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Events
China May Seek More Coal From Mongolia as Russia’s Share Shrinks www.bloomberg.com
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 neighbor at Russia’s expense.
While total imports surged 14% to 543 million tons in 2024, Australian shipments recorded a whopping gain of nearly 60%, according to customs data on Monday. Exports from Mongolia were 19% 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 favors Australian and Mongolian suppliers.
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Mongolia accounted for 60% of its southern neighbor’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 Corp. Those deals are expected to deliver an annual 20 million tons of coal when they peak in five year’s time.
On the Wire
BHP Group said iron ore output in its second quarter edged up 1% from the year before, as long-term demand for the steelmaking material is pressured by a bleaker outlook for China’s economy.
Chinese refiners boosted purchases of crude oil from the North Sea and the Mediterranean, as Asian processors widen their search for replacement barrels following the recent US sanctions targeting Russian oil.
The London Metal Exchange has approved Hong Kong as a warehouse location for the first time as the bourse seeks a stronger link to mainland China — the world’s biggest metals market.
China’s deflationary pressures were most severe in its industrial sector for a second straight year, in a sign of a deep imbalance between supply and demand that’s driving prices lower across the economy and inflaming trade tensions.
This Week’s Diary
(All times Beijing unless noted.)
Tuesday, Jan. 21:
CNPC’s report on oil and gas markets in 2024, briefing in Beijing at 14:00
Wednesday, Jan. 22:
CCTD’s weekly online briefing on Chinese coal, 15:00
Cnooc’s 2025 strategy briefing in HK, 17:00
CSIA’s weekly polysilicon price assessment
Thursday, Jan. 23:
CSIA’s weekly solar wafer price assessment
Friday, Jan. 24:
China’s weekly iron ore port stockpiles
Shanghai exchange weekly commodities inventory, ~15:30
Published Date:2025-01-21
