Page 7 - AsiaElec Week 35 2021
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China opens border to Mongolian coal trucks
MONGOLA CHINA has reopened its border to Mongolian Mongolia.
coal trucks, but shipments remain limited and The announcement related to the new termi-
are so far insufficient to alleviate a persistent nal came shortly after the the Mongolian-Chi-
supply crunch, particularly of steel-making coal, nese Zamiin-Uud-Erenhot crossing restriction
Bloomberg reported on September 1. was lifted on August 30, increasing commodity
The Gashuunsukhait-Ganqimaodu crossing transports.
was reopened on August 31, according to Feng- Coking coal futures in Dalian rose to an all-
kuang Coal Logistics, after a halt of over a week time high last week and have gained over 50%
to prevent the spread of COVID-19 from Mon- this year. Domestic supply in China has been
golia. However, traffic has been slowed by virus constrained by safety and environmental restric-
tests on truck drivers. tions, exacerbated by China’s ban on Australian
Mongolia’s finance minister, Javkhlan Bold, coal and the suspension of overland imports
told the Montsame media outlet that with the from Mongolia, Morgan Stanley said in a note
reopening of the border to coal trucks, Mon- to clients.
golia will be able to hit projections thanks to a Prices fell 0.4% to 2,451 yuan ($379) a tonne
new customs terminal. He was quoted as saying: on September 1 for a fifth daily decline since the
“Mongolia exports about 70% of its coal through record was hit. Thermal coal futures in Zheng-
the Gashuunsukhait border checkpoint... At the zhou dropped for the first time this week and
border checkpoint, the construction of a customs were also close to all-time highs.
zone has recently been completed, where driv- Environmental officials continue to target
ers will be able to load and unload coal without Chinese coal operations.
leaving their trucks. By putting it into operation, At the same time, environmental scrutiny
we plan to export most of the 9.6mn tonnes of could reduce demand for the mineral as China
coal that have accumulated at Tsagaan Khad. It halts new industrial projects in regions that fail
is considered that this will create the opportunity to comply with energy-saving and emissions tar-
to export the same amount of coal as previous gets, as part of President Xi Jinping’s drive for a
years in the coming year.” carbon-neutral economy by 2060. The mounting
Fitch Ratings saw the new terminal as set to climate pressure has weighed on metals produc-
significantly boost coal export to China from tion including in steel and aluminum.
Mongolian coal to benefit from new terminal
CHINA A new terminal on Mongolia’s border with without leaving the restricted area. This arrange-
China introduced in tandem with the reopening ment will reduce human contact and the possi-
of the frontier should ultimately help the Mon- bility of COVID-19 transmission.
golian mining sector to recover, according to a “For the remainder of 2021, we assume the
Fitch Ratings assessment released on Septem- new terminal will have annualised traffic of
ber 1. However, the ratings agency added that 9mn tonnes, with the terminal shared among
even with the new terminal, border disruptions three coal producers. From 2022 we assume
would continue to incapacitate one of Mongolia’s annualised traffic of 18mn tonnes. The new ter-
biggest mining companies, Mongolian Mining minal will boost MMC’s export volume signifi-
Corporation (MMC). cantly. The company now expects daily average
“We estimate sufficient liquidity to serve its throughput to be around 175-200 trucks per
coupon obligations in October 2021 irrespec- day,” Fitch added.
tive of the operational status. However, the com- The rating agency anticipated a recovery in
pany’s credit metrics may weaken to the point MMC’s financials in 4Q21. Operations should
where we may take rating action if border dis- return to normal in 2022, and the rating head-
ruptions continue to worsen and completion of room would widen if the new terminal could
the new terminal falls behind schedule,” Fitch begin operations as planned this month, along
stated. with an improvement in the COVID situation,
The terminal eliminates the need for Mon- Fitch said. However, a worsening COVID situ-
golian truck drivers to cross the border; trucks ation and operational lags at the new terminal
will unload coal at a point still within Mongolia might cause MMC’s credit profile to deteriorate,
and Chinese truck drivers will pick up shipments and may lead to a rating action, it observed.
Week 35 01•September•2021 www. NEWSBASE .com P7
