Over the last year and a half, the renaissance of coal – both kinds – has been gobsmacking.

No one saw coal prices of $400 to $600 per tonne coming, including those in the coal industry.

“If, a year ago, fifteen months ago, you had said to people thermal coal could be $440, and coking coal could be $600, they’d call the ambulance and recommend a nice doctor,” Neil Bristow, managing director of H&W worldwide Consulting, said Thursday at a recent Coal Association of Canada conference.

“Who would believe it?”

While Russia’s invasion of Ukraine has roiled energy markets and driven up coal prices, the reality is that thermal coal prices had been surging months before the invasion, as Europe was already in a self-induced energy shortage and resorting back to coal power.

Five or six years ago, thermal coal sold for about $60 to $80 per tonne, Bristow said. Even before Russia invaded Ukraine, thermal coal prices had soared to around $200 per tonne.

“The fundamentals that caused those prices to increase in Q3 and Q4 of 2021 are still there, and they’ve only been exacerbated by the sanctions on Russian coal,” said Ernie Thrasher, CEO of Xcoal Energy and Resources.

Never in Bristow’s lifetime has he seen thermal coal (burned to produce power) worth more than metallurgical coal, which is used to make steel, but it is now.

Metallurgical coal (also called coking or steelmaking coal) briefly touched $600 per tonne, Bristow said, but has since settled down to about $270 per tonne. That’s still a high price, but less than thermal coal at the moment, which is well above $300 per tonne.

The usual market forces of supply and demand that would normally see producers responding to high prices with increased production simply isn’t happening with coal.

In the U.S., the coal mining industry is half the size it was a couple of decades ago, and simply can’t suddenly reverse coarse. Australia’s coal production peaked in 2016 and it seems unlikely it can respond to the sudden demand for thermal coal either. B.C. is a major producer and exporter of metallurgical coal, but Canada exports little if any thermal coal.

Xcoal estimates the UK and Europe alone will need to find 47 million tonnes of coal that used to come from Russia. It’s unlikely to come from the U.S.

“There’s just not much the U.S. can do,” Thrasher said. “We’ve basically dismembered our coal industry.”

Even if American coal mines could increase production, there is limited coal terminal capacity for exports, which is why coal produced in Montana and Wyoming is shipped through B.C. export terminals. And right now, one of those terminals — Westshore — has been paralyzed by a strike.

“There is just no elasticity in the supply chain that’s allowing people to respond to these prices, and the old adage of the best thing for high prices is high prices is not holding true,” Thrasher said.

In total, Xcoal estimates the global coal supply gap at 96 million tonnes.

“These high coal prices are occurring at a time when the Chinese economy is just dead flat on its back,” Thrasher added. If China’s economy were to suddenly recover and grow, that would put even more pressure on both thermal and coking coal prices.

“Who can supply 96 million tonnes to fill that gap?” Thrasher wondered. “It’s probably only China and India. There’s just not a lot of other countries in the world where there’s the ability to produce the coal that needs to fill this gap.”

As for steelmaking coal, which is B.C.’s second most valuable export, a global recession might cool demand and temper prices somewhat. But Bristow predicts prices will remain high over the next few years, as there simply not enough new metallurgical coal mines being built.

“My models do not show enough coking coal to meet the demand in the world after about 2027, 2028,” Bristow said. “We desperately need new mines.”

“I’m going to be bold and say it will not stay $400 or $500 a tonne for very long,” Thrasher said of coking coal prices. “But I think the days of seeing sub-125, 150 dollars per metric tonne of coking coal for any period of time are in the rear-view mirror, and it’s because the coal simply is not being produced.”

Thrasher said he can envision stagflation resulting from the shortage of coal, if there is a global recession.

“If we get into a major global economic slowdown, it certainly is going to put a damper on our products,” Thrasher said. “The question is, if you go back and look at those supply shortfalls, will a 5% global economic slowdown be enough to solve the problem if you’re 10% short in energy supply? You basically have a stagflation environment where the global economy is crashing but you still need energy and the energy prices stay high.

“It will affect thermal more than coking coal. It could be something we haven’t seen in 40 or 50 years.”

