Mongolia exports over 90 percent of processed meat products to China www.zgm.mn

China’s pork price has been surging due to Covid-2019, bird flu, and mumps. In particular, the National Bureau of Statistics of China informed that pork price boomed by 116 percent in January from the previous year. Continued shocks in demand and supply of pigs, chicken, and seafood are likely to incent Mongolian meat export. As of 2019, China made up 99 percent of beef and mutton export of Mongolia; horse meat composed 98 percent of meat export. Mongolia earned USD 106 million from these three types of meat export. This is 1.8 times more than the previous year and it is assumed that meat export increased while domestic meat supply declined. Inflation exceeded the Central Bank’s target which is driven by summer and autumn surge of meat prices in 2018 and 2019, it increased more than 30 percent from the previous year. Domestic meat reserve stores up 12.1 million tons and 8.6 million tons of entities which is enough to meet the demands of citizens for 5 months. Analysts warned that if meat export to China soars, it will create a domestic deficit and price slump.

Fluorspar enrichment plant becomes ready to commission in Dundgobi www.montsame.mn

Dundgobi /MONTSAME/ ‘Bolorjonsh’ LLC in Bayanjargalan soum of Dundgobi aimag has built fluorspar enrichment plant in territory of Enger-Us bagh (smallest administration unit) of the soum and it is now ready to commission.

Government to study options for gold refinery plant www.montsame.mn

Ulaanbaatar /MONTSAME/. The Cabinet today at its regular session assigned relevant ministers, heads of agencies and other officials to study and report back the possibilities to build a gold refinery with the investment from domestic and foreign sources.

Ambassador of China to Mongolia presents letter of credence www.montsame.mn

Ulaanbaatar /MONTSAME/. Newly appointed Ambassador Extraordinary and Plenipotentiary of the People’s Republic of China to Mongolia, Mr. Chai Wenrui presented his credentials to President of Mongolia Khaltmaagiin Battulga.

Boeing's got bigger problems than the 737 Max www.cnn.com

New York (CNN Business)Fixing the 737 Max and getting it back in the air is crucial for Boeing. But it's not the only major challenge facing the embattled aircraft maker. Boeing also needs to focus on its next generation of passenger planes.

The aircraft maker has made its focus clear as it works on getting the 737 Max approved to fly again, which is expected to happen by the middle of this year. The plane has been grounded since March, following two fatal crashes that killed 346 people. The nearly year-long crisis has put orders and deliveries of many of the company's jets on hold.
Tuesday, Boeing reported that it didn't receive any new orders for commercial jets in January, compared to 45 orders a year ago. And it only delivered 13 commercial planes in the month, down from 46 a year earlier.
The 737 Max crisis has stymied Boeing's growth. But Boeing (BA) faces a longer-term threat that is even more important to overcome: Boeing is falling behind rival Airbus and needs to build the next generation of planes to remain competitive in the future.

The 777X
The 777X widebody plane has already been developed and is going through its first round of test flights. But its official debut has been pushed back because of problems with its engine from General Electric (GE).
At the time of the Max crisis, Boeing was planning on delivering the 777X at some point this year. But in October, it pushed back the first delivery date to early 2021.
Boeing has 309 orders of the 777X that are now being delayed.

The new plane
Boeing is positioning its new airplane for the middle market, slotting in between the 737 Max and long-range wide bodies like the 777X and the 787 Dreamliner. The plane would probably carry about 250 passengers and travel nearly 5,000 miles. The segment would serve airlines who want a larger plane that can carry more passengers and travel farther than current single-aisle jets.
Boeing has already fallen behind rival Airbus in that part of the market. Last June, Airbus started taking orders for the A321neo XLR, its middle-market jet that is set to be in service in 2023.
Boeing coming up with a middle-market jet of its own is "the most important thing I would say," said Richard Aboulafia, aerospace analyst with the Teal Group. "Airlines want a larger, single aisle jet for international routes, and some regional routes as well."
Boeing has been talking for years about developing what it called the NMA for New Middle-Market Airplane. It was popularly being referred to in the industry as the 797, given Boeing's plane nomenclature. Boeing had been signaling it would serve that part of the market with a new widebody jet. But last month new CEO David Calhoun announced that the company is going back to the drawing board on the plane's design.
"We're going to start with a clean sheet of paper again," he said.
That was seen as an indication that the plane would ultimately be a longer single-aisle jet, like the Airbus offering.
"It was long overdue for a reexamination," said Aboulafia. "There's been a shift away from twin aisles and towards single-aisle jets. What was a 50-50 split has become two thirds-one third split."

