Mongolian coking coal market showed mixed signals at major Chinese border crossings last week, with modest price fluctuations and an uptick in futures prices offering faint glimmers of optimism. However, fundamentals remained tepid as downstream demand proved weak, and actual transaction volumes were limited.

Lower molten iron output and expectations for further coke price reductions dampened appetite for feed coal. Simultaneously, high customs clearances added supply-side pressure to an already fragile market.

Market dynamics

Ganqimaodu Sentiment improved marginally at Ganqimaodu port on the back of futures market gains, prompting a rise in traders' offers. Nevertheless, this optimism was not mirrored in downstream procurement, which remained subdued.

On December 19, Ganqimaodu Mongolian 5# raw coking coal was around 977 yuan/t, up 41 yuan/t compared to the week-ago level, ex-stock with VAT, while Jinquan Mongolian 5# washed coal was down 20 yuan/t to 1,140 yuan/t.

During December 15-20, there were 1,533 coal trucks cleared customs averagely each day, up 10.0% from the daily average over December 8-13. The clearance volume at the port set new single-day records for two consecutive days at the beginning of the week.

Higher clearance volumes and feeble trades continued to drive portside inventories up. As of December 21, coal stocks at Ganqimaodu supervision warehouses stood at 3.67 million tonnes, up 6.0% week on week and marking an eight-week sequential increase, Sxcoal's tracking data showed. The stockpile hit the highest level in over five months.

Meanwhile, the short-haul trucking rates from Tsagaan Khad to Ganqimaodu came in at 90 yuan/t exclusive of VAT on December 19, flat from a week ago, as per Sxcoal data.

Ceke and Mandula A mild recovery in domestic market sentiment led to more inquiries from certain buyers, yet overall purchasing stayed cautious at Ceke port, with transaction volumes modest. As of December 19, the prices of MAK A and South Gobi A raw coal were around 530 yuan/t and 630 yuan/t, respectively, both down 10 yuan/t from a week ago, ex-stock Ceke with VAT. MAK West raw coal stood stable on the week at 630 yuan/t.

Ceke's daily truck clearance averaged 763 during December 15-20, a 22.5% slump compared to the week-ago average. This followed a one-day spike to 2,124 trucks on December 8 during a clearance stress test, after which volumes returned to normal levels.

Mandula port saw customs clearances continue at elevated levels. The daily average increased 11.0% week on week to 334 trucks over December 15-20. However, downstream buyers, deterred by previously high prices, temporarily halted procurement, leading to a build-up in port inventories. Traders came under growing pressure to offload stock, prompting a softening in prices.

On December 19, the price for washed primary coking coal slid 50 yuan/t week on week to 790 yuan/t, ex-stock Mandula with VAT.

Mongolian coking coal e-auctions

A total of 230,400 tonnes of coking coal was listed for auction on the Mongolian Stock Exchange over December 15-19, with an unsold rate of 28%.

Energy Resources LLC, an indirect wholly-owned subsidiary of Mongolian Mining Corporation, put 38,400 tonnes of Mongolian 3# washed hard coking coal (S 0.85%, A 11%, GRI 75) for sale in three auctions over the past week, each at 12,800 tonnes.

The miner successfully concluded the auctions at an average hammer price of 830 yuan/t, DAP Ganqimaodu and exclusive of Chinese VAT, down 18 yuan/t from the week-ago average, with a starting price of 800 yuan/t.

Erdenes Tavantolgoi JSC sold 128,000 tonnes of 5# washed coking coal (S 0.85%, A 10.5%, GRI 80) at $124.2/t DAP Ganqimaodu and exclusive of VAT, yet another auction of 1/3 coking coal was aborted after starting at $96.4/t.

Forecast

Despite no significant demand recovery, imported Mongolian coking coal may still gain some support from emerging signs of stabilization in China's domestic market, with spot prices for select grades even rebounding. This could potentially ease the pricing strain for Mongolian materials.