China May Seek More Coal From Mongolia As Russia’s Share Dwindles

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China’s record coal imports last year were driven by large increases in imports from Australia and Mongolia, while Russian imports actually fell.

Bloomberg News

Published on January 20, 2025 • 3 minutes read

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(Bloomberg) — China’s record coal purchases last year were driven by big increases in supplies from Australia and Mongolia, while Russian cargoes actually fell.

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Now that Chinese demand is flattening, Mongolia could be best placed to hold or even grow its market share in its southern neighbor at Russia’s expense.

While total imports surged 14% to 543 million tons in 2024, Australian shipments recorded a whopping gain of nearly 60%, according to customs data on Monday. Exports from Mongolia were 19% higher. Indonesia remained China’s biggest supplier, although the increase last year was relatively modest.

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The bonanza enjoyed by Australian miners underscores how diplomatic relations have improved after China banned their exports at the start of the decade. Of all the relations between Beijing and Moscow, Russia is losing out because its coal is more expensive, and new US sanctions could make exports even more unattractive to Chinese buyers this year.

Mongolia, on the other hand, benefits from its proximity to China and wants to strengthen that with better rail connections. Unlike Australia, which ships coal far and wide and can respond to price increases elsewhere in Asia, most of Mongolia’s customers are located in one country.

The rescheduling of trade flows comes as China’s import needs are expected to moderate this year due to a domestic coal glut, likely to pressure prices and higher profits for exporters. But the country still lacks the high-grade fuel used by the steel industry, favoring Australian and Mongolian suppliers.

Mongolia grabbed 60% of its southern neighbor’s imported coal for steelmaking last year. Previous opposition on national security grounds to aligning the country’s data with China has been overcome, and the government is now pushing for improved cross-border rail links that could double coal shipments to China, according to a parliamentary resolution last month.

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China’s steel industry is in bad shape and production is expected to decline in the coming years, so the outlook is far from over. But Mongolia is looking to improve its position as a thermal coal supplier, too.

Its parliament also approved a 16-year concession from the biggest miner, Erdenes Tavan Tolgoi JSC, to four Chinese companies, including the country’s largest company, China Energy Investment Corp. Those deals are expected to bring in 20 million tons of coal a year if they reach their peak in five years.

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BHP Group said its second-quarter iron ore production rose 1% from a year earlier, as long-term demand for the steelmaking material was weighed down by a negative outlook for China’s economy.

Chinese refiners increased purchases of North Sea and Mediterranean crude, as Asian processors increased their demand for replacement barrels following recent US sanctions targeting Russian oil.

The London Metal Exchange has approved Hong Kong as a warehouse for the first time as the bourse seeks a stronger link with mainland China – the world’s largest metal market.

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China’s inflationary pressures have been heaviest in its industrial sector for the second year in a row, a sign of a deep imbalance between supply and demand that is driving down prices across the economy and fueling trade tensions.

This week’s diary

(Always in Beijing unless otherwise noted.)

Tuesday, January 21: