Dulguun Baasandavaa, Mongolian Stock Exchange Interim CEO

Mongolia is the largest supplier of coking coal to China, the world’s largest consumer. The country has quickly assumed the role of China’s top traditional supplier, overtaking Australia, the leading exporter. The Mongolian Stock Exchange plays a critical role in physical coal trading for Chinese markets, and its plans for coking coal futures may become a game changer for global coal trading.

Dulguun Baasandavaa, interim CEO of the Mongolian Stock Exchange, speaks with S&P Global Commodity Insights Managing Editor Rohan Somwanshi and Senior Price Reporter Olivia Zhang on Mongolia’s coal expansion plans, dependency on China, India as a potential export market and Mongolia’s emerging role in the global coking coal trade.

“Selling coal to India will depend on arbitrage. If prices at Indian ports exceed those at Chinese ports, trading companies will likely pursue Mongolian coal.

-What is the current level of coking coal production in Mongolia? Are there any key expansion plans over the next three to four years?

-Mongolia’s coking coal production volume reached about 85 million mt in 2024, and it is expected to increase in the coming years as the coal industry plans to boost production in the country.

There is definitely a lot of potential for coking coal in Mongolia in terms of expansion. We are inviting potential investors to explore, as only a small percentage of our land has been surveyed. Right now, geological surveys are limited and below expectations. While many mining companies operate, improving the quality of coal for coking purposes requires investment in coal washing facilities. If that happens, the overall volume of coking coal will increase without the need for additional mines.

-China plays a big role in Mongolian exports, but is there growing interest from other countries? Do you see Mongolia's exposure to these markets increasing in the foreseeable future?

-It all depends on coal prices. If prices rise, as we have seen from 2021 through 2024, there is potential. However, if prices fall to pre-COVID levels, the chances for Mongolia’s shipments beyond China or Russia diminish. Our aim is not to reach many countries but to achieve the highest profit margin per metric ton of coal, which largely depends on transportation.

-Do you see moving coal becoming easier in the future? Physically moving coal is Mongolia's biggest challenge. If prices are right, do you see any opportunity to move coal out of Mongolia to ex-China markets?

-We observe that moving coal is becoming easier in Mongolia and China. We are thankful to our Chinese partners, as we are building a railway connecting Mongolia's largest land port, linking Mongolian and Chinese railways. This will increase coal transportation volumes by 15 million mt/year.

-Will these upcoming railway upgrades boost Mongolian coking coal exports to China this year and in the future?

-I definitely hope so. If we perform well and deliver as promised, we can surpass 80 million mt in exports to China in 2025.

-India is the largest seaborne coal importer, and its demand has skyrocketed in recent years. Is it profitable for Mongolian coal exporters to ship coal to India?

-India has shown interest in purchasing Mongolian coal. However, I do not know and cannot promise how they will transport the coal -- either through China or Russia -- and whether it will be feasible by the time it reaches the nearest Indian port. We do not have those calculations yet.

Furthermore, selling coal to India will depend on arbitrage. If prices at Indian ports exceed those at Chinese ports, trading companies will likely pursue Mongolian coal. I can see such events happening, as coal prices are declining significantly and oil prices also drop, potentially reducing transportation costs. I think there is room for traders to not just play in the Indian market but also globally due to falling transportation costs and shifting economic dynamics.

-What role does the Mongolian Stock Exchange play in shaping the future of Mongolia's coking coal physical trade? Does it plan to introduce futures coking coal contracts?

-We aim to be an exchange with top international standards, guaranteeing quality, transparency and fairness. Our commodity trading platform serves all participants, whether domestic, Chinese or global companies. The exchange is open to all participants interested in Mongolian commodities.

Regarding coking coal, the MSE facilitates trading of mining products through spot and forward contracts. As commodities trading began just two years ago in Mongolia, our focus is on building a strong foundation with a few financial institutions for the first time to build a reputation.

As the market matures, we can introduce futures contracts. Personally, I'd rather say that in three years' time we may see the introduction of coking coal futures.

In the meantime, we are focusing on resolving existing smaller challenges in the markets before introducing futures so that the buyers and sellers are satisfied with the current instruments, and then there will be a clear line moving forward in introducing futures.