(This article first appeared in Business in Vancouver)

Mirada PLC - Surrey, England-based broadcasting technology firm - Furthers partnership with SKYmedia Corp LLC, a communications service provider in Mongolia and a subsidiary of mobile phone operator Skytel Group LLC, through a contract extension. The contract covers SKYmedia's entertainment streaming service in Mongolia. Mirada will add a number of additional features to enhance the platform.

Current stock price: 40.50 pence

12-month change: down 39%

The total performance of Mongolia’s export of mineral products is currently at 70 percent. Specifically, the export of coal is running at 98.9 percent, copper concentrate --87.7 percent, iron--59.8 percent, gold -- 68.8 percent, and zinc-- 103.8 percent, reported the Ministry of Mining and Heavy Industry.

On September 16-22, freight transportations were done by 1316 trucks and 402 containers per day. During these days, 1,028.9 thousand tons of coal were exported, increased by 403.2 percent or 4 times compared to the same period of the previous year. From the beginning of the year, 17,793.0 thousand tons of coal were exported, which showed an increase of 5,756.8 thousand tons or 48 percent compared to the same period of the previous year. 1,063.2 thousand tons of copper concentrate have been exported, which is an increase of 8 percent compared to the same period last year.

As for iron ore and concentrate, a total of 3,024.9 thousand tons were exported from the beginning of the year, decreased by 48 percent compared to the same period last year.

As of September 22, the Central Bank has purchased 13.75 tons of gold since the beginning of this year.

At Ulaanbaatar's Naiman Sharga money exchange market, elderly women stand in the street waving wads of money at passers-by, encouraging them to change foreign currency to Mongolian tugriks.

Each transaction nets them a small profit -- but when the value of the tugrik fluctuates it makes that more difficult, and lately the currency has taken a dive.

This year the currency has fallen almost 15 percent against the US dollar -- most of that since the start of Russia's invasion of Ukraine.

Angara Banerji, the International Monetary Fund's mission chief, listed a raft of factors behind the country's inflation, including a rise in domestic meat prices, China's border restrictions, surging oil and food prices, and an increase in transportation and logistical costs for imports.

The declining currency has pushed up the cost of everyday goods for a country struggling to navigate global economic headwinds caused by transportation bottlenecks and inflationary pressures, war and economic uncertainty.

"The rate is going down dramatically because of the war in Ukraine and the coronavirus," said Ts. Maisaikhan, a currency trader who operates inside the market.

"We don't produce much ourselves, most things are imported, so when the dollar goes up the price of everything goes up too."

Like elsewhere in the world, Mongolia's inflation has soared this year and reached 14.4 percent in August, compared with 9.5 percent during the same month in 2021, according to the country's National Statistical Office.

Prices for food and beverages increased by about a fifth on-year in August -- the same rate as medicine and health care -- while the cost of clothing, utilities and housing also went up.

"Inflation has surged sharply since mid-2021 and has exceeded the Bank of Mongolia's target band," said Banerji.

Last summer there were a few weeks when potato prices temporarily tripled after China closed the border over Covid-19.

Next to the money exchange offices lies Urt Tsagaan (Long White), a pedestrian mall filled with jewellery makers, seamstresses, hairdressers, boot repair stalls, cobblers, and tattoo studios.

In a sewing shop near the money exchange, Sukhbaatar Tuya said she buys some meat and vegetables each day but when prices spike suddenly it just means buying less produce.

"We're just going day by day," she said. "We don't have any plans beyond the next three days or a week."

"We have to live like this," she said. "There is no other way."

The Monetary Policy Committee of the Bank of Mongolia (MPC) held its scheduled meetings on September 16 and 20, 2022. Taking into consideration current state of the economy and financial markets as well as outlook and risks to the domestic and external economic environment, the MPC decided to:

1. Raise the policy rate by 2 percentage points to 12 percent;

2. Widen the policy rate corridor to be set as 2 percentage points above and below the policy rate and;

3. Exclude certain bank liabilities with maturities of at least 360 days and more that are newly funded on international markets in the form of bonds or loans from required reserve liabilities.

Annual inflation reached 14.4 percent nationwide and 14.8 percent in Ulaanbaatar city as of August 2022. External factors have been largely contributing to headline inflation through its impact on prices of imported goods. The extent of such impact is expected to decline in the upcoming quarters, leading to lower inflation outlook.

