Prime Minister of Mongolia L.Oyun-Erdene takes part in the farewell ceremony for Shinzo Abe. The ceremony has held today (27 September) in Tokyo.

L.Oyun-Erdene made an official visit to Mongolia as part of the celebration of the 50th anniversary of diplomatic relations between Mongolia and Japan.

Shinzo Abe visited Mongolia three times. He emphasized the relationship and cooperation between Mongolia and Japan and made a valuable contribution to the mutual relations.

This year, Mongolian Tugrik has fallen almost 15 percent against the US dollar. The declining currency has pushed up the cost of everyday goods for a country struggling to navigate global economic crisis.

According to the National Statistical Office, inflation in Mongolia has soared this year and reached 14.4 percent in August, compared with 9.5 percent during the same month in 2021.

Mongolia is a frontier economy known as the land of blue sky and as the birth place of Chinggis Khan.

Mongolia is the 2nd largest landlocked country in the world, behind Kazakhstan. At present It is estimated that 600,000 of Mongolia’s 3.4 million people are nomads. Mongolia is an immense country created by chengis Khan in the 13th century.

Originally a nomadic Buddhist centre, the capital UB, became a permanent site in the 18th century. When the country fell under the control of the Soviets at the dawn of the 20th century, concrete buildings replaced yurts and the city was named Ulaanbaatar or at times Ulan Bator. Literally meaning “red hero”.

In 1911, Mongolia declared its independence, achieving it with help from the Soviet Union in 1921. Mongolia became a socialist state (the Mongolian People’s Republic) in 1924. Following independence and until the collapse of the Soviet Union in 1989, the country was a Soviet satellite state, and heavily reliant on economic, military, and political assistance from Moscow.

Mongolia, a nation bordered by China and Russia, is known for vast, rugged expanses and nomadic culture and the Mongol empire. In recent years the commodity story led to a Mongolia boom and increased interest from global investors.

According to the ADB Asian Development Bank, Mongolia’s economic growth is expected at 2.3% in 2022 compared to the 1.4% growth in 2021 and climb to 5.6% for next year 2023, supported by domestic demand, investment, and recovery in industry, agriculture and services.

OT Oyo Tolgoi mine completion and the Russian-Chinese natural gas pipeline will be major macroeconomic drivers going forward. At full production OT is estimated to provide and account for 30% of GDP for Mongolia.

Oyo Tolgoi is one of the world’s largest undeveloped copper-gold deposits located in the South Gobi region, Mongolia, and the project is managed by Oyo Tolgoi LLC, which is majority-owned by Rio Tinto

Oyo Tolgoi is one of the world’s largest undeveloped copper-gold deposits, located 80 kilometres north of the Chinese border in Khanbogd soum, South Gobi province.

Toronto Canada listed Turquoise Hill Resources Ltd. (TRQ) has been a barometer for global investor interest in Mongolia.

Much of what is happening in Mongolia resembles the early stages of the oil boom in Kazakhstan., only in a country with a much smaller population, and the effect and opportunity for investors could be of interest.

In 2011, Mongolia was the fastest growing economy in the world. GDP has increased from US$ 1 billion in 2001 to over US$ 11 billion just a decade later. Even compared to 2010 when I first visited the country, the Ulan Bator of 2022 is unrecognizable and has fintech IPOs on the local stock exchange. Soviet era apartments that once loomed large over the city are being outnumbered by WIFI posts in the street and new developments which include gated communities and multistorey office blocks and shopping centres like Shangri-La Ulan Bator.

Mongolia is 15 times larger than south Korea and south Korean budget airlines like Jeju Air and T’way Air have discovered Mongolia. Older Korean people have expressed a certain nostalgia for Mongolia, saying it reminded them of the times before south Korea became fully developed economic powerhouse.

Mongolia as an investment destination and local stock market MSE Mongolia stock exchange, is still a very low liquidity market and difficult to access for global investors. The country had a few international investment funds but those were most probably ahead of its time.

In geopolitics, Mongolia’s importance to the world will rise due to its being a small democratic country, geographically located next to and a buffer zone between the Russian federation and The People’s Republic of China.

Mongolia expects Russia to begin construction of the “Power of Siberia 2” gas pipeline through its territory to China within two years, as Moscow moves to connect its Europe-supplying gas fields to Asia for the first time. The war in Ukraine had clouded planning for the pipeline, Mongolia however is said to expect construction to go ahead.

