Mongolia stops coking coal exports to China in pricing scrap

Mysteel reports Ya Batsuuri, CEO of Mongolian coking coal miner Tavan Tolgoi, said last week the state-owned company had suspended all coal exports to China starting on January 11.

The bulk of China's coking coal imports from Mongolia are from Tavan Tolgoi – mined since the 60s – in the South Gobi desert which is the world’s largest high-quality coking coal used in steelmaking.

China imported 16.8 million tonnes of metallurgical coal from Mongolia in the first 11 months of 2012, comprising over one third of total imports.

The reason behind the suspension is that Mongolia wants to raise coking coal export prices for China.

From levels above $300 a tonne in the first half of 2011 coking coal prices have steadily declined to the $160 a tonne level it is trading at today.

Mongolia's dealings with China over resources have been testy of late.

Last year Mongolia blocked the sale of coal miner Southgobi Resources to China's state-owned Chalco and wrangling over an electricity supply deal with China also held up the start of operations at Oyu Tolgoi, a massive copper-gold project near the Chinese border.

Both Southgobi and Oyu Tolgoi are majority-owned by Canada's Turquoise Hill which is controlled by Rio Tinto.

Mongolia last year put on ice plans to publicly list Tavan Tolgoi which boasts a 6 billion tonne resource and could have raised $3 billion.

The country also stopped all talks with international miners on developing the western Tsankhi block of Tavan Tolgoi which on its own holds 1.2 billion tonnes.

Mongolia’s National Security Council rejected a development deal struck with US giant Peabody Energy, Shenhua and a Russian-Mongolian consortium mid-September 2011, just two months after they were announced as winners.

Mongolia is walking a diplomatic tightrope with Tavan Tolgoi. Aside from from closer ties with China it wants to use the project to strengthen its longtime political and cultural links with Russia and at the same time make room for the US as a geopolitical balancer in Asia.