AN ECONOMY DEPENDENT ON COAL

A.Khaliun

Coal is the main source of our country’s export earnings. At the end of September, coal exports amounted to 47 million tons, and, by the end of the year, this figure may reach 52 million tons.” said Minister of Economy and Development Ch. Khurelbaatar on the platform of the Mining Week conference in October.

However, in the second decade of November 2023, the physical volume of coal exports reached 60 million tons, which was the dream of the government. For the first time in its history, Mongolia exported 60 million tons of coal. In other words, the volume planned in the 2023 budget was exceeded by 10 million tons during the 40 days before the end of the year.

If plans for state budget revenues and actual coal sales, which account for 93% of export earnings, remain at this level in 2024, we could see a positive picture of the country’s economic growth next year. The main raw material that will support economic growth next year is coal.

On December 23, 2022, the Law on Mining Products Exchange was approved, and the first pilot coal trading on the exchange began in February this year. When the law came into force on July 1, coal trading largely normalized. In the past, coal was sold at a low price, and the Chinese side handled all transportation and made most of the profit. With the start of trading on the commodity exchange, the situation has improved, and our revenues have increased significantly. Now Mongolian companies transport coal to the southern border, and the profit from transportation stays in the country, which has a positive effect on the economy.

Since February 9, 2023, “Erdenes Tavantolgoi“ Joint Stock Company has sold 8 million tons of coal worth $1,001.6 million through the Mongolian Stock Exchange in 59 trades. J. Ganbaatar, Minister of Mining and Heavy Industry, announced that the volume of coal traded on the exchange will be gradually increased to 30%. Preparations are underway to trade copper on the commodity exchange next year, which will increase export revenues and have a positive impact on the economy.

Mongolia has abundant coal reserves. Coal is an organic rock formed by physical and chemical processes from the remains of plants and animals buried beneath the earth’s crust for millions of years.

Coal accounts for 40% of the world’s energy production and 70% of steel mills are powered by coal. In 1882, the world’s first coal-fired power station was commissioned in London, England. Coal is considered to have played a historic role in the Industrial Revolution.. In 2015, 196 countries signed the Paris Agreement and began investing in new energy sources and deploying clean renewable energy technologies to reduce greenhouse gas emissions from coal. Although the importance of coal in the energy sector is declining, it is not yet time to abandon it completely, says Michelle Manook, CEO of the World Coal Association.

We reasoned that the golden age of benefiting from coal, this common mineral, would be over for our country in the next ten years. But Ms. Michelle Manook’s presentation brought us some relief.

“The events of the last two years have proven that countries cannot phase out coal so quickly. The efficiency of the renewable energy sector in other countries is still low. The shortage of gas storage in Europe is due to the dependence of natural gas supplies on one country.

Under such circumstances, it is obvious that renewable energy cannot be a reliable source of energy. Since energy security is a priority in the world, there is no other choice in the near future but to continue refining and using coal in an environmentally friendly way,” she said.

It is estimated that there are 20 trillion tons of coal reserves in the world, but the confirmed reserves are 1 trillion tons. For Mongolia, estimated biological coal reserves are 173.3 billion tons and proven reserves are 34.6 billion tons.

In addition to trading coal on the Mineral Exchange, washing and beneficiation will increase its market value and competitiveness. Therefore, Erdenes Tavantolgoi Joint Stock Company has started construction of a coal processing plant based on the Tavantolgoi deposit. The plant is scheduled to be commissioned in July 2024. Along with improving the quality of products, the government is focusing on increasing the capacity of border crossings. 6-7 of the 17 border crossings with China are the main gateways for exporting mineral products.
In addition, the Government of Mongolia has begun to cooperate with the Chinese side on the urgent construction and operation of a railroad to the border points of Khangi- Mandal and Gashuunsukhait for the transportation of minerals.

In 2024, the budget plans to increase salaries, pensions, benefits, and provide allowances to every child. The source of funding for this policy, which aims to protect the population’s income and support household livelihoods, is revenue from the export of natural resources, including coal.