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Mongolia to Develop Coal Rail Link to China

Mongolia to Develop Coal Rail Link to China

Coal Mine Coal Mine(Pixabay)
ByMei Manuel November 09, 2018
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On Thursday, a Mongolian official reveals to Reuters that the government is currently working on a plan that would open a railway from its Tavan Tolgoi coal project to the Chinese border by 2021.

According to the Chief Investment Officer of the state firm handling the project, Samdandoj Ashidmunkh, the rail link from Tavan Tolgoi will be able to transport 30 million tonnes of coal every year to China.

It is expected that the link will be finished within two years of an overseas initial public offering of stock in Tavan Tolgoi scheduled in the beginning of 2019 as explained by Ashidmunkh during a forum in Shanghai regarding Chinese and Mongolian cooperation in mining.

Mongolia believes that demand for high quality coking coal from China's steel industry will increase. However, analysts from China say that steel production is close to its peak and may fall anytime soon.

Tavan Tolgoi is currently the world's largest undeveloped coking coal mine with at least 7.4 billion tons of reserves.

Originally, a thermal power plant was included in the project and it would supply Rio Tinto's Oyu Tolgoi copper mine.

However, Mongolia does not have access to funds and the project in Rio Tinto was postponed.

Ashidmunkh said the government still plans to build a power plant at Tavan Tolgoi.

"It would be too much to have two power plants (in the region). Even if (Oyu Tolgoi) built its own power plant they will still need to purchase our coal," he said.

Analysts attending the forum expressed scepticism about Mongolia's ambitions, saying the cost for logistics would reduce Mongolian coal's competitiveness in the market and demand can weaken.

"China and Mongolia are greatly divided in the perception of coal resources at present," said Chang Yijun, chief analyst with the consultancy Fenwei Energy.

Mongolian coal would only be competitive in southern China, where more imports were required, he said.

 

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