Mongolia is keen to enlist India as a likely partner for the supply of coking coal and has reportedly reached out to the Steel Ministry to explore possible cooperation, people familiar with developments said.
Coking coal is an important raw material for steelmaking and India – the second largest producer of crude steel in the world – is one of the largest importers of this raw material. Most imports are covered from Australia, followed by the USA, Indonesia and Mozambique.
However, with recent increased volatility in coking coal prices, India’s steel mills have been keen to explore alternative markets such as Russia. Deliveries from the US and Indonesia nearly doubled in FY23. In FY23, coking coal imports amounted to 54.3 million tons (mt).
“Mongolia is interested in supplying coking coal to Indian mills and has approached the ministry with proposals. In fact, some company-level discussions were also held. But the decision has to be made by the steelmakers,” said the official familiar with the discussions.
Mongolia is said to be building a coking coal washing plant – with a deadline of 2024 – and this could help export coking coal here. Joint ventures could also be considered.
According to ministry officials, one of the main concerns of Indian mills is the “landlocked nature of Mongolia” and the ability to ship coal “long distances,” leading to an increase in costs. In addition, there are other concerns as to whether the quality of Mongolian coking coal matches or harmonises with that of the blast furnaces of Indian mills.
Mongolia is reported to have rail links with Russia and China, and with the ports of those countries. The push is to use these lines to export coal. In 2022, three major rail projects have been commissioned and four new rail checkpoints will open, primarily with a focus on mineral transportation.
Mongolian coal on exchanges
Incidentally, Mongolia has been exporting its coal since February at prices set through auctions on the Mongolian Stock Exchange (MSE) and has reportedly stopped entering into direct sales contracts 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.