Two new reports published by the World Bank today offer policy options for strengthening Mongolia's financial sector and private sector, and recognize Mongolia's reform efforts and climate commitments. But they also highlight the need for better policy coordination and implementation across agencies to maximize impact.

"Creating a more efficient financial sector and a supportive environment for private investment can offer Mongolia significant development opportunities," said World Bank Country Manager for Mongolia Taehyun Lee. "A strategic, well-coordinated approach that aligns with sectoral policies will help the country achieve a more diversified, equitable and resilient development."

Building the Foundations for Financial Sector Development outlines comprehensive reforms Mongolia could adopt to address banking sector vulnerabilities and improve market development. It identifies steps policy makers could take to reform the country's legal and judicial system and strenghten its central bank in order to make it easier for banks to extend credit to the private sector, which fell from 60 percent of GDP in 2013 to 41 percent in 2022. New businesses, investments in assets, and access to credit for small and medium-sized enterprises (SME) also decreased over this period. Banks' reluctance to take risks reflects the high concentration of Mongolia's banking system, in which the top three banks hold about 80 percent of assets.

The report stresses the importance of strengthening the independence, governance, and oversight of the Bank of Mongolia. It calls for better sharing of credit information; improved enforcement of contracts, including through judicial decisions; and out-of-court workouts. It also suggests restarting the government securities issuance program, in order to create a liquid market for domestic government securities, which is essential for developing the domestic capital market and improving the foreign exchange market.

Meanwhile, Boosting Mongolia's Private Sector and Green Competitiveness proposes policy actions to increase productivity and private investment, especially outside the mining sector. It recommends three main strategies, including i) making regulations more predictable and reducing bureaucracy through digitalization; ii) improving the capabilities of SMEs (through quality certification and technology adoption, for example) to help them grow; and iii) supporting public-private efforts, in order to attract private investment in renewable energy, energy efficient production, and sustainable agribusiness.

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Mongolia’s northernmost province hosts one of the world’s clearest lakes, Lake Khuvsgul. It’s a popular vacation destination for Mongolians and other tourists. While soaking in the last days of summer 2024, Volunteers Darcy, Noa, and John enjoyed hospitality at a small camp on the lake's southwestern shore. They soon discovered that the camp’s owner and manager, Yadam Otgonbayar, known as “Otgoo,” was also a part of the Peace Corps family.

Otgoo was born in 1966 and grew up in a small village at the southern tip of Lake Khuvsgul. She eventually became a Russian language teacher.

In 1991 Mongolia was transitioning to democracy and initiated a partnership with the Peace Corps in order to educate its citizens in English. News of the arrival of foreign English teachers spread throughout the country.

A quest to learn English

Upon hearing the news, Otgoo asked her school director if she could leave to study English to become an English teacher. The director declined Otgoo’s request because she was the school’s only Russian teacher.

Otgoo, however, is not one to take “no” for an answer. She quit her job and traveled to Sukhbaatar, where Peace Corps Volunteer Paul Dewey was teaching. There she approached a school director and asked to live in a dorm room while attending English lessons. He agreed. Although the school dorm had no heating, Otgoo was determined to make it work.

For two years Otgoo studied under Paul. By day she attended English lessons, and at night she borrowed Paul’s teaching materials and taught the same lessons to a small group of students at the school where she was living. The tuition she collected from her students enabled her to buy food and other necessities.

From student to teacher

One day, while Otgoo was studying in her dorm room, Paul came by to tell her that the Peace Corps was hiring teachers to teach Mongolian to the next Peace Corps Trainee cohort. He encouraged Otgoo to apply, given her skill in English and enthusiasm for teaching. She decided to apply.

As part of the application process Otgoo taught an English lesson for the Peace Corps program manager to observe. Otgoo recalls watching her fellow applicants, who were all trained English teachers from Sukhbaatar. They knew their students well and had clearly rehearsed their lessons with their students.

When Otgoo's turn came, she proudly introduced herself to the students and showed a map of her home province. “Hello, I’m Otgoo. I’m from Khuvsgul. Do you know where Khuvsgul is?” During the rest of the lesson, Otgoo asked her students questions and described her life in the northern province. Later she learned that the Peace Corps program manager was also from Khuvsgul.

Otgoo was hired to be a language and culture facilitator (LCF) for the Peace Corps, where she worked with Trainees in 1993–1994. One of her students, Layton C., said, “I was blessed and grateful to have achieved advanced Mongolian language proficiency, in large part due to Otgoo’s inspiring teaching.”

Teaching university-level English

After finishing her second year as an LCF, Otgoo heard about an opportunity to teach English at the business and management university in Ulaanbaatar, about 200 miles south of Sukhbaatar. Although she was not a trained teacher, by then her English skills were strong. She came to the interview with some trepidation. When she walked into the interview room, she was surprised to see yet another Peace Corps former student, Frank D. Once again, Otgoo was, in her words, “a very lucky woman.” She got the job.

Otgoo taught many students at the business and management university, earned an MBA, and studied hospitality in Europe. However, economic conditions in Mongolia were difficult in the aftermath of the Soviet Union’s collapse.

Returning to Lake Khuvsgul as an entrepreneur

One day, Otgoo received a phone call from a former university student that she’d taught, then working for the provincial government in Khuvsgul. The government was looking for people to open new businesses. Otgoo had never owned a business and had no idea what sort of business she could start, but her former student immediately issued her a business-owner’s certificate and told her, “Go tell people in Khuvsgul that you’re a business owner, and they will help you.” So she did.

Otgoo returned to Khuvsgul as the new owner of a yet-to-be-developed ger (nomadic tents) camp. As backpackers trekked along the lake, Otgoo approached them for their business and asked them to spread the word. She offered them a place to sleep and a meal of fresh fish, which she caught in the lake.

Continuing to spread the Peace Corps spirit

Today, Otgoo is the proud owner of “Nature’s Door” ger camp on the southwest shore of Lake Khuvsgul. Nature’s Door has 12 gers, a restaurant, and a studio where Otgoo occasionally teaches English lessons to camp managers and local teachers. Otgoo manages a team of cooks, cleaners and security guards, whom she refers to as her “internal customers.” She feels her responsibility is to care for them and provide them with productive and meaningful jobs.

As more and more businesses establish themselves around the lake, Otgoo finds herself discouraged by the attitudes of local business owners who assume tourists are rich and have nothing to offer but money. Instead, she believes tourism should be seen as an opportunity to exchange cultures. Business owners and managers should focus on providing tourists with an authentic experience and improving the lives of their employees, just as Peace Corps did for her.

At the conclusion of the 16 Days of Activism Against Gender-Based Violence, UNDP and the Ministry of Family, Labour and Social Protection, co-organized an inter-ministerial discussion on Mongolia’s national report for the Beijing Declaration and Platform for Action. The event brought together government officials and development partners to assess progress and outline the path forward in advancing gender equality.

The year 2025 marks the 30th anniversary of the Beijing Declaration and Platform for Action, adopted at the Fourth World Conference on Women in 1995. This landmark global framework, endorsed by 189 countries, remains pivotal in promoting gender equality and women’s empowerment. Addressing violence against women, one of the declaration’s 12 critical areas of concern, continues to be an urgent priority.

Mongolia’s national review, led by the Ministry of Family, Labour, and Social Protection with technical support from UNDP, identifies key lessons and actionable solutions to advance the objectives of the Beijing Declaration. These findings were presented at the Asia-Pacific Ministerial Conference on Beijing+30 in Bangkok in November 2024 and will contribute to global deliberations at the 69th Commission on the Status of Women in March 2025.

His Excellency Enkh-Amgalan Luvsantseren, Minister for Family, Labour and Social Protection of Mongolia, stated “The Beijing Declaration has been a guiding framework for Mongolia’s efforts to promote gender equality. This review is more than a report—it is a call to action. By enhancing inter-ministerial coordination, we can accelerate progress and fulfill our commitments to the women and girls of Mongolia.”

