CHINA’S record coal purchases last year were driven by big increases in supplies from Australia and Mongolia, while Russian cargoes actually fell.
Now that Chinese demand is flattening, Mongolia could be best placed to hold or even grow its market share in its southern neighbour at Russia’s expense.
While total imports surged 14 per cent to 543 million tonnes in 2024, Australian shipments recorded a whopping gain of nearly 60 per cent, according to customs data on Monday (Jan 20). Exports from Mongolia were 19 per cent higher. Indonesia remained China’s biggest supplier, although the increase last year was relatively modest.
The bonanza enjoyed by Australian miners underscores how diplomatic relations have improved after China’s ban on their shipments at the start of the decade. For all of the strategic ties between Beijing and Moscow, Russia is losing out because its coal is too expensive, and new US sanctions could make exports even less attractive to Chinese buyers this year.
Mongolia, meanwhile, benefits from its proximity to China and is seeking to cement that with better rail connections. Unlike Australia, which ships coal far and wide and can respond to rising prices elsewhere in Asia, the vast majority of Mongolia’s customers are in one country.
The rearrangement of trade flows comes as China’s import needs are expected to moderate this year due to a glut of domestic coal, which is likely to pressure prices and cap profits for exporters. But the country’s still short of the higher grade fuel used by the steel industry, which favours Australian and Mongolian suppliers.
Mongolia accounted for 60 per cent of its southern neighbour’s coking coal imports for steelmaking last year. Prior objections on national security grounds to aligning the country’s track specifications with China’s have been overcome, and the government is now pushing for improved rail links at the border that could eventually double coal cargoes to China, according to a parliamentary resolution last month.
China’s steel industry is in bad shape and production is expected to drop in coming years, so the outlook is far from rosy. But Mongolia has an eye on improving its position as a thermal coal supplier, as well.
Its parliament has also endorsed 16-year term supplies from its biggest miner, Erdenes Tavan Tolgoi JSC, to four Chinese firms, including the nation’s biggest utility, China Energy Investment. Those deals are expected to deliver an annual 20 million tonnes of coal when they peak in five year’s time. BLOOMBERG
