukhait (Ganqimoudou) border crossing with China, which was opened nearly 12 months ago, remains in limbo awaiting “official approval” to be recognised as a cross-border “rail line”. This is likely to have ramifications for another imminent rail link connecting Mongolia and China at the border point of Shivee Khuren (Ceke). Construction started in late May 2023 and the works are expected to finish by October 2023. The new line will cover a distance of 7.1km, and once completed, will be the second dedicated cross-border railway between China and Mongolia. This will change the composition of cross border trade that is currently dominated by truck haulage at these border crossings.
In light of this, Commodity Insights expects the approval of both border crossing points to be negotiated together which will cap Mongolia’s coking exports for 2023 at around 50Mt.