Ms. Matilda Dimovska, UNDP Resident Representative in Mongolia, emphasized UNDP’s commitment: “UNDP is proud to support Mongolia in this crucial review of the Beijing Declaration. The findings present a clear roadmap for future actions and partnerships that will drive progress toward gender equality and ensure that no one is left behind.”

Ms. Cai Cai, Chief of the Gender Equality and Social Inclusion Section, Social Development Division at UN ESCAP, highlighted the broader regional context: “The Asia-Pacific region’s progress on the Beijing Declaration demonstrates the power of regional collaboration. Mongolia’s proactive approach provides a compelling example of how national priorities can align with global objectives for gender equality.”

The inter-ministerial discussion reaffirmed the critical role of collaborative efforts in addressing gender-based violence and advancing gender equality in alignment with the Beijing Declaration’s vision.

About UNDP

UNDP is the leading United Nations organization fighting to end the injustice of poverty, inequality, and climate change. Working with our broad network of experts and partners in 170 countries, we help nations to build integrated, lasting solutions for people and planet.

The Federal Republic of Germany, through KfW Development Bank, and the government of Mongolia, through the Ministry of Finance, signed today a landmark agreement to convert €29 million of Mongolia’s debt into public health investments. With the new funds, Mongolia will enhance access to TB care, improve case detection and treatment, and expand HIV services for key and vulnerable populations. The country will also use the investment to transition to a more integrated and efficient health system.

The agreement was signed under the Global Fund’s Debt2Health initiative [ download in English | Español | Français ] , an innovative financing mechanism designed to encourage domestic financing for health by converting debt repayments into lifesaving investments in public health programs. Under individually negotiated “debt swap” agreements, a creditor nation foregoes repayment of a loan when the beneficiary nation agrees to invest all or part of the freed-up resources into a Global Fund-supported program.

Germany – the second largest European donor to the Global Fund and the fourth largest public donor overall – has been the leading supporter of the Global Fund’s Debt2Health mechanism, both in piloting the concept in 2007 and in supporting the scheme as a creditor in multiple subsequent transactions.

The G20 Joint Finance and Health Task Force actively supports such debt-for-health swap arrangements as part of a broader strategy to strengthen health financing in low- and middle-income countries, addressing debt burdens and improving pandemic preparedness and universal health coverage.

Javkhlan Bold, Minister of Finance of Mongolia, said: “This debt conversion agreement exemplifies Mongolia’s commitment to strengthening its health systems and achieving lasting health outcomes. With the support of Germany and the Global Fund, we can address critical health needs in our communities and enhance the resilience of our health sector.”

Helmut Kulitz, Ambassador of the Federal Republic of Germany to Mongolia, said: “This debt conversion is a new and innovative element in our cooperation with Mongolia. By redirecting resources towards Mongolia’s health priorities, we are enabling sustainable development and strengthening national resilience. This is a significant contribution to the country-wide improvement of Mongolia’s health system.”

Frank Bohnet, Director of KfW Development Bank, said: “The signing of this debt swap agreement marks a significant step in our long-standing and trustful financial cooperation with Mongolia. This project reflects our commitment to support Mongolia in enhancing its health care services and ensuring that affected people receive necessary treatment and support.”

Peter Sands, Executive Director of the Global Fund, said: “Debt2Health is a transformative mechanism that strengthens health financing and improves access to care. We commend Germany and Mongolia for their leadership in leveraging innovative financing to tackle infectious diseases like tuberculosis and HIV, while also enhancing pandemic preparedness. We hope this inspires other countries to explore similar approaches to advance global health.”

Since its inception in 2007, the Debt2Health mechanism has generated close to US$330 million in health funding. Debt swap agreements have involved a range of countries, including Australia, Germany and Spain on one side; and Cameroon, Côte d’Ivoire, Democratic Republic of Congo, Egypt, El Salvador, Ethiopia, Indonesia, Jordan, Mongolia, Pakistan and Sri Lanka on the other side.

