Mongolia to conduct coal exports trade via exchange from Feb. 1

SINGAPORE, Feb 1 (Reuters) - Mongolia will export its coal at prices set via auctions on the Mongolian Stock Exchange (MSE) from Wednesday and stop signing direct sales contracts with overseas buyers, mainly from China, in a bid to tackle widespread graft in the sector.

The move came after a coal-related corruption scandal triggered protests in the capital Ullanbaatar in early December.

The government approved a regulation on Dec. 14 requiring parties involved in coal exports to make their trades through open electronic trading via the MSE from Feb. 1.

Under the previous trading mechanism, buyers only paid mine-mouth prices to miners and sorted out the logistics by themselves. The new so-called “border prices” will factor in the transportation fees and aim to simplify the coal export process.

“The new mechanism will lower the threshold for new participants to join the trade as they do not need to invest big capital in logistics,” said analysts from consultancy Mysteel in a note on Wednesday.

Mysteel expects most major Chinese firms to have signed term-contracts with Mongolian miners covering the first quarter of 2023, accounting for 70% of total coal trade between the two countries in that period.

Analysts and traders expect the new policy would push up coal prices in the future, especially for the existing Chinese buyers.

The MSE carried out a trial coal auction in mid-January when about 12,800 tonnes of coal from Energy Resources LLC were sold, according to the exchange.

Mongolia’s state news agency Montsame reported that the border price was set at $187 a tonne during the auction.

Spot coking coal prices were assessed at about $220 a tonne at Chinese border port Ganqimaodu.

The exchange will also organise a training course on the online coal export trade on Feb. 1 to help familiarise participants with the online trading system, payment and transportation, it said.

More than 80% of Mongolian coal exports went to China in 2022.

As China gradually eases its unofficial ban on Australian coal imports, Mongolian coal will face increasing competition with Australian cargoes which are favoured by Chinese users due to their quality. (Reporting by Muyu Xu; Editing by Jan Harvey)