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China gets burned as Mongolia breaks coal link

31 Jan 2023

 

Mongolian government yielded to citizens outraged over corruption but Chinese ask, ‘Why take it out on us?’

 

China Energy Investment Corp resumed its purchase of Australian coal in Janauary 2023. Photo: ceic.com

China will have to pay more to buy coal from Mongolia, which says it will stop shipping its solid fuel to China directly from February and instead sell it through auctions. 

Mongolia will also use border price, instead of pithead price, to sell its coal starting Wednesday, meaning that the new price will include the transportation cost between its coal mines and borders.

The Mongolian government made the decisions after thousands of people stormed the country’s capital in December to protest against alleged corruption in the coal industry.

China’s foreign ministry has not yet commented on the matter. Several Chinese columnists criticized Mongolia for breaking an agreement with China, which bought 84% of Mongolian coal last year.

In early January, China Energy Investment Corp, a state-owned company, placed an order to import coal from Australia, the world’s second-largest coal exporter after Indonesia, Reuters reported. 

Since October 2020, Beijing has banned imports of coal from Australia after the Australian government called for an investigation into the Covid-19 outbreaks in China.

In September 2021, China faced a nationwide power crunch as power plants reduced their output due to a sharp rise in regional coal prices. They said they could not make profits under the country’s electricity price cap.  

The central government set up a task force and spent three months resolving the matter. It ordered coal mines in Inner Mongolia and Shanxi to boost output while allowing electricity prices to increase by 10-20%. It also imported more coal from Mongolia, Russia and Canada.

Mongolia replaced Australia as China’s largest s