Strong points

More railway lines will be put into service in 2022

Oyu Tolgoi copper mine to reach full production in a few years

Mongolia plans to open copper smelting lines

Coking coal shipments increased by 161% compared to the year 2022

Mongolia is stepping up efforts to supply raw materials such as coking coal and copper to China in 2022 after lackluster trade in 2021, as it expands its mining sector and strengthens its transportation network, Batnairamdal Otgonshar said. , Deputy Minister of Mines and Mines of Mongolia. Ministry of Heavy Industry.

Mongolia is a major supplier of metallurgical coal and copper concentrates to China, with most trade being by truck. Mongolian truck suppliers in 2021 faced severe logistical challenges when transporting shipments from land ports to China due to pandemic-related restrictions at border crossings.

Mongolia plans to launch three railway lines this year, which will take the country’s mining sector to a whole new level, Otgonshar said in an interview with S&P Global Commodity Insights.

Rail shipments will be much more convenient, cost-effective and safer with less human contact amid COVID-19 border restrictions compared to trucks, once rail networks come online, Otgonshar said.

Suppliers will use the new rail lines to ship coking coal and copper concentrates.

The Tavantolgoi-Gashuunsukhait railway line will be put into operation in July, with 75% of the project completed so far, the minister said.

Meanwhile, construction of the Zuunbayan-Khangi/Mandal railway lines began in March, and the country aims to start operations later this year, Otgonshar said.

Copper concentrates

The transport of copper concentrate from Erdenet to Mongolia via Erenhot Railway Port in China was halted from December 2021 to January, due to China’s zero COVID control policy.

The Mongolian government is closely monitoring the logistics issue, Otgonshar said.

Despite transportation difficulties, Mongolia still managed to export 335,000 tons of copper concentrates to China in the first quarter of this year, already reaching 25.6 percent of its annual target, he said.

Mongolia will only focus on the Chinese market, as transportation costs for other markets are very high and the Chinese market is big enough to absorb Mongolia’s growing production, the minister added.

According to market sources, copper concentrate from the Oyu Tolgoi mine has been sold to Japanese and Korean smelters on a trial basis.

Mongolia exported 1.2 million tons of copper concentrates to China in 2021, accounting for 5.1 percent of China’s copper concentrate purchases, the minister said.

Mongolia is advancing the capabilities of its mining industry and the country has the potential to become the world’s fifth largest copper player by 2030, Otgonshar said.

This is expected to happen after a major ramp-up of the Oyu Tolgoi mine, as full production is expected to reach within the next few years, Otgonshar added.

Oyu Tolgoi in the South Gobi region of Mongolia is one of the largest known copper and gold deposits in the world and is expected to be the fourth largest copper mine in the world.

Mongolia has developed skills in mining over the past 30 years and now is the time to take it to the next level, moving to higher value-added processing, Otgonshar said.

The government plans to build a copper smelter at Erdenet mine by 2025-2026, while another copper smelter at Oyu Tolgoi mine is also under discussion, the minister said.

Overcoming past obstacles, the Mongolian government reached an agreement with Rio Tinto and Oyu Tolgoi in January to begin underground mining.

As the government and Rio Tinto have resolved binding constraints, they can focus on production, processing concentrates and producing more value-added products, Otgonshar said.

Oyu Tolgoi is expected to produce around 500,000 tonnes of copper per year on average from 2028 to 2036 from surface and underground operations, according to Rio Tinto. An average of approximately 350,000 tonnes of copper is expected to be produced from operations for another five years. The mine produced 163,000 tonnes in 2021.

Coking coal

China’s coking coal supply came under severe strain last year at a time of high demand as Mongolian supplies struggled due to border restrictions.

Meanwhile, shipments from Australia – China’s traditional coal supplier – remained largely absent in 2021 due to an unofficial ban, causing coking coal prices to fluctuate for most of the year.

Platts assessed that CFR China low-volume hard coking coal more than doubled to $615/tonne in October 2021 from the January 2021 level, according to data from S&P Global Commodity Insights.

Given rising coking coal prices, this shows greater demand for the product in China, Otgonshar said.

Mongolia is aiming for a big comeback in Chinese coking coal markets in 2022.

Demand for Mongolian coking coal from China was sufficient and there was growing interest from many buyers to buy more coking coal and thermal coal, even as border challenge issues remained, Otgonshar said.

Mongolia is ready to export as much as it can to meet demand in China, and I hope border issues will improve over time, the minister added.

The transport of Mongolian coking coal to China has slowed significantly, from over 2,000 trucks per day in 2020 to 200-300 trucks per day currently.

Mongolia plans to export 36.7 million tonnes of coking coal to China this year, Otgonshar said.

If realized, Mongolian shipments in 2022 would show a 161% jump from the 2021 level. The country exported 14.04 million tonnes of coking coal to China in 2021, accounting for a quarter of imports. China’s total.