Mongolia is the Next Panama

Coal Mongolia 2013 was successfully held in Ulaanbaatar last week. This is of course, an international conference and exhibition attended by the biggest coal industry players from the government and business sectors of Mongolia, as well as the world. The event lasted for two days and thoroughly examined many important issues including the competitiveness of the Mongolian coal industry, related governmental policies, the instability of our legal environment and how Mongolia can become competitive in the Chinese coal market. It also focused on what role infrastructure (especially railroad projects) can have in fulfilling this goal.

In coal businesses, the cost of transportation to deliver products to end-users takes up the biggest part of the cost. Productiveness and efficiency in this industry are highly dependent on transportation infrastructure development. Therefore, the industry can be more competitive and produce more profit only when there is more value added to coal being transported.

It can be costly to transport coking coal due to its weight and size. That is why transportation and logistics costs needed for product delivery to the final point or end-users, greatly affect the price. For example, MMC’s (Mongolian Mining Corporation) medium-volatile, hard coking coal with an ash content of 10.5 percent was priced at USD $103-$104 a tonne at the Gants Mod border point in January, 2013. Australian coal of the same quality however, costs USD $163-$164 per tonne in the northern region of China. The USD-$60-per-tonne difference is made up of the transportation and logistics costs needed for transporting the coal from Gants Mod to Tangshan.

China leads the world in coal imports and comes in second in coking coal imports. China imported 44.7 million tonnes of coal in 2011 and 53.6 million tonnes in 2012. Mongolia’s total coal exports exceeded 20 million tonnes in 2011 and supplied more coking coal to China than Australia did that year. Also, 36 percent of China’s total coking coal imports were supplied by Mongolia in 2012. In order to maximize the profits of our coal exports, we need to minimize the transportation costs and increase the value by coal washing.

Railroad policy

The above example shows the huge impact a good transportation policy and proper rail infrastructure can have on the economic development of our country.

Building a railroad network that will allow us to transport not only coal, but also other products including other mineral resources, has...