Coal haul from Mongolia into key China land port nose-dives on new COVID-19 cases

Coal trucks hauled from Mongolia through Inner Mongolia's Ganqimaodu border port have nose-dived after fresh COVID-19 cases were reported in the region, although this is not expected to impact metallurgical coal supplies as China's domestic demand remains weak, industry sources said Dec. 9.

Ganqimaodu is a land border port and is the largest channel for importing coal from Mongolia.

The number of daily coal trucks from Mongolia to Ganqimaodu fell below 100 on Dec. 7, down from 300 per day in the week ended Dec. 3, consultancy Founder CIFCO Futures said Dec. 9.

Overall coal truck volume is back to lower levels after about 500 trucks hauled coal per day in the week ended Nov. 26, according to CIFCO's data.

Meanwhile, another border port in Inner Mongolia, Ceke, has remained shut in December after new cases were reported, with the hub having been shut back in October, according to local media reports.

While coal imports from Mongolia have fallen sharply because of the pandemic, China's met coal supply has remained stable and is also seen rising, so no supply side pressure is evident now, according to Founder CIFCO.

The run rate of China's coking sector is low, leading to weak demand support for met coal, with supply tightness absent from the markets for now, the consultancy said.

A few months back, China was facing a tight met coal supply situation amid stricter environmental controls imposed on mines and strict power rationing for industrial usage. Later, in October, heavy rains forced some mines in Shanxi to close temporarily, cutting supply and bumping up coking coal prices.

But the sector has emerged from the supply scare since power crisis has eased.

However, China's overall domestic met coal stocks of 19.98 million mt as of Dec. 7 remain lower, compared with the same period in 2020, Founder CIFCO said.

Meanwhile, industry participants said they do not rule out the possibility of authorities suspending operations at the Ganqimaodu land port.

On the other hand, recommencing operations at Ceke port must be approved by the local government, with a restart likely by the end of February, sources said.

As coal truck volumes from Mongolia have dipped, met coal prices have rebounded, although slightly, leading the downstream sector to replenish stocks, SDIC Essence Futures said.

Dalian Commodity Exchange's most-active coking coal futures contract price closed at Yuan 2,044/mt ($322/mt) on Dec. 9, higher than Yuan 1,933/mt a week ago, DCE data showed.

SDIC said direction of domestic coking coal prices hinges on the extent of demand resumption from the downstream sector and coal haulage from Mongolia.

Mongolia has emerged as a key coal supplier to China amid the absence of met coal from its traditional supplier Australian, which faces an unofficial ban that was first placed in late 2020.