The Power of Siberia 2 project has become critical to Russia as it faces the prospect of losing Europe as a market for its gas following its invasion of Ukraine and accusations it has “weaponised” supply to create a price crisis. Energy industry executives expect the timeline to accelerate due Moscow’s souring relations with the West over the war in Ukraine and the subsequent shrinking European market for its key export.

Construction of a Russian-Chinese natural gas pipeline transiting through Mongolia will begin in 2024 and is expected to go online in 2030.

MNT - The Mongolian Tughrik is the currency of Mongolia and commercial banks pay 10% to 12% on local currency deposits. Khan bank the largest Mongolian bank and considered sovereign risk is planning and preparing for an IPO on the MSE. (Mongolia stock Exchange). Analysts estimate Khan Bank of Mongolia ROE (Return on Equity) at over 20%

The country and central bank Mongol Bank maintains capital controls, limiting the amount of tugrug allowed out of the country, as well as how much can be converted into foreign currency.

The currency floats freely and has seen its value erode over the past decades relative to major world currencies. As of the first half of 2022, 11 commercial banks are operating in the market.

Mongolia will probably seek to refinance its $500m bond maturing next year; nation has taken efforts to preserve market access, such as not asking for debt relief under a G-20 initiative to avoid downgrades by rating companies. The ruling party’s victory in Mongolia’s parliamentary elections this week is considered conducive for policy continuity and may lead to another IMF funding program for the strategically important country and frontier market.

Rainer Michael Preiss is Partner & Portfolio Strategist at Das Family Office in Singapore.

Over the last year and a half, the renaissance of coal – both kinds – has been gobsmacking.

No one saw coal prices of $400 to $600 per tonne coming, including those in the coal industry.

“If, a year ago, fifteen months ago, you had said to people thermal coal could be $440, and coking coal could be $600, they’d call the ambulance and recommend a nice doctor,” Neil Bristow, managing director of H&W worldwide Consulting, said Thursday at a recent Coal Association of Canada conference.

“Who would believe it?”

While Russia’s invasion of Ukraine has roiled energy markets and driven up coal prices, the reality is that thermal coal prices had been surging months before the invasion, as Europe was already in a self-induced energy shortage and resorting back to coal power.

Five or six years ago, thermal coal sold for about $60 to $80 per tonne, Bristow said. Even before Russia invaded Ukraine, thermal coal prices had soared to around $200 per tonne.

“The fundamentals that caused those prices to increase in Q3 and Q4 of 2021 are still there, and they’ve only been exacerbated by the sanctions on Russian coal,” said Ernie Thrasher, CEO of Xcoal Energy and Resources.

Never in Bristow’s lifetime has he seen thermal coal (burned to produce power) worth more than metallurgical coal, which is used to make steel, but it is now.

Metallurgical coal (also called coking or steelmaking coal) briefly touched $600 per tonne, Bristow said, but has since settled down to about $270 per tonne. That’s still a high price, but less than thermal coal at the moment, which is well above $300 per tonne.

The usual market forces of supply and demand that would normally see producers responding to high prices with increased production simply isn’t happening with coal.

In the U.S., the coal mining industry is half the size it was a couple of decades ago, and simply can’t suddenly reverse coarse. Australia’s coal production peaked in 2016 and it seems unlikely it can respond to the sudden demand for thermal coal either. B.C. is a major producer and exporter of metallurgical coal, but Canada exports little if any thermal coal.

Xcoal estimates the UK and Europe alone will need to find 47 million tonnes of coal that used to come from Russia. It’s unlikely to come from the U.S.

“There’s just not much the U.S. can do,” Thrasher said. “We’ve basically dismembered our coal industry.”

Even if American coal mines could increase production, there is limited coal terminal capacity for exports, which is why coal produced in Montana and Wyoming is shipped through B.C. export terminals. And right now, one of those terminals — Westshore — has been paralyzed by a strike.

“There is just no elasticity in the supply chain that’s allowing people to respond to these prices, and the old adage of the best thing for high prices is high prices is not holding true,” Thrasher said.

In total, Xcoal estimates the global coal supply gap at 96 million tonnes.