The Global Fund is committed to continue developing and implementing practical, innovative finance mechanisms to increase the impact against the three diseases. These solutions complement government spending and amplify domestic health financing.

Gulf states want to be part of Mongolia's critical mineral exploration as they look to build supply chains for commodities essential to the energy transition, the country's prime minister has told The National.

Luvsannamsrai Oyun-Erdene visited the UAE, Saudi Arabia, and Bahrain last week to deepen economic ties with the region, particularly in mining, renewable energy and infrastructure.

The landlocked nation between China and Russia has been building diplomatic and economic relationships with countries other than Russia and China, its two biggest trade partners.

“The governments of the Gulf countries have expressed their interest to work with us on geological survey and mapping of critical minerals so that we can co-operate on exploration projects,” Mr Oyun-Erdene said.

“We have abundant resources of minerals. As for the Gulf countries, they have the know-how and the technology, especially in energy.”

Mongolia, a major coking coal and copper exporter primarily to China, aims to expand its exploration of new deposits of critical minerals, including nickel, lithium, and rare earths. The Oyu Tolgoi project, which is majority-owned by mining company Rio Tinto, is expected to become the world's fourth-largest copper mine by output by 2030.

Critical minerals such as copper, lithium, nickel and cobalt are crucial to support the growth of clean energy technology, including wind turbines, power grids and electric vehicles.

The UAE and Saudi Arabia have been exploring or investing in mining projects in Africa and Latin America, regions abundant in critical minerals. They are also prioritising the development of domestic processing capabilities to reduce reliance on foreign suppliers and add value to their economies.

Mr Oyun-Erdene said that the Gulf and Mongolia could also partner on energy transition projects and the construction of satellite cities in Mongolia.

On Saturday, Masdar hosted a Mongolian delegation led by Mr Oyun-Erdene to discuss collaboration on renewable energy, sustainable development, and expertise sharing to strengthen bilateral trade ties, the Abu Dhabi-based clean energy company said in a post on X. The official also met with Abu Dhabi’s sovereign wealth funds.

“It is very important for Mongolia to learn from the best practices and good experiences of these countries … and the Gulf countries have also expressed their interest to co-operate with us on satellite cities,” Mr Oyun-Erdene said.

Mongolia is actively developing satellite cities around its capital, Ulaanbaatar, which is home to about half of the country’s population. A major city is the planned Khushigt Valley project, which will be able to accommodate 150,000 people by 2040, as per local media reports.

Deal with India

President Sheikh Mohamed met Luvsannamsrain Oyun-Erdene, Prime Minister of Mongolia at Al Shati Palace. Abdulla Al Bedwawi / UAE Presidential Court

Last month, Reuters reported that India is in talks with Mongolia to set up a preliminary pact that will focus on mineral shipments between the two countries. The pact will focus on the transit of minerals such as coal and copper, it said.

“We are in talks with the government of India on exporting coking coal,” Mr Oyun-Erdene said but did not reveal further details.

A rise in global coking coal trade last year was largely driven by Mongolia, which more than doubled its exports during the year to about 54 million tonnes, according to the International Energy Agency.

China is the main buyer of Mongolian coal. A new railway between Talvan Tolgoi in southern Mongolia and Gashuunsukhait-Gantzmod on the Chinese border became operational in late 2022, significantly boosting Mongolia's capacity to export coal to the world’s second-largest economy and top steel manufacturing country.

Mongolia is “very active in terms of foreign policy, and we are co-operating with many countries around the world”, Mr Oyun-Erdene said.

Last year, France and Mongolia signed a $1.7 billion agreement to develop the Zuuvch-Ovoo uranium mine in south-west Mongolia. The project, led by the French nuclear company Orano, aims to secure uranium supplies for France, which is heavily reliant on nuclear power plants, while also contributing to Mongolia's economic growth.

Mr Oyun-Erdene said that both countries would soon finalise an investment agreement, paving the way for construction to begin.

