Rumors of "Mongolia's coal resource tax raised to 20%" spark market concerns; industry insiders say "policy adjustment is less likely"

Yesterday, the domestic coking coal futures market experienced sharp fluctuations due to rumors that "Mongolia plans to raise the mineral resource tax on coal from the current level to 20%." The most-traded contract saw a single-day increase of over 7% at one point, sparking market concerns about rising costs for imported coking coal. Az, Deputy General Manager of Golomt Capital LLC (Golomt Securities), a member of the Mongolian Mineral Exchange and a Mongolian securities company, told a reporter from Cailian Press: "The government submitted a new draft tax law to the State Great Khural yesterday. I heard that the draft proposes to increase the special tax on the use of mineral resources (AMNAT) to 20%, but this is just a rumor." Industry insiders both domestically and overseas believe that the likelihood of a policy adjustment is relatively small.

Recently, the market was suddenly abuzz with news that "Mongolia plans to raise the coal resource tax to 20%," leading to a significant gap-up opening in domestic coking coal futures prices. On June 4, the most-traded coking coal futures contract reached a high of 1,285 yuan/mt, up 7.19% from the previous trading day's closing price.

A reporter from Cailian Press learned from relevant sources in Mongolia and domestic Ganjimod coal importers that there is currently no official information supporting this news. Senior executives from Golomt Securities disclosed to a reporter from Cailian Press that they had consulted with the Ministry of Finance and the General Taxation Bureau, confirming that "apart from this draft tax law, no other bills related to AMNAT have been submitted."

Az told a reporter from Cailian Press: "The Tax Policy Department of the Ministry of Finance (of Mongolia) participated in drafting this tax bill. We specifically inquired with the Ministry of Finance, the General Taxation Bureau, as well as places like 'Erdenes Tavantolgoi,' Energy Resources, and the Mongolian Stock Exchange. They all said, 'There are no changes to AMNAT.' The Ministry of Finance and the General Taxation Bureau also clearly stated that the new draft does not involve any changes to AMNAT. Companies like 'Erdenes Tavantolgoi' and Energy Resources have not received any information about tax rate adjustments either. Because such tax rate changes must go through legal procedures and be approved by the State Great Khural."

Xu Xiao, head of the Mongolian Research Society based in Ulaanbaatar, also discovered through reviewing recent legislative documents that "no relevant adjustments have been mentioned by official channels such as the Ministry of Finance and the Mineral Resources Authority."

Mongolian coal exports surged from 16 million mt in 2021 to 89 million mt in 2024. However, due to the sluggish coal market this year, Mongolian coal exports have recently decreased. Domestic coal importers believe that the likelihood of a short-term adjustment to Mongolia's resource tax is relatively small.

Manager Zhang, a staff member of Tangshan Jiyunda Cargo Handling Co., Ltd. stationed in Ganjimod, told a reporter from Cailian Press that the current price of Mongolian No. 5 coal has fallen back to pre-2018 levels, and sales are currently difficult. If Mongolian coal prices rise due to an increase in the resource tax, it will be difficult for the downstream market to absorb the cost.

Manager Tan, the head of Ganjimaodu Pinchuang Trading, believes that from the perspective of market supply and demand, Mongolian coal does not currently meet the conditions for tax increases. Even if taxes are increased in the future, due to the lengthy approval process, they will not be implemented in the short term.

This statement is similar to the views expressed by individuals within Mongolia. Az told a reporter from Caixin that even if there are relevant proposals in the future, the process can only be initiated and submitted to the State Great Hural after the appointment of a new prime minister, and the deliberation by the State Great Hural will also take at least 1-2 months.