MONGOLIA: Ulaanbaatar Railway took delivery of two more TEM18DM diesel shunting locomotives from Transmashholding subsidiary Bryansk Engineering Plant on October 22.

Under a contract signed in 2019, Bryansk is due to supply 10 TEM18DMs and 14 2TE25KM two-section diesel locomotives for main line freight services. All are due to be delivered by mid-2021. The national railway already has 15 TEM18DMs delivered in 2011-19 and 15 2TE25KMs supplied in 2017-20.

Owned jointly by the governments of Mongolia and Russia, with the Russian stake managed by RZD, the 1 520 mm gauge Ulaanbaatar Railway reported a total freight volume of 27 million tonnes in 2019, a 4% increase on the previous year.

Fitch Ratings - Hong Kong - 28 Oct 2020: Fitch Ratings has published China-based steel producer Inner Mongolia Baotou Steel Union Co., Ltd.'s (BSUC) Long-Term Foreign-Currency Issuer Default Rating (IDR) and foreign-currency senior unsecured rating of 'BB+'. The Outlook is Stable.

BSUC ratings are derived from Fitch's internal assessment of the consolidated credit profile of BSUC's immediate parent, Baotou Iron & Steel (Group) Co., Ltd. (BISC), which is 77%-owned by the Inner Mongolia Autonomous Region. Fitch assesses BISC's ratings based on four factors set out in its Government-Related Entities Rating Criteria. BSUC's ratings, in turn, are linked to its parent's creditworthiness under Fitch's Parent and Subsidiary Linkage Rating Criteria due to strong legal, operational and strategic ties between the two entities.

KEY RATING DRIVERS

Strong Parent-Subsidiary Linkage: BSUC is 55%-owned by BISC and is the main steel operating subsidiary of the parent. In 2019, BSUC accounted for 80% of total assets and more than 65% of the group's consolidated EBITDA. BISC has absolute management control over BSUC with significant management overlap between the two. BISC provides guarantees to a large part of BSUC's bank debt and has injected numerous operating assets into BSUC. We rate BSUC on a top-down basis from our internal assessment of BISC's credit profile under our criteria.

Funds Parent's Rare Earths Operations: BISC is the largest rare earth producer in the world and receives around 50% of the annual rare earth ore production quota issued by China's Ministry of Industry and Information Technology (MIIT) each year. China has a near-monopoly of the global rare earth market, and the Chinese government sees the industry as strategically important. While the majority of BISC's rare earth resources and production are not in BSUC, BSUC's profits help to fund BISC's mining and rare earth development operations, which have been historically unprofitable.

Leverage to Remain High: Fitch has assessed that BSUC's Standalone Credit Profile will stay weak as we expect leverage to remain close to the 2019 level in the medium term. In 2019, BSUC's FFO net leverage rose to 5x from 3x in 2018, mainly due to lower steel profitability. We expect leverage to remain at 5x-6x in 2020-2022.

However, Fitch expects BSUC's financial profile to be stable in the near term as the company does not have major capex plans in the next few years. BSUC's financial flexibility metrics are likely to remain intact, with FFO fixed-charge coverage maintained at just below 3x.

Adequate Liquidity, Reliable Funding Access: At end-June 2020, BSUC had CNY18 billion in short-term debt outstanding, compared with CNY4 billion of cash on hand and CNY9 billion in unused available credit facilities. Over 50% of BSUC's debt is short-term. We expect BSUC to be able to roll over its short-term debt given support from BISC. BISC, excluding BSUC, had CNY14 billion in available credit facilities at end-June 2020 and has reliable funding access due to its strong government support and long-term relationships with major commercial and policy banks.

DERIVATION SUMMARY

BSUC is rated on a top-down basis from its parent BISC, as per Fitch's Parent and Subsidiary Linkage Rating Criteria. Fitch's internal assessment of BISC's credit profile is based on Fitch's Government-Related Entities Rating Criteria. BISC is 77%-owned by the Inner Mongolia Autonomous Region government and plays a strategically important role in rare earths production for China. BSUC's ratings are derived using the same methodology used for Sinochem Hong Kong (Group) Company Limited (A/Stable) and COFCO (Hong Kong) Limited (A/Stable).

KEY ASSUMPTIONS

Fitch's Key Assumptions Within Our Rating Case for the Issuer:

- Low single-digit revenue decline in 2020, then revenue to rise by 1% on average annually in 2021-2023

- EBITDA margin of 9%-10% during 2020-2023

- Annual capex of around CNY2 billion during 2020-2023

- No major acquisitions or divestitures during 2020-2023

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

- An upgrade of Fitch's internal assessment of the creditworthiness of Inner Mongolia Autonomous Region.

- Increase in the likelihood of support from the Inner Mongolia government

Factors that could, individually or collectively, lead to negative rating action/downgrade:

- A downgrade of Fitch's internal assessment of the creditworthiness of Inner Mongolia.

- Weakening of likelihood of support from the Inner Mongolia government.

- Weakening linkages between BISC and BSUC.

BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

LIQUIDITY AND DEBT STRUCTURE

Adequate Liquidity: At end-June 2020, BSUC had CNY18 billion in short-term debt outstanding, compared with CNY4 billion in cash on hand and CNY9 billion in unused available credit facilities. The credit facilities were uncommitted, but we believe they are adequate, as committed facilities are uncommon in China. BSUC's debt maturity is concentrated, with short-term debt accounting for over 50% of total debt. We expect BSUC to be able to continue rolling over its short-term debt given its support from BISC.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS

BISC is 77% owned by the Inner Mongolia Autonomous Region and Fitch assesses BISC's ratings based on four factors set out in its Government-Related Entities Rating Criteria

BSUC's ratings are notched down from BISC's ratings under Fitch's Parent Subsidiary Rating Linkage Criteria.

ESG CONSIDERATIONS

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

On October 22, a ceremony was held to hand over the 4,000 sheep donated by Mongolian people to the Chinese people at the border region of Zamiin-Uud-Erlian. The first batch of sheep entered China, eight months after Mongolian President Khaltmaa Battulga handed over the certification of the gift of 30,000 sheep to Chinese President Xi Jinping to help China fight against the COVID-19 pandemic. Following the visit, two sides have agreed with organizing the handover ceremony of 30,000 sheep after the COVID-19 pandemic calms down and the sheep fully gain weight in autumn time.

During the ceremony Tumen Tegshjargal, Mongolian President's Foreign Policy Advisor said, "It is an event that expresses the warmth of the Mongolian people to the Chinese people and brings a positive atmosphere to the relations between the two peoples." While Chai Wenrui, Ambassador of China to Mongolia, who speaks Mongolian very well, said, "Chinese people will not forget this friendship of the Mongolian people. China and Mongolia have a long history of friendly neighbors linked by waters and mountains. The fact that we have understood and helped each other in our fight against the disease reflects the deep idea of Mongolian old proverb that the lives and spirits of neighbors are the same."

During his visit last February, President of Mongolia Battulga was warmly welcomed by his Chinese counterpart Xi Jinping as the first foreign state leader to visit China since the outbreak of COVID-19. The visit and the donation of sheep by the Mongolian President reminded of ancient traditions and expressed Mongolian people's support to the Chinese people to overcome hardship. All has become a significant event today.

The gift of 30,000 sheep is expressing special considerations and friendship. Traditionally Mongolians believed that sheep are warm-blooded animals and the first choice for giving gifts, which also implied sincerity and enthusiasm. Also, mutton is the best recipe for enhancing immunity and hopes that the Chinese people can overcome the epidemic situation as soon as possible. It can be said that this gift fully reflects the deep friendship of the Mongolian people towards the Chinese people.

Mongolians say, "A needle in need is of greater use than a camel in prosperity" as it implies "adversity reveals the quality of friendship". In response to the remarks made by the President of Mongolia during his visit, President Xi also quoted ancient Chinese proverbs. He said that "If you have received a drop of beneficence from other people, you should return to them a fountain of beneficence," with credit to Confucius.

As such, both sides concluded that the meeting, having taken place at a time of the novel coronavirus outbreak in China and an ongoing nationwide fight against it, is a proof that the Comprehensive Strategic Partnership between the two countries has reached a new height and the demonstration of ideal cooperation between neighboring countries to the world.

The Chinese public also expressed particular gratitude for Mongolians' donation of 30,000 sheep. The topic "Mongolian President donated 30,000 sheep to China" received more than 100 million views on the Chinese social media platform, Sina Weibo.

Experts believe the "sheep diplomacy" has helped solidify the strategic partnership between the two countries, improve political and economic relations, and deepen mutual understanding between the Chinese and Mongolian people. International affairs expert and former Mongolian diplomat Dashdorj Bayarkhuu considered this visit as a "diplomatic victory for a small state" and a "smart move to promote Mongolia's positive image to the Chinese people". Another Mongolian independent international affair researcher Luguusharav Byambakhand sees this visit as a "soft power policy success for Mongolia in winning over the hearts and minds of the Chinese".

Opportunity to increase trade

The gift of 30,000 sheep is also expressing that Chinese market is in Mongolia's economic interest, which takes almost 90 percent of its exports, mostly coal and copper. Thus, the spread of COVID-19 in China posed particular challenges to the country. Mongolia has had to prevent the pandemic from spreading within its territory while at the same time keeping its economy afloat. During the spread of the coronavirus, the export of commodities to China, Mongolia's main source of revenue, was severely disrupted. But just after the visit of President Battulga, the coal transportation resumed with additional precautionary measures for ensuring the health of Mongolian truck drivers entering China.

China and Mongolia are aiming for trade to reach $10 billion this year. Trade volume between Mongolia and China reached $8.9 billion in 2019, accounting for 64.4 percent of Mongolia's total foreign trade, according to Mongolian National Statistics Office.

In the coming years, Mongolia aims to increase the export of many sectors to China – primarily its livestock. According to the livestock census conducted in 2019, heads of livestock animals in Mongolia totaled 70.9 million. Mongolia has the potential to export 6 to 7 million livestock or 174,000 tons of meat annually. However, due to the animal hygiene system not well-developed and China's requirement of border customs regulations, not enough meat can be exported to its southern neighbor. Currently, China only imports frozen horse meat and a small amount of heat-processed beef from Mongolia. In 2019, Mongolia exported a total of 58,000 tons of meat, of which 30,300 tons was exported to China. Mongolia had set a goal of exporting a total of 7 million tons of meat for more than 15 countries in 2020, but due to the pandemic of the coronavirus, strategic food exports were suspended in the first half of the year.

The Government of Mongolia has identified agriculture as one of the pillars of Mongolia's economic development and aims to become a "food exporter". Chinese President Xi Jinping addressed the second China International Import Expo in Shanghai last year and stated that going forward China will give greater importance to imports. Meanwhile, Mongolia is keen to take advantage of China's opening-up policies and increase their country's exports to its southern neighbor.

The sheep had been collected from herders in three eastern and southern provinces of Mongolia – Khentii, Sukhbaatar, and Dornogobi and each one of them went under thorough veterinary examination. Officials said that by the middle of November, the handover of the 30, 000 sheep will be concluded. The fact that Mongolia has successfully transferred 30,000 sheep to China for the first time, indicates the potential for further supply of mutton to China and meat export increase.

Sarangua Tumur is a Mongolian freelancer for China Focus

Mongolia MICS Plus follows the field-testing of the MICS programme’s new initiative in Belize, during 2019-2020. MICS Plus uses a representative household sample frame to select a sample of respondents, to collect data via phone calls over an extended period, at frequent intervals. In its original form, MICS Plus uses the households interviewed during a MICS as the sample frame, but can be based on any representative sample frame of households with landline or mobile phone numbers.

MICS Plus is using the national population registry of Mongolia as the sample frame. The household-based registry was updated by the National Statistical Office of Mongolia in February 2020 and includes one or more phone numbers for each household. Overall, 2,200 households were sampled from the population registry. Households were selected randomly in each of the urban and rural areas of five regions.

The first wave of calls started on 18 September 2020, with 11 interviewers calling all households and recording responses via the data management system. Topics in the first wave of calls covered access to internet, COVID-19 self-protection knowledge, behavior and information sources, as well as government benefits, and detailed questions on distance learning. The first wave is complete and results will be made available in November on this page, together with methodological details of the survey.

China received more metallurgical coal from neighboring Mongolia in September than from its once-key supplier Australia, amid escalating tensions between Beijing and Canberra.

Coal exports from Mongolia, which borders China to the north, surged by 17 percent to 4.65 million tons last month, Global Times reported, citing data from the Mongolian General Administration of Customs. More than 96 percent of those shipments were destined for China, making Mongolia the largest metallurgical coal supplier to the country, the report said. According to S&P Global Platts, shipments from Mongolia to China rose to a record pace in September, jumping by over a quarter month-on-month and more than eight percent compared to a year earlier.

Shipments of the commodity from Australia, which used to be China’s top source of coking coal, dropped to their lowest level this year in September, falling to 2.72 million tons.

The swift change in China's imports comes amid reports that Australia's coal is not wanted in China any more. Earlier this month, Chinese power stations and steel mills reportedly started canceling orders, while Chinese ports turned away Australian shipments. No official confirmation has been made so far by either country.

Tensions between Australia and its largest trading partner have been flaring for around three years, since Canberra alleged that there was a growing Chinese influence on its domestic affairs – a claim repeatedly denied by Beijing. In 2018, the Australian government added fuel to the fire as it banned China’s Huawei and ZTE from the country’s 5G rollout.

With relations souring, Beijing has effectively banned imports of Australian barley, and imposed restrictions on wine and meat shipments, among other measures. However, the ban on coal supplies could be more painful for Australia, as it accounts for a much larger share of the bilateral trade between the two countries. Coal is one of the three major Australian commodity exports to China, behind iron ore and liquefied natural gas (LNG).

Ulaanbaatar /MONTSAME/. The cabinet made following decisions at its meeting held on October 28, today.

- An open contest of logo design and brand book for the 100th anniversary of People’s Revolution in Mongolia was announced between September 18 and October 09. 36 submissions have been made by 14 designers for the contest. The cabinet ordered corresponding officials to promote to the public the best selected design and use it for their intended purpose in the anniversary celebrations next year and present the design for the 100th anniversary medal to the parliament.

- The 40th anniversary of the first space flight by a Mongolian and the joint space mission will be marked in March 2021. Jugderdemidiin Gurragchaa along with the Soviet cosmonaut V.A.Janibekov took off from the Baikonur Cosmodrome on March 22, 1981. In eight days of space travel, the two cosmonauts circled the Earth for 124 times and landed back on their home planet on March 30.

This was the first-ever space flight in the history of Mongolia. Gurragchaa is the first and only Mongolian to fly to the space and the second Asian cosmonaut. Thus, Mongolia became the 10th country in the world to send off its cosmonaut to space, 5th country to test its technology in space and 20th to create space equipment, which was tested in space.

Red Bull driver Max Verstappen sparked criticism over the weekend after he called Lance Stroll a “Mongol” and a “retard”, and later said it’s not his problem if fans were offended by his use of the ableist slurs.

This wasn’t the first time Verstappen has used such ableist language; at the 2017 US Grand Prix, he called FIA steward Garry Connolly a “Mongol” on Dutch TV after he was handed a penalty for a track limits violation.

Verstappen’s conduct at last weekend’s Portuguese Grand Prix prompted Mongol Identity – an organisation which campaigns to end the historical misuse of the term “Mongol” – to publish an open letter which urged the Red Bull driver to apologise.

And now, Uuganaa Ramsay, the group’s director, has told Formula1News.co.uk managing editor Suliman Mulhem that they aren’t looking for Verstappen to be punished by the FIA or by Red Bull – they merely want him to apologise for his mistake.

“We believe in human kindness. We all make mistakes. We are simply asking for a public apology as this carries a louder message to our next generation,” Ramsay told this publication.

Continuing, she said how Red Bull deals with the situation is an “internal affair”, but Mongol Identity hopes “that they will walk the talk, not only tick boxes to be seen as competent when their actions say different.”

Ramsay also offered to work with Formula One and Red Bull Racing “to raise awareness to ensure the drivers understand the connotations of using ‘Mongol’ as a slur.”

Yesterday (28 October), the Mongolian Cabinet appointed two representatives of the board of directors of Oyu Tolgoi LLC. Bayasgalan who worked at JP Morgan and geological engineer Gan-Ochir were selected from 46 candidates who applied to the post in September.

The board of directors of Oyu Tolgoi consists of nine representatives; three of them are appointed by Mongolian Government. The Government of Mongolia holds 34% of the total issued shares of Oyu Tolgoi LLC through Erdenes Oyu Tolgoi LLC, a subsidiary of Erdenes Mongol LLC, a state-owned company.

Ulaanbaatar /MONTSAME/. The cabinet meeting, Minister and Chief of Cabinet Secretariat L.Oyun-Erdene presented about the emergency regime performance and results set on Erdenet Mining Corporation and Mongolrostsvetmet LLC, the state-owned enterprises.

The emergency regime was set at Erdenet Mining Corporation and Mongolrostsvetmet LLC by the government in March 2019, and extended twice in September 2019 and April 2020 by six months respectively to ensure no interruptions in their operations.

At the cabinet meeting, the state-owned companies were praised for its efforts to maintain continues and normal operations throughout the duration of emergency regime, improving the workplace accountability and financial disciplines and increasing their net profits, tax payments and investments.

In 2019, the Erdenet Mining Corporation increased its sales revenue by MNT 119.5 billion, earning net profits of MNT 516.8 billion and contributing MNT 961.8 billion to the state and local budgets.

In the first three quarters of 2020, sales revenue of the Erdenet Mining Corporation was grown by MNT 198 billion, with net profit of MNT 353.3 billion and paid MNT 811.5 billion for taxes.

As for Mongolrostsvetmet LLC, its sales revenue jumped by MNT 56.5 billion and net profits totaled MNT 34.6 billion, paying MNT 33.4 billion in taxes. In the first three quarters of this year, Mongolrostsvetmet’s sales revenue rose by MNT 28.7 billion, net profits reached MNT 24.4 billion, and MNT 30.8 billion was paid for tax payment.

Ulaanbaatar /MONTSAME/. The Bank of Mongolia, today, October 28, organized a monthly press briefing on the latest update on the financial and banking industry of Mongolia.

As of September 2020, inflation rate for Mongolia was 1.7 percent, and 1.4 percent in Ulaanbaatar.

As of the first nine months of 2020, total loan balance in the banking industry was at MNT 17.2 trillion, which was made up of MNT 15.6 trillion of loans in Tugrug currency and MNT 1.6 trillion borrowings in foreign currencies. In particular, volume of salary and pension-secured loans accounted for 18 percent, which was highest share in total loans, followed by loans in the trade, real estate and mining.

In September 2020, banks issued mortgage loans worth MNT 77.3 billion to 1,052 borrowers, 30.6 percent of which is made available from financial sources of the government-approved mortgage loan program and 69.4 percent from the banks’ own funding.

Total outstanding balance of mortgage loans reached MNT 4.8 trillion with the total number of borrowers at 99,500. 73.3 percent of the total borrowers took out their mortgage loans funded by the mortgage loan program, 22 percent was funded through the banks’ sources and 4 percent from other types of sources.

Compared to the same period of last year, non-performing loans grew by MNT 4.5 billion. According to the Bank of Mongolia, the balance of payment from January to September 2020 showed deficit of USD 472.5 million, showing decrease compared to the second half of this year, when the balance of payment deficit equaled to USD 679.2 million.

Mongolia’s foreign trade balance saw a surplus of MNT 1.2 billion in the first nine months of this year.