Falling behind Airbus
But Boeing already has fallen behind Airbus. The market for a mid-range aircraft is probably somewhere been 2,500 and 4,000 planes. Airbus has already taken orders for the A321neo-XLR to serve that market. But once airlines pick a plane in a segment of the market, they rarely buy a rival's plane in the same segment.
"Their competitor already has something," said Ron Epstein, aerospace analyst for Bank of America-Merrill Lynch. "Is it too late [for Boeing] already? It could be. It's hard to say for sure."
While Boeing said it was continuing to work on the new plane during the Max crisis, it was clear that the diversion of resources and and attention to fixing the Max delayed its debut. Calhoun promised it would move quickly on the new plane's design. And he insisted the decision to scrap the old plans and start again was more market related than Max related.
"If we were not having trouble with the Max, I would have made the [same] decision on the NMA," he said on a recent press call.
A replacement for the 737 Max
After it addresses the middle market, Boeing will have to turn attention once again to the part of the market now served by the 737 Max. That's because the need to come up with an replacement for the 737 is on the horizon.
It's tough to tell how soon it will need a 737 replacement. Experts say Boeing might not start taking orders for a 737 Max successor for another 10 years.

But the need to come up with a successor could be sooner than that.
If the fixes for the 737 Max aren't enough to make passengers comfortable with flying Boeing's best-selling jet, Boeing could have to act sooner. Boeing executives and many airlines say they believe passengers will be willing to fly the Max once it is cleared to fly again. But nobody knows for sure.
It has orders for about 4,000 737 Max jets that it has yet to build. So no matter passengers' initial reactions, it will probably continue to build it for years.
But it will also needs new orders at some point to justify the program. So far it has only firm orders for 32 of the planes in the 11 months since the grounding, although International Airlines Group, the owner of Aer Lingus, British Airways, Iberia and other European carriers, signed a letter of intent to buy 200 of the Max jets at the Paris Air Show last June.
The first 737 was delivered more than 50 years ago in 1967. The Max is just the latest version, as it debuted in 2016. Even without the current crisis, experts say it was a model that needed a complete redesign.
"The 737 has reached the end of its line with the Max," said Aboulafia. "It made sense as a last of its kind. There's no way you can get a fifth version out of the plane."

Ambassador of China to Mongolia Chai Wenrui www.montsame.mn

The Mongolian National Chamber of Commerce and Industry (MNCCI) launched a donation campaign, calling for its members to render assistance to the People’s Republic of China to combat with the novel coronavirus infection. The Mongolian delegates yesterday handed over MNT 140 million, which has been collected so far within the campaign, to the Embassy of China in Mongolia.

Ulaanbaatar testing new electric buses www.news.mn

The Mongolian capital is currently testing eight electric buses, which look set to become the first of many on Ulaanbaatar’s streets. The vehicles, have been produced by China’s Yinlong Energy Company for public transportation. The buses began operation on 20 January on a trial period set to push them through the worst of a Mongolian winter. According to public transport specialists, the buses can handle -50 and -60 Celsius temperatures and can be recharged quickly within 15-20 minutes. The buses have 36 seats and run 200 km when fully charged.

Face recognition technology to be introduced in general entrance exam www.montsame.mn

Ulaanbaatar /MONTSAME/ In connection with the start of online registration for general entrance exam, the Education Evaluation Center held press briefing on February 10. According to the report, face recognition technology will be introduced in the general entrance exam from this year.

The time is nearing to domestically process black gold and become self-sufficient www.montsame.mn

Ulaanbaatar /MONTSAME/ The oil refinery project which had been an unachieved goal of Mongolia, has started and is progressing successfully at the moment. A couple months ago, the Government of Mongolia completed its obligation to construct the infrastructure of the plant worth over MNT 120 billion with its own money and labor. Minister of Road and Transport Development B.Enkh-Amgalan emphasized that the infrastructure has been built at thrice cheaper cost with the use of domestic workforce. The Government of India is disbursing funding for the project as scheduled. In other words, the most favorable conditions for realization of the project are here today. The only thing to hope is that the project will continue even when the government changes.

Gas price can be maintained at MNT 1000

The commissioning of the 27 km railroad, 17 km road, and 110 kV power transmission line connecting the oil refinery in Altanshiree soum of Dornogobi aimag and Sainshand city of the aimag opens up an opportunity to transport equipment and materials to the construction site to begin the construction works.

The construction of the non-technological facilities of the refinery with an initial estimated cost of USD 1.2 billion will start in the spring of 2020 and the crude oil processing facilities in 2021. In case the works are done promptly and stably, the plant will open in 2023 and Mongolia’s total production will increase by 30 percent, GDP by 10 percent. In addition, it is expected to bring many positive changes such as annual budget contribution of USD 150 million, 20 percent drop in the exchange rate of USD against MNT, 20-30 percent decline in foreign exchange outflows and creation of over 600 jobs. Most importantly, when Mongolia starts producing gasoline domestically, gas price will fall to around MNT 1000 per liter or even MNT 800 with the government’s support. Furthermore, the price could go down from MNT 800 once the plant’s capacity reaches 2 million tons.

Mongolia’s gas consumption reaches 1.8 million tons a year during its peak time and the country spends about USD 1 billion on this. Mining and agriculture, the main economic sectors, account for 60-70 percent of the total consumption. Statistics show that the consumption decreases to 1.2 million tons when mining is stagnant. It is anticipated that the refinery will produce 400 thousand tons of A-95 gasoline, 600 thousand tons of diesel fuel, 40 thousand tons of aviation fuel, 20 thousand tons of mazut and other petroleum products and satisfy at least 70-80 percent of the domestic demand.

Should raw materials be supplied at extraction cost or market price?

There are 33 petroleum exploration blocks in Mongolia. One million tons of oil is annually extracted from three of these blocks, namely Tamsag XXI, Toson Uul XIX located in Dornod aimag and Zuunbayan XIV in Dornogobi aimag, and exported to China. The oil in place of these producing blocks was estimated at 332 million tons and their total proven reserves at 43 million tons, which means only 15 percent of the total oil reserves can be extracted. There is almost no country in the world that extracts all of its oil in place as the allowed extraction volume depends on the energy in the ground layer. The more this energy is, the more oil can be extracted. For instance, in Russia, up to 80 percent of the oil reserves can be extracted in some blocks.

It is planned to extract 1.5 to 1.6 million tons of oil from the abovementioned three blocks each year between 2015 and 2039. Coming into operation of the oil refinery will enable to supply to it the entire crude oil extracted in Mongolia. However, should it be supplied at market price or the cost of extraction? Regarding its shares, the Chinese side will obviously go for market price.

According to a Production Sharing Contract that expires in 2032, 25-30 percent of the total extracted oil is allotted to Mongolia. If the Government successfully creates an opportunity to purchase its share of crude oil at extraction cost, it will hugely support the economy of the plant, highlighted D.Altantsetseg, CEO of the Mongolian Oil Refinery state owned company. It is because raw material costs make up 85 percent of the total production costs of an oil refinery and operational and other costs account for the remaining 15 percent.

Railroad considered to be more efficient than pipeline

It is planned to supply raw materials to the plant from the Toson Uul XIX and Tamsag XXI blocks. It had been thus decided to build an oil collection center in and a pipeline starting from Tosol Uul XIX as the block is 90 km closer to the refinery than Tamsag XXI, which is located 640 km away from the refinery. However, the Government of Mongolia concluded that establishing railroad instead of pipeline would be an optimal choice for developing railroad infrastructure in the eastern region. Even though it would be economical to use pipeline transport, construction of a pipeline itself costs USD 350 million. The construction of a railroad between Tamsag XXI and Sainshand soum also requires the same amount of funds needed in building a refinery. Nonetheless, refinery authorities support this position of the government, emphasizing that pipeline transport and railroad transport basically have no difference.

The necessities of proving oil reserves and intensifying exploration

8 million of the 43 million tons of total proven oil reserves of Mongolia has been extracted and exported and what is left now is 35 million tons of oil. Therefore, the refinery will have an annual capacity of 1.5 million tons. Intensifying oil exploration and increasing oil extraction are crucial to exporting products after fully meeting the domestic demand.

Within the goal, Mongolian geologists have actively carried out explorations and thus far discovered oil reserves from three blocks. Specifically, a number of wells drilled in the blocks Galba XI, Khukhnuur XVIII, and Matad XX in Dornod aimag contained oil. In 2018, 1500 tons of oil have been extracted from Galba XI on trial and exported to China. From the now relinquished block Khukhnuur XVIII, approximately 35 tons of oil has been extracted. Two of the three wells that are planned for this year have been drilled in the relatively active block Matad XX. According to a primary exploration report, one of the two wells contains oil.

1.75 percent interest loan to be repaid from seventh year

During his visit to Mongolia in 2015, Prime Minister of India Narendra Modi agreed to give Mongolia a soft loan of USD 1 billion for its infrastructure development. The year after, the government decided to build an oil refinery with the loan. A feasibility study then estimated that USD 1.2 billion would be needed for the construction of an oil refinery. The sides agreed to increase the financing of the oil refinery establishment project by USD 236 million during Mongolian President Kh.Battulga’s state visit to India in September this year. Minister of Finance Ch.Khurelbaatar and General Manager of Exim Bank of India Shri Saroj Khuntia signed an agreement on the additional financing on October 9.

As agreed, the repayment of the Indian 20-year soft loan with an interest rate of 1.75 percent will start seven years after the first disbursement. It is expected that the plant will cover its cost within the first five to eight years of operation. The project consulting service fee of USD 73 million in the detailed feasibility study equals not the usual 10 but 5.8 percent of the total project cost. Authorities of the Mongolian Oil Refinery company underlined that feasibility studies offer cost estimates within -20 to +20 percent accuracy and that efforts are being put to cut the cost.

Mongolia has previous experience in domestic gas production

Geologists of Mongolia and Soviet Union embarked on an oil expedition in the 1940s. Mongolia first started extracting oil from a well drilled in Choibalsan I block in Zuunbayan and Tsagaan Els oilfields of Dornogobi aimag in 1949. The country has extracted 490 thousand tons of oil every year from 1949 to 1969, producing A-76 and diesel fuels through its refinery. In 1969, when large blocks were emerging in Russia, the plant was put out of operation due to an accident.

Later in the 1980s, