China suspends North Korean coal imports, potentially spurring Mongolian coal demand
Chinese officials have reported that China will not be importing coal from North Korea for the remainder of 2017, possibly spurring the demand of Mongolian coal, analysts say.
The reason for the coal import ban is the most recent missile test conducted by North Korea last week. China’s Ministry of Commerce released a public statement that the decision to halt imports was in accordance with a UN Security Council resolution passed last November.
"Imports of coal produced in North Korea, including shipments already declared to the customs but yet to be released, will be suspended for the remainder of this year," said the statement on the ministry's website.
According to Baci: International Trade Database, North Korea exported 1.03 billion USD worth of coal to China in 2014, and in 2016, exported 22.4 million tons of anthracitic coal that can be used as an alternative to coking coal in the steelmaking process, a nearly 15 percent rise from 2015. Mongolia accounted for 23.6 million tons of Chinese coal imports in 2016. As coal exporting countries scramble to fill the void left by North Korea, analysts have noted that Mongolia is a frontrunner along with Australia.
However, due to debt obligations to Aluminum Corporation of China (Chalco), in December, China paid 63 USD a ton for Mongolian coking coal when the seaborne price was averaging above 230 USD a ton.
Erdenes Tavan Tolgoi officials noted that the debt to Chalco could be paid within the first quarter of 2017. Economists note that this could be a critical point in which Mongolia can contribute to filling the void created by the ban and increase its coal prices to market price levels.