Mongolia and India are discussing two shipping routes for coal transport

The two routes under discussion include the Far East Corridor, which uses the Vladivostok – Chennai shipping route; while the second plan under consideration includes the North-South International Transport Corridor through the use of the Port of Chabahar, officials involved in the discussions said.

A third route using the Russia-Mongolia-China economic corridor has been reportedly shot down, officials said.

The International North-South Transport Corridor (INSTC) is a multimodal transport project spanning 7,200 km, aiming to facilitate the movement of goods between Afghanistan, Armenia, Azerbaijan, Russia, Central Asia, Europe, India and Iran. In December 2016, India agreed to use the INSTC, established in 2000 and ratified (by India, Iran and Russia) in 2002.

On the other hand, both India and Russia are interested in opening the 10,500 km long Vladivostok-Chennai shipping route. The Union Department for Ports, Shipping and Waterways is planning a stakeholder meeting in September to discuss issues and expedite the opening of the route.

“Mongolia has proposed using the INSTC route, including using the ports of St. Petersburg and Chabahar, or the Valdivostok – Chennai route to transport coking coal. Discussions continue. In fact, Mongolia was also interested in getting the Ministry of Mines to invest in their country in various segments like copper etc. Therefore, some of these routes are currently under active investigation. The route from Mundra to St. Petersburg was also discussed during the talks,” government sources said.

India, the second largest producer of crude steel in the world, is also among the largest importers of coking coal. Almost 80-90 percent of Indian steel mills’ coking needs are met by imports, mainly from Australia, followed by the US and now Russia. In FY23, coking coal imports amounted to 53 million tons.

Mongolia is a landlocked country, so any coal shipment from there must go through neighboring Russia or China.

Inside officials said Russia has already allowed Mongolia to use its transportation infrastructure to allow coal and copper to be shipped to Asia-Pacific markets. Mongolia reportedly has access to the Russian port of Vladivostok.

More recently, Mongolia has started exporting its coal at prices set through auctions on the Mongolian Stock Exchange (MSE). The change has been initiated since February, when the country stopped entering into direct sales deals with foreign buyers.

The government there passed an ordinance obliging parties involved in coal exports to conduct their open e-commerce transactions through the MSE.

In the previous trading mechanism, buyers only paid miners mine prices and took care of the logistics themselves. The new so-called “marginal prices” take into account transport fees and aim to simplify the process of exporting coal, they say.

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