Economic growth

Mongolia’s economy is expected to record strong growth next year, driven by continued expansion of coal and copper mining. Last month, the International Monetary Fund raised its forecast for Mongolia's economic growth next year to 7 per cent from 6 per cent, positioning the country as one of the world's fastest-growing economies.

Mr Oyun-Erdene is confident that Mongolia will be able to “maintain” its economic growth despite a slowdown in China, its largest trading partner.

“In the near future, we are working to open more export border ports to export to China, so I'm confident that this will facilitate more trade between our two countries and increase the size of our products going to China,” he said.

“So, no matter the economic situation in the world and China, we are confident that we can maintain the economic indicators.”

Copper jumped on Monday, rising by more than 2% overnight to a four-week high of $4.30 per pound ($9,470 per tonne) on the CME in Chicago, after China’s politburo signalled for the first time since 2008 it is abandoning its “prudent” monetary policy stance.

But optimism about the impact of a “moderately loose” policy and promises of “vigorously boosting consumption” faded in afternoon trade with March futures giving up some gains towards the end of regular trading.

The bellwether metal spiked at the end of September after similar positive noises about economic stimulus from Beijing, but remains down nearly 10% since then.

In a new note, London-based researcher Capital Economics warned that ”monetary easing in China is far less potent than it used to be [and] there is now limited appetite among households and large parts of the private sector to take on more debt, even at lower rates.”

Capital Economics says that with monetary policy effects likely to be underwhelming, Beijing’s fiscal policy would have to do the heavy lifting: “Our calculations suggest that the share of on-budget spending being devoted to investment is on course to hit its highest since 1987 this year.”

Rising fixed investment in China on this scale is an unalloyed good for metals markets and especially copper given its widespread use in industry, manufacturing and construction.

Even so, Capital Economics in a September research report argued that a correction in Chinese construction activity “will be as large as 50% decline from peak to trough” and that most of the correction still lies ahead:

“While the green transition and Al-related use will boost demand for industrial metals over the rest of this decade, we expect this to largely be offset by a substantial contraction in demand from China’s construction sector.

“Against this backdrop, and with supply proving resilient, we forecast copper and aluminum prices to fall in the coming years and be below consensus expectations during the 2020s.”

Capital Economics forecasts copper would lose touch with the $9,000 a tonne level next year, average only $8,000 by the end of 2026, and continue to drift lower through 2030.

Authorities of Ulaanbaatar held the “UB Opportunity” investment forum in Beijing, China to draw investments to major construction, energy, and transport projects to be implemented in the capital of Mongolia in the coming years.

Around 450 representatives from 204 entities engaged in the infrastructure, energy, and investment sectors took part in the forum, where the capital officials led by the Governor of the Capital City of Mongolia and Mayor of Ulaanbaatar Nyambaatar Khishgee presented the projects.

Mayor Nyambaatar thanked the representatives of business entities and organizations who attended the event and said, “The Government of Mongolia revised the Law on Public-Private Partnerships and the law came into force since the beginning of this year. In line with the law, Ulaanbaatar authority strives to stimulate public-private partnerships to expand the city's economy. We intend to cooperate with foreign and domestic enterprises in the energy and infrastructure sectors. Therefore, we would like to invite representatives of Chinese enterprises taking part in today's event to actively participate in the tenders to be announced within the framework of the key projects to be implemented in Ulaanbaatar City and strengthen cooperation between Mongolia and China.

The Mayor of Ulaanbaatar highlighted metro and highway construction projects. "In the coming years, one of the high-capacity multi-modal vehicles to be introduced into the capital's public transport is the metro. The metro route will be from Amgalan to Tolgoit with a length of 17.7 km, having 14 stations. The feasibility study for the project's management consulting services is 70 percent complete. The average speed of traffic is estimated to increase by 48 percent with the construction of the metro. In addition, public transport will be diversified to reduce road congestion in Ulaanbaatar City. For example, the preliminary feasibility study for a tram that can transport a large number of people in a short time will be completed by February next year. One vertical line will be built by the first quarter of next year. The route of the line will run 20.4 km from Zunjin Shopping Center to Sukhbaatar Square and will have 23 stations. The introduction of the tram will increase the average speed of traffic by 22 percent. In addition, the first expressway within the capital will be built. The tender for the four-lane Tuul Expressway, a 33-kilometer-long box girder structure, will be announced by December. Once the expressway is put into operation, the average speed of traffic will increase by 13.5 percent, and the throughput of vehicles passing through the Darkhan and Zamiin-Uud directions will improve."

