Chinese coal traders clog Mongolian border town seeking high-value fuel



Chinese coal traders are rushing to the small town of Ganqimaodu on the Mongolian border to cash in on imports as prices of the fuel have soared nearly 40% in a month after mine safety checks crimped supply while industrial demand is rising.

The dash to secure Mongolian supplies illustrates coal’s continued preeminence in the energy mix of China, the world’s biggest consumer of the fuel. The increasing imports also reflect the country’s appetite for foreign supplies even as domestic coal output has climbed to a record so far in 2022.

Thermal coal prices at Qinhuangdao, the main port for loading northern Chinese supplies onto ships bound for users in the south, have climbed to 1,520 yuan ($212.20) a tonne this week compared to about 1,080 yuan in late August, according to three China-based coal traders.

That is the highest in six months and above the government price cap of 1,150 yuan a tonne for coal sold to utilities. Traders can make about 200 yuan per tonne in profit after bringing Mongolian fuel to northern Chinese ports, said one of the traders, who is based in the Inner Mongolia region where Ganqimaodu is located, and has recently struck deals in the town.

“The town is full of coal traders and it’s hard for the newcomers to find hotel rooms,” he said.

Trade between China and Mongolia has suffered since the COVID-19 pandemic, with transport restrictions cutting coal exports from one of the world’s top 10 producers.

Daily coal imports via Ganqimaodu averaged about 90,000 tonnes in September, up 19% from August, according to the traders, though the volume is still only half the level before curbs on trucks started and a fraction of China’s total imports, which have been around 21 million tonnes a month this year.



China has called for higher domestic coal production since a power shortage roiled industry across the nation a year ago. But output in recent weeks has been reduced by stricter safety inspections following several fatal accidents in its major coal mining hubs.

Daily coal output in China fell to 11.95 million tonnes per day in August, down from a peak of 12.76 million in March and lower than Beijing’s target of 12 million for 2022.

Analysts and coal traders expect the probes to last until the end of the Communist Party Congress that takes place from Oct. 16 until Oct. 24.

The Daqin railway, China’s biggest coal transporting line by volume that connects its major mining hub in northern China with Qinhuangdao, will shut for nearly a month from Sept. 28 for scheduled maintenance, further reducing supply to the market.

“The rising demand from the chemical and coking industries is driving coal prices despite easing consumption from the power generation sector,” Luo Yong, analyst from China Coal Transportation and Distribution Association, said in a note. “The major coal transporting lines, Daqin, Wari and Hanyuan, are under seasonal maintenance, which also strengthened the tight supply expectation and pushed up port prices.”

Operating rates at cement makers have rebounded to about 57% in recent weeks, a peak for 2022, according to data compiled by Wind.

Major coal-consuming producers of chemicals such as methanol, chlor-alkali and urea, also increased their run rates.

Coal supply is expected to improve once the mine safety checks are relaxed and the Daqin railway resumes.

“Traders are leveraging all their personal connections and bidding high to secure more supply now as they know this might be a short-lived chance to make profit,” said one of the traders of the appetite for Mongolian coal.


Source: Reuters (Reporting by Muyu Xu; Editing by Dominique Patton and Christian Schmollinger)

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