Mongolia Coking Coal Exports Surged to China, Australian Coal Less Attractive

SHANGHAI, Nov. 17 (SMM) -- According to data from China Customs, domestic aggregate coking coal imports were 30.38 million mt in the first three quarters, down 9.4% YoY. Imports made from Australia were down from 39.21% the same period last year, to 20.59%; imports from Mongolia rose from 29.81%, to 44.96%, making Mongolia the largest coking coal supplier to China.

Coking coal imports made from Australia accounted for as high as 67% in China's coking coal import market in 2009. Australia used to be the largest coking coal supplier to China, but domestic enterprises prefer to source coking coal oversea more widely. As Mongolia became one of the largest coking coal producers, imports from Australia are becoming less attractive.

Australian coking coal exports fell this year due directly to the severe flood which caused output to fall sharply. But Australian coking coal exports to China in the first three quarters last year were still less than Mongolia's the same period this year. Australia is losing its market shares most significantly in North China. According to Steelease sources, Hebei Province-one of the largest iron and steel producers in China-used to import coking coal from Australia, while coking coal imports coming from Mongolia to Beijing, Tianjin and Tangshan regions outstripped 2 million mt in the first three quarters this year, much higher than the imports of 1.05 million mt from Australia, making it the largest coking coal supplier to China.

The average price of coking coal imports made from Australia was USD 221.4/mt in the first three quarters this year (RMB 1,405.4/mt), while the average price from Mongolia was only USD 75.5/mt (RMB 479/mt). Although imports from Mongolia are raw coal, prices are much lower than Australia's after converting into clean coal prices, allowing Mongolia's coking coal to be popular. That is the reason why many countries had been competing for the exploration right of Tavan Tolgoi mine-the largest open pit coal mine in the world.

On the other hand, Mongolia has an advantage in coking coal transportation. The Tavan Tolgoi mine is located 180 km away from Chinese border. Enterprises investing in Mongolia have built railway transportation network between Mongolia and China with the exploration of Mongolia's coal market. The Baltic Dry Index fell by over 25% compared to last year's, but falling sea freight charges failed to help increase Australia's coking coal exports, and allowed Canada to be more competitive in the coking coal exports struggle for China market.

In addition, Australian government pushing the mining field also caused the popularity of Australia's coal to weaken. Australian Parliament announced November 8th that it had passed the carbon tax bill by the Gillard Government, elevating the controversial bill to a law. According to the law, about 500 companies will pay AUD 23/mt (USD 24/mt) to discharge a ton of carbon starting July 2012, before the carbon discharge trade mechanism is employed. As resource costs at resource companies in Australia rise, Australia's competitiveness in global coking coal market will continue to weaken.