The consulting service provider for a two-ring expressway to reduce traffic congestion within the city has been selected, and the feasibility study will be fully developed in 2025. The construction of the highway will increase the throughput of the main streets and intersections of the city center, and the average speed of traffic will increase by 27 percent. Meanwhile, the tender for the construction of a new bridge connecting the Tuul Expressway with the Nisekh road will be announced next year to begin the construction work, according to Mayor Nyambaatar.

At the end of the presentation, investors clarified the projects and programs of interest and exchanged ideas on cooperation, expressing their willingness to cooperate in the construction of trams, bridges, and highways, based on their experience, technology, and know-how.

In Mongolia, almost 90% of the country’s energy supply is consumed for heating purposes, with coal dominating as the primary energy source. While it keeps homes warm during the brutal winters, this reliance on coal has unleashed a public health and environmental crisis, contributing to severe greenhouse gas emissions and staggering air pollution levels.

The Cost of Breathing

Each year, 300 Mongolians die due to air pollution-related illnesses, including 240 children under 5. On the coldest winter days, Ulaanbaatar's PM2.5 levels soar to an alarming 687 micrograms per cubic meter, 27 times above the World Health Organization's recommended safe limit. The capital city is ranked 2nd globally on the list of most polluted cities, and the classification "Very Unhealthy" barely scratches the surface of the problem.

This pollution isn’t just choking the air. It’s eroding the health of Mongolia’s population. Respiratory diseases, cancer, mental health decline, and neurological damage are only part of the toll.

The economic translation? Indoor air pollution alone costs Mongolia ₮47 billion in annual health expenditures, while the broader environmental damage from pollution tallies up to ₮360 billion annually. Cumulatively, the economic loss equals a staggering ₮3.9 trillion or 7.6% of Mongolia’s GDP.

The Urban Factor

Nearly half the population lives in Ulaanbaatar, packed into 0.3% of Mongolia’s territory. Of these, 53% reside in ger districts, where raw coal burning generates 70%–80% of the city’s air pollution.

The government introduced charcoal briquettes in 2018 through Tavantolgoi Fuel LLC. While this initiative promised cleaner air, Mongolians are still breathing toxic smog six years later. The incremental improvements have been far from sufficient.

Hollow promises: Prime Minister L.Oyun-Erdene’s remark, “Nobody expected that we could reduce air pollution within a year by 50%. Our lungs testify to it,” feels painfully ironic. For many, toxic air continues to exacerbate stillbirths, pneumonia, asthma, and nerve damage, overshadowing any proclaimed progress.

A Wake-Up Call

Mongolia’s reliance on coal and its insufficient policy responses are a glaring reminder of the cost of short-term solutions. For the world, Ulaanbaatar serves as a cautionary tale of how unchecked urbanization and outdated energy policies can create a health and economic catastrophe. For Mongolians, it’s an urgent call to demand sustainable solutions that prioritize clean energy, health, and the environment. Ulaanbaatar’s toxic air serves as a grim reminder, “Every breath is a plea for change”.

The Prime Minister of Mongolia, L. Oyun-Erdene, has completed a week-long visit to the Middle East during which he discussed how to increase bilateral co-operation and promote economic development with the leaders of Saudi Arabia, the Kingdom of Bahrain and the United Arab Emirates.

Prime Minister of Mongolia L. Oyun-Erdene meets with Crown Prince and Prime Minister of the Kingdom of Bahrain Salman bin Hamad bin Isa Al Khalifa

During his visit, the Prime Minister met with:

Crown Prince and Prime Minister of the Kingdom of Saudi Arabia Mohammed bin Salman Al Saud, with whom he discussed expanding bilateral co-operation in the areas of renewable energy, minerals and environmental protection

Crown Prince and Prime Minister of the Kingdom of Bahrain Salman bin Hamad bin Isa Al Khalifa, with the two leaders discussing plans to work together to promote economic development and combat desertification

President of the United Arab Emirates Sheikh Mohamed bin Zayed Al Nahyan, who agreed with Prime Minister Oyun-Erdene on the importance of strengthening ties in areas ranging from the digital economy to tourism

The historic nature of the visit – which included the first ever official visit by a Prime Minister of Mongolia to Bahrain – and the seniority of those meeting with the Prime Minister, underscore Mongolia's increasing attractiveness to international partners as a destination for foreign direct investment. This follows Mongolia's economy growing by 7% in 2023.

During his time in the region, the Prime Minister also gave a keynote speech to the 16th Session of the Conference of the Parties to the UN Convention to Combat Desertification (UNCCD COP 16), taking place in Riyadh, during which he outlined the impact of desertification on Mongolia and the need for international collaboration to tackle this issue. Mongolia will host the UNCCD COP 17 summit in 2026.

The Prime Minister also attended the One Water Summit taking place in Riyadh, where in a meeting with President Macron of France both leaders expressed their interest in expanding co-operation in the mining sector in an environmentally-sustainable way, and commencing work on major joint projects in the near future.

Commenting on his visit, the Prime Minister of Mongolia, L. Oyun-Erdene, said:

"Strengthening Mongolia's economic and diplomatic links with key Third Neighbours in the Middle East is vital to secure the investment that will deliver a better standard of living for our people and tackle the environmental challenges that threaten our nomadic heritage.

"In working more closely with Saudi Arabia, Bahrain and the United Arab Emirates, we can unlock new opportunities in mining, renewable energy, tourism, agriculture and other sectors, partnering to deliver major projects to the benefit of our citizens.

"The success of my visit shows that countries in fast-growing parts of the world are increasingly looking on Mongolia as a partner for growth and economic development, and I look forward to our ties in the region going from strength-to-strength in the years ahead."

China’s trade restrictions on strategic minerals are starting to hit Western companies where it hurts.

Blaming Beijing’s curbs on antimony exports announced in August, German chemicals and consumer goods heavyweight Henkel told customers last month it had declared force majeure and suspended deliveries of four types of adhesives and lubricants widely used by automakers, according to a Nov. 8 letter to clients reviewed by Reuters.

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Henkel uses the silvery metal to make its Bonderite and Teroson-branded products, core parts of the company’s adhesive technologies division, which brought in 10.79 billion euros ($11.4 billion) in revenue last year.

“We have been notified by our suppliers that the importation of these raw materials has been delayed pending the Chinese government accepting license applications,” according to the letter, which was signed by two senior executives.

“As a result, Henkel is hereby declaring force majeure in connection with its deliveries of these products,” the German company also said, adding it was unable to predict the duration of the situation.

The letter from Henkel, which had not been reported previously, and conversations with more than two dozen traders, miners, processors, end-users, and industry experts in North America, Europe and China underscore the severe disruption caused by Beijing’s trade restrictions and highlight how Western players’ struggle to replace China-based supply chains.

Contacted by Reuters about the letter, Henkel said it was working to support its customers and find alternative supplies: “We are monitoring the global supply situation of antimony very closely and aim to restore solutions to fulfill our customers’ orders.”

The price of antimony, scarce in nature but essential for military equipment such as ammunition, infrared missiles, nuclear weapons, and night vision goggles, rallied nearly 230% this year to about $39,000 per metric ton in Rotterdam’s busy spot market, according to market intelligence provider Argus.

China is the world’s largest antimony producer and dominates the production of many strategic materials.

Last year, Beijing also limited exports of gallium and germanium – used for semiconductors, solar panels and weapons – as well as certain types of graphite – a key component in EV batteries.

