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New COVID-19 containment measures hurt Mongolian coal supply to China: sources

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Platts Market Data Metals

New COVID-19 containment measures hurt Mongolian coal supply to China: sources


Number of vehicles carrying coals to China seen falling

Slight rise in unwashed Mongolian coal prices

Outlook on Mongolian prices mixed

Singapore — Mongolian coal supply to China has come under greater scrutiny by Chinese market participants amid the latest coronavirus containment measures implemented March 16 at the Ganqimaodu border -- the gateway for Mongolian coking coal to China, market sources told S&P Global Platts late March 18.

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The latest measures were implemented following a confirmed COVID-19 case in one of Mongolia's copper mines, which also uses the same gateway to deliver copper into China, market sources said. The Ganqimaodu border plays a key role in China's overall coking coal import volume.

The new border checks include a COVID-19 test for the drivers for each time they enter China and a reduction in the number of vehicles allowed to 50 per day from 200 earlier.

The latest containment measures would translate to lesser coal volumes being transported into Mongolia daily, with traders already raising prices by Yuan 20-30/mt for unwashed coals.

Industry sources reported less than 50 vehicles crossing into China March 18 and they expect the number to fall drastically in the coming days.

"The situation is evolving every day and they might even close the borders like they did during February-March 2020 period," a Chinese trader involved in Mongolian coking coal told Platts.

Despite the slight increase in prices, market sources said that sentiments have not turned bullish yet, as demand for domestic coking coal and coke have taken a backseat in March.

"There might be limited upside for Mongolian coals, as the price competitiveness of imported coals is diminishing amid the weakness seen in domestic coking coal prices," a China-based trader said.

Another buy-side source said the magnitude of uptick in Mongolian coal prices was expected to be low, as demand for raw materials appear sluggish in the near term due to hefty environmental regulations looming in the northern parts of China.

Mongolia coal supply to China shared a big chunk of China's overall coking coal imports in 2020 amid the country's import restrictions on Australian cargoes. This implies the supply and prices of Mongolian coals are also being closely monitored, alongside domestic coking coal prices.

Industry sources said that Mongolian coals typically follow the price direction of domestic market, but any events affecting the inflow of coals could have repercussion as well.