“These high coal prices are occurring at a time when the Chinese economy is just dead flat on its back,” Thrasher added. If China’s economy were to suddenly recover and grow, that would put even more pressure on both thermal and coking coal prices.

“Who can supply 96 million tonnes to fill that gap?” Thrasher wondered. “It’s probably only China and India. There’s just not a lot of other countries in the world where there’s the ability to produce the coal that needs to fill this gap.”

As for steelmaking coal, which is B.C.’s second most valuable export, a global recession might cool demand and temper prices somewhat. But Bristow predicts prices will remain high over the next few years, as there simply not enough new metallurgical coal mines being built.

“My models do not show enough coking coal to meet the demand in the world after about 2027, 2028,” Bristow said. “We desperately need new mines.”

“I’m going to be bold and say it will not stay $400 or $500 a tonne for very long,” Thrasher said of coking coal prices. “But I think the days of seeing sub-125, 150 dollars per metric tonne of coking coal for any period of time are in the rear-view mirror, and it’s because the coal simply is not being produced.”

Thrasher said he can envision stagflation resulting from the shortage of coal, if there is a global recession.

“If we get into a major global economic slowdown, it certainly is going to put a damper on our products,” Thrasher said. “The question is, if you go back and look at those supply shortfalls, will a 5% global economic slowdown be enough to solve the problem if you’re 10% short in energy supply? You basically have a stagflation environment where the global economy is crashing but you still need energy and the energy prices stay high.

“It will affect thermal more than coking coal. It could be something we haven’t seen in 40 or 50 years.”

(This article first appeared in Business in Vancouver)

Mirada PLC - Surrey, England-based broadcasting technology firm - Furthers partnership with SKYmedia Corp LLC, a communications service provider in Mongolia and a subsidiary of mobile phone operator Skytel Group LLC, through a contract extension. The contract covers SKYmedia's entertainment streaming service in Mongolia. Mirada will add a number of additional features to enhance the platform.

Current stock price: 40.50 pence

12-month change: down 39%

The total performance of Mongolia’s export of mineral products is currently at 70 percent. Specifically, the export of coal is running at 98.9 percent, copper concentrate --87.7 percent, iron--59.8 percent, gold -- 68.8 percent, and zinc-- 103.8 percent, reported the Ministry of Mining and Heavy Industry.

On September 16-22, freight transportations were done by 1316 trucks and 402 containers per day. During these days, 1,028.9 thousand tons of coal were exported, increased by 403.2 percent or 4 times compared to the same period of the previous year. From the beginning of the year, 17,793.0 thousand tons of coal were exported, which showed an increase of 5,756.8 thousand tons or 48 percent compared to the same period of the previous year. 1,063.2 thousand tons of copper concentrate have been exported, which is an increase of 8 percent compared to the same period last year.

As for iron ore and concentrate, a total of 3,024.9 thousand tons were exported from the beginning of the year, decreased by 48 percent compared to the same period last year.

As of September 22, the Central Bank has purchased 13.75 tons of gold since the beginning of this year.

At Ulaanbaatar's Naiman Sharga money exchange market, elderly women stand in the street waving wads of money at passers-by, encouraging them to change foreign currency to Mongolian tugriks.

Each transaction nets them a small profit -- but when the value of the tugrik fluctuates it makes that more difficult, and lately the currency has taken a dive.

This year the currency has fallen almost 15 percent against the US dollar -- most of that since the start of Russia's invasion of Ukraine.

Angara Banerji, the International Monetary Fund's mission chief, listed a raft of factors behind the country's inflation, including a rise in domestic meat prices, China's border restrictions, surging oil and food prices, and an increase in transportation and logistical costs for imports.

The declining currency has pushed up the cost of everyday goods for a country struggling to navigate global economic headwinds caused by transportation bottlenecks and inflationary pressures, war and economic uncertainty.

"The rate is going down dramatically because of the war in Ukraine and the coronavirus," said Ts. Maisaikhan, a currency trader who operates inside the market.

"We don't produce much ourselves, most things are imported, so when the dollar goes up the price of everything goes up too."

Like elsewhere in the world, Mongolia's inflation has soared this year and reached 14.4 percent in August, compared with 9.5 percent during the same month in 2021, according to the country's National Statistical Office.

Prices for food and beverages increased by about a fifth on-year in August -- the same rate as medicine and health care -- while the cost of clothing, utilities and housing also went up.

"Inflation has surged sharply since mid-2021 and has exceeded the Bank of Mongolia's target band," said Banerji.

Last summer there were a few weeks when potato prices temporarily tripled after China closed the border over Covid-19.

Next to the money exchange offices lies Urt Tsagaan (Long White), a pedestrian mall filled with jewellery makers, seamstresses, hairdressers, boot repair stalls, cobblers, and tattoo studios.

In a sewing shop near the money exchange, Sukhbaatar Tuya said she buys some meat and vegetables each day but when prices spike suddenly it just means buying less produce.

"We're just going day by day," she said. "We don't have any plans beyond the next three days or a week."

"We have to live like this," she said. "There is no other way."

The Monetary Policy Committee of the Bank of Mongolia (MPC) held its scheduled meetings on September 16 and 20, 2022. Taking into consideration current state of the economy and financial markets as well as outlook and risks to the domestic and external economic environment, the MPC decided to:

1. Raise the policy rate by 2 percentage points to 12 percent;

2. Widen the policy rate corridor to be set as 2 percentage points above and below the policy rate and;

3. Exclude certain bank liabilities with maturities of at least 360 days and more that are newly funded on international markets in the form of bonds or loans from required reserve liabilities.

Annual inflation reached 14.4 percent nationwide and 14.8 percent in Ulaanbaatar city as of August 2022. External factors have been largely contributing to headline inflation through its impact on prices of imported goods. The extent of such impact is expected to decline in the upcoming quarters, leading to lower inflation outlook.

Economic activities grew relatively high in the first half of 2022. Despite border restrictions being eased to a certain degree, its negative effect on mining and transportation sector persists. Non-mining production in trade, services, taxes and agriculture sectors intensified in the second quarter of 2022 and reached 2019 pre-pandemic levels in the first half of 2022. Household consumption has been rising consecutively in the last 3 quarters and supporting domestic demand. Recovery in non-mining sector activities is expected to continue this year, mainly contributing to economic growth.

Higher deposit dollarization in the banking system and elevated benchmark rates in international markets have necessitated increases in domestic currency yield. As such, the MPC decided to implement a set of policy measures to raise the policy rate, widen the policy rate corridor to its pre-pandemic level and exclude certain bank liabilities newly funded on international markets from reservable liabilities with the objective to stabilize inflation in the medium term and increase domestic currency yield. Raises in the policy rate would not only be effective in reducing inflation to its target level, but also is consistent with the policy of ensuring domestic and external economic balance.

The subsequent policy actions on whether to pursue further monetary tightening would be dependent on developments in external and domestic economy as well outlook changes in inflation and macroeconomic conditions. The MPC remains committed to implementing necessary policy actions until inflation returns to stabilizing around the target level.

Credit rating firm Moody’s Investors Service said on Thursday it had changed its outlook for the global metals and mining Industry from stable to negative as a global economic slowdown continues to soften demand.

The downturn is affecting prices, which consequently reflects a decreasing profitability for the largest Moody’s-rated companies in the industry during the upcoming 12 months, the firm said.

“[EBITDA and prices] will remain higher than in pre-pandemic years but below the record-high levels seen in early 2022,” says Moody’s senior vice president Barbara Mattos.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) will significantly decline for producers of base metals, including copper, nickel, aluminum and zinc, Moody’s financial research experts said.

Moody’s downgrades mining sector outlook to negative

Moody’s expects copper miners to face EBITDA declines due to lower production volumes

in certain regions, higher input costs and lower prices. At the same time, low inventory levels and supply challenges in main copper-producing regions such as Chile and Peru will limit copper-price declines, it says.

Aluminum producers re expected to be the worst hit as prices for the have fallen drastically from recent record highs, while energy and key raw material costs remain high, particularly in Europe. This combination will reduce companies’ margins and earnings, Moody’s says.

While gold is often seen as a hedge against inflation, the agency notes that prices for both the yellow metal and silver are declining due to higher interest rates and a stronger US dollar. Unlike other metals, market sentiment rather than fundamentals such as supply and demand, influences pricing in this industry, which will negatively affect precious metals miners’ EBITDA.

Today’s report follows one Moody’s published in early September, which lowered its 12-month price assumptions for certain metals and mining commodities.