Responding to a fresh US crackdown on China’s chip industry, Beijing this week further ratcheted up pressure, imposing an outright ban on exports of gallium, germanium and antimony to the United States, where Henkel makes Bonderite in Michigan.

Looking for alternatives

Beijing’s restrictions bring added urgency for Western players to cut their reliance on minerals from China.

Miner Perpetua Resources, for instance, is developing an antimony mine in Idaho with US government funding.

But new mines can take years to develop, leaving players like Henkel scrambling to find alternatives, which are often more costly.

“Please note that we are in close contact with our suppliers and using all commercially reasonable means to leverage our global supply chain to address this situation and support our customers,” Henkel also wrote in the letter.

Meanwhile, some Western miners and processors have started to build up capacity.

United States Antimony (USAC), the only North American processor of the metal, made plans to lift output at its Montana smelter, which was running at 50% of capacity after China announced curbs on antimony exports in August.

“Our decision to ramp up production was predominantly triggered by the more than tripling of worldwide Rotterdam antimony prices,” the company’s chairman, Gary Evans, told Reuters.

China’s restrictions “created significantly more demand for our finished products,” he added.

Mining at the Montana site was halted in 1983, when it was cheaper to source antimony from mines outside the United States, and environmental curbs now prevent extraction there, according to the company.

USAC, which does not rely on China, is in talks to receive the material from four other countries and one domestic supplier as early as December, Evans said, declining to name them for competitive reasons.

Orders at Ottawa-based Northern Graphite, which touts itself as North America’s only producer of natural flake graphite, jumped 50% in the aftermath of China’s graphite curbs announced in October 2023, CEO Hugues Jacquemin told Reuters.

“When the export controls came into effect in December last year, there was quite a surge in demand. We started ramping up capacity,” said Jacquemin, whose firm is developing projects in Namibia and Ontario to add to its mine in Lac des Iles, Quebec.

China accounts for over 70% of supply of both natural mined graphite and its synthetic variety.

Mark Jensen, CEO of ReElement Technologies, an arm of American Resources that specializes in recycling and refining rare earths, said China’s most recent export ban means the company has this week fielded at least 10 calls from US miners offering zinc ore, which can be a source of germanium during processing.

Those shipments had previously gone to China for processing given lower labour cost and different environmental standards, he said.

“We have been reaching out to US suppliers of these feedstock to sell these byproducts to us instead of sending it to China as we are now an alternative to China,” Jensen told Reuters.

Canadian miner Teck Resources, which produces germanium as a byproduct at its Red Dog zinc mine in Alaska and is the only supplier of the metal in North America, told Reuters it was studying whether to boost output of the critical material there now that China has blocked exports to the United States.

Disrupted markets

China’s export squeeze has triggered a surge in prices for many strategic minerals.

Gallium sold outside of China was 30% to 40% more expensive than in the People’s Republic in the first half of 2024 from a year before, according to Toronto-based Neo Performance Materials, which produces gallium by recycling manufacturing scrap, said in August.

In China, the restrictions have forced some weaker players out of the market, traders and analysts told Reuters.

Two Chinese germanium traders told Reuters they had given up on exports as they were unable to secure licenses either because overseas clients were unwilling to provide specific details on end-users or because they are from the United States.

Even before Beijing’s latest curbs singling out the United States, no Chinese germanium or gallium was shipped there this year through October, Chinese customs data show. Over the same period in 2023, the US ranked as the fourth- and fifth-largest export market for the minerals.

For end-users, China’s restrictions underscore the importance of supply diversification.

“When you de-risk, you need to de-risk with different levers,” said Maxime Picat, chief purchasing officer at automaker Stellantis. “If you are a one-solution company, knowing that your battery suppliers are all Chinese or all Korean, then you are at risk.”

($1 = 0.9465 euros)

(By Amy Lv, Divya Rajagopal, Ernest Scheyder, Alessandro Parodi, Giulio Piovaccari and Sabine Siebold; Editing by Tony Munroe, Veronica Brown and Lisa Jucca)