Economic activities grew relatively high in the first half of 2022. Despite border restrictions being eased to a certain degree, its negative effect on mining and transportation sector persists. Non-mining production in trade, services, taxes and agriculture sectors intensified in the second quarter of 2022 and reached 2019 pre-pandemic levels in the first half of 2022. Household consumption has been rising consecutively in the last 3 quarters and supporting domestic demand. Recovery in non-mining sector activities is expected to continue this year, mainly contributing to economic growth.

Higher deposit dollarization in the banking system and elevated benchmark rates in international markets have necessitated increases in domestic currency yield. As such, the MPC decided to implement a set of policy measures to raise the policy rate, widen the policy rate corridor to its pre-pandemic level and exclude certain bank liabilities newly funded on international markets from reservable liabilities with the objective to stabilize inflation in the medium term and increase domestic currency yield. Raises in the policy rate would not only be effective in reducing inflation to its target level, but also is consistent with the policy of ensuring domestic and external economic balance.

The subsequent policy actions on whether to pursue further monetary tightening would be dependent on developments in external and domestic economy as well outlook changes in inflation and macroeconomic conditions. The MPC remains committed to implementing necessary policy actions until inflation returns to stabilizing around the target level.

Credit rating firm Moody’s Investors Service said on Thursday it had changed its outlook for the global metals and mining Industry from stable to negative as a global economic slowdown continues to soften demand.

The downturn is affecting prices, which consequently reflects a decreasing profitability for the largest Moody’s-rated companies in the industry during the upcoming 12 months, the firm said.

“[EBITDA and prices] will remain higher than in pre-pandemic years but below the record-high levels seen in early 2022,” says Moody’s senior vice president Barbara Mattos.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) will significantly decline for producers of base metals, including copper, nickel, aluminum and zinc, Moody’s financial research experts said.

Moody’s downgrades mining sector outlook to negative

Moody’s expects copper miners to face EBITDA declines due to lower production volumes

in certain regions, higher input costs and lower prices. At the same time, low inventory levels and supply challenges in main copper-producing regions such as Chile and Peru will limit copper-price declines, it says.

Aluminum producers re expected to be the worst hit as prices for the have fallen drastically from recent record highs, while energy and key raw material costs remain high, particularly in Europe. This combination will reduce companies’ margins and earnings, Moody’s says.

While gold is often seen as a hedge against inflation, the agency notes that prices for both the yellow metal and silver are declining due to higher interest rates and a stronger US dollar. Unlike other metals, market sentiment rather than fundamentals such as supply and demand, influences pricing in this industry, which will negatively affect precious metals miners’ EBITDA.

Today’s report follows one Moody’s published in early September, which lowered its 12-month price assumptions for certain metals and mining commodities.

Long lines of vehicles were seen at a border crossing between Mongolia and Russia on Sunday as people fled the Kremlin’s call-up of hundreds of thousands of reservists for the war in Ukraine.

The head of a checkpoint in the town of Altanbulag told AFP that more than 3,000 Russians had entered Mongolia via the crossing since Wednesday, most of them men.

Queues of people holding Russian passports were also seen outside the immigration counter for the border crossing, according to an AFP reporter there.

“From September 21, the number of Russian citizens entering Mongolia has increased,” checkpoint head Major G. Byambasuren told AFP.

“As of 12:00 (noon) today, more than 3,000 Russian citizens have entered Mongolia.”

Russian President Vladimir Putin on Wednesday announced Russia’s first military call-up of fighting-age men since World War II.

It is designed to fill Russia’s army with hundreds of thousands of men after a string of setbacks that appears to have altered the tide in the seven-month Ukraine war.

Byambasuren said about 2,500 of the Russians crossing the border were men while more than 500 were women and children.

“Most of them are single young people who crossed the border with their parents,” he added.

Russian nationals can visit Mongolia and stay without a visa for 30 days, and extend their stay by another 30 days if needed, Byambasuren said.

Authorities on Saturday detained more than 700 people at protests across Russia against the partial military mobilization, according to an independent monitoring group.

Police monitor OVD-Info counted at least 726 people detained at rallies in 32 cities, nearly half of them in Moscow.

A stream of Russians were also seen flocking by air to Istanbul on Saturday where several expressed relief at escaping but also concern for the safety of loved ones left behind.

Mongolia's capital observed its Car-Free Day on Sunday to raise public awareness of air pollution and negative effects of traffic congestion and promote healthy lifestyle.

Both private cars and public transport vehicles were barred from all main roads of the Mongolian capital Ulan Bator on the Car-Free Day.

For many years, air pollution and traffic jam have been the most pressing issues in its capital, home to around half of the country's 3.4 million population.

Various events such as cultural concerts, running and walking races and employment promotion events are going on within the framework of the Car-Free Day under the motto of "Together for a safe and healthy environment."

Mongolia has observed Car-Free Day in its capital since 2009.

A hundred years later Mongolia witnessed a long line of motorists at its northern border post Kyakhta from a region with Buryats, who are attempting to flee the Ukraine war, as Putin declared a partial mobilization of Russian reservists to augment his war effort in Ukraine.

Cars standing in line to enter Mongolia

Russian motorists at the Russian border to enter Mongolia. Source: @batbayarlaw

According to Justice Minister Nyambaatar, the country will not bar Russian “tourists” from entering for a 30-day visa-free stay.

As Mongolia is becoming Russia’s primary gateway to China images of huge lines at the border revealed that Mongolia had unexpectedly become a safe haven for men, women and children escaping Russia.

So far, Mongolians’ initial attitude to Buryats has been cordial and favorable. Former President Elbegdorj, who is a staunch advocate of worldwide ethnic Mongolians, called citizens to embrace their brothers and sisters from Russia and urged Putin to end the brutal war.

Expat Buryats launched a Telegram channel and other online forums to help people cross the border, find rental homes in Ulaanbaatar and find out if physicians in hospitals speak Russian.

Businesses and entrepreneurs perceive the unexpected demand for shelter, food, and basic services as an opportunity to make good money as most “migrants” come with cash unable to use their Russian bank cards in Ulaanbaatar because of sanctions.

Also, Mongolia is a safe transit route for fleeing Russians to South Korea, the United States, and other destinations.

Many questions have arisen as a result of this sudden influx from the northern neighbor: whether Ulaanbaatar can accommodate thousands of these political migrants, whether Putin would press Mongolian leaders to return his military-capable citizens, what happens to legal status of Russians/Buryats who overstay their one-month visa, and so on.

"Tourists" from Russia are not yet considered refugees or asylum seekers. A small group of expats demonstrated in New York City, urging visiting President Khurelsukh to provide Buryats safe haven and to establish a "humanitarian corridor" for Russians fleeing the war.

Mongolia works with the UN and offers limited assistance to refugees and asylum seekers but they do not enjoy legal status in the country. The government does not provide them with work permits, health care or education.

In Russia, there are around 400,000 Buryats encircling Lake Baikal with the main city of Ulan-Ude.

They speak Mongolian dialect, however Russian is the first language of most urban and younger Buryats. Another 40,000 Buryats live in northern Mongolia, with another 70,000 in northeastern China.

A delegation from the EBRD’s Board of Directors will visit Mongolia on 26 October 2022.

During their five-day stay the Directors will meet senior Mongolian officials to discuss reforms and priorities for the country’s economy. The visit will also present an opportunity to take stock of the EBRD’s assistance to Mongolia aimed at overcoming the negative impact of the Covid-19 pandemic and mitigating geopolitical adversities caused by Russia’s war on Ukraine.

Representatives from the EBRD Board of Directors visiting Mongolia will include:

Caspar Veldkamp representing the Netherlands, China, Mongolia, North Macedonia and Armenia

Eva Cassel representing Sweden, Iceland and Estonia

Cagatay Imirgi representing Turkey, Romania, Azerbaijan, Moldova and the Kyrgyz Republic

Philip Lindsay representing Australia, Korea, New Zealand and Egypt

Yann Pouezat representing France

Leander Treppel representing Austria, Israel, Cyprus, Malta, Kazakhstan, and Bosnia and Herzegovina

Enrique Alejo representing Spain and Mexico and the United Arab Emirates

Dimitris Metaxas-Trikardos representing Portugal, Greece, San Marino and India

Markus Schulte representing the European Union.

The EBRD is the largest foreign private sector investor in Mongolia with 93 per cent of its portfolio in the private sector. To date the Bank has invested almost €2.2 billion in the country’s economy through 122 projects.