Positive economic indicators as impact of coal

А. Khaliun

In 2023, Mongolia traded with 163 countries, and the total trade turnover reached $24.4 billion. Of this, exports totaled $15.1 billion, and imports  $9.2 billion, resulting in a surplus of $5.9 billion. Compared to the same period last year, exports increased by $2.6 billion (21.9%) and imports by $54.1 billion (6.3%), the National Statistics Office said.

What led to a $2.6 billion increase in exports over the previous year? Coal, of course. Revenue from coal exports increased by 37% and reached $2.4 billion. As for the physical volume, it increased by 38 million tons compared to the previous year to reach 70 million tons. According to the budget law for 2023, it was planned to export 36.5 million tons of coal, but this plan was exceeded by 33.5 million tons.

But if we look at exports of other mineral products:

Fluorspar and its concentrate
Increased by $162 million or 2.5 times
Increased by 700,000 tons

Oil
Increased by $123 million
Increased by 2.1 million barrels

Export of gold
Declined by $389 million or 35% from the previous year  

Export of copper concentrate
Rose by 17% from the previous year

Between January and November 2023, foreign enterprises operating in Mongolia made direct investments of $1.29 billion. The Bank of Mongolia noted that most of the direct investment came from the Oyu Tolgoi project.

On January 17, the National Statistics Office (NSO) presented preliminary indicators of Mongolia’s socio-economic performance for 2023. According to the  report, in 2023, mining products accounted for 92% of total exports, while agricultural products accounted for 6%. 91% of our country’s total exports went to China and 4% to Switzerland. Coal accounted for 62.7% of goods exported to China, copper concentrate - 19%. 99.5 % of goods exported to Switzerland was gold. 

Thanks to coal, there were positive changes in Mongolia’s balance of payments in 2023. The difference between income and expenditures in  the balance of payments amounted to +$1.4 billion. Economists note that the current account surplus became positive for the first time in more than 10 years.

“On the other hand, the increase in coal exports has led to the optimization of the monetary policy pursued by the Mongolbank in recent years and the setting of the exchange rate. At the end of 2023, foreign exchange reserves increased by $1.4 billion to reach $4.9 billion. The accumulation of foreign exchange reserves had a positive impact on the MNT exchange rate against foreign currencies by one percent in 2023,” explained D. Gan-Ochir, Chief Economist at Mongolbank.

He said he expects Mongolia’s economic growth to reach 6.2% in 2024, an expectation that can be realized if export revenues are high, especially if coal exports do not fall below 60 million tons.

Coal accounts for 67% of export earnings

Mongolbank analyzes the situation in the macroeconomy, inflation and financial sector, and conducts research on industrialization policy and productivity improvement. 
In January 2024, the Research and Statistics Department of the Mongolbank released an overview of research work completed in 2023.

This report contains an article by researcher B. Erkhembayar on “Estimating the Price of Mongolian Export Coal”. The article provides a brief review of the coal market, the main driver of our country’s economic growth and our expectations for the coming years.

The characteristics and quality of coal from our mines with proven reserves, coal price forecasts, macroeconomic calculations, etc. help in negotiations with trading organizations.

Thus, researcher B. Erkhembayar noted that it is important to study the characteristics of Mongolian coal, how its price relates to the price of what type of coal on the world market, and how to make proper forecasts for the future.

The caloric value of our coal is 6430-8100 kcal/kg

There are currently more than 270 registered deposits in Mongolia, of which less than half are coking coal deposits. About 70 of them have been studied in detail from a geographical point of view. These coal deposits are located in the western, southern and central regions of our country.

The caloric value of our coal ranges from 6,430 to 8,100 kcal/kg. Of these, coal from the Kharkhiraa basin has the lowest caloric value, coal from fields such as Saikhan Ovoo and Khushut has the middle value, and coal from Khotgor and Tavantolgoi has the highest value. In general, coal quality improves from east to west of the country. Hard coal and lignite are used for domestic power generation, while coking coal is mainly exported.

According to the 2021 report of the Mineral Resources and Petroleum Authority of Mongolia, 44 mines owned by 40 coal companies are active in our country. Of these, 29 mines produce hard coal, and 15 mines produce lignite. Among these mines, the Tavantolgoi mine in Umnugobi aimag and the mines of the Nariinsukhait group of deposits account for most of the exports. Baganuur and Shive-Ovoo mines do not export coal but use all of it  for domestic consumption.

Among the companies that export coal, companies such as Energy Resources LLC, SouthGobi Sands LLC and MoEnCo LLC export concentrated coal.

In 2022, our country produced 37.2 million tons of coal and exported 31.7 million tons. 94% of exported coal was sold to China, 3.8% to Singapore and 2.1% to South Korea. According to the statistics of the last five years, domestic coal consumption is about 10 million tons per year, and about 70% of it is used in thermal power plants. In addition, in the years (2017-2019 and 2022) when coal exports exceeded 30 million tons, more than 97% of exports went to China alone, and this is still the case.

Since 2015, coal exports from our country have steadily increased year after year, but the outbreak of Covid-19 in 2020-2021 created problems for the transportation sector. As a result, the amount of coal exported decreased year after year. It was highlighted that Mongolia exported 36.5 million tons of coal in 2019, reaching a historic high. From then to 2021, the amount of coal exported decreased by about 60%, but in 2022, transportation of coal resumed, and the amount of coal exported doubled from the previous year to 31.7 million tons.

Our coking coal accounted for 45.2% of China’s coking coal imports in 2019, but this fell to 26.6% during the pandemic years before recovering to over 40% in 2022.

Looking at coal exports by border crossings, the Gashuunsukhait and Shiveekhuren border points in Umnugobi aimag account for more than 90% of all coal exports. These border points are closest to the Tavantolgoi and Nariinsukhait deposits, so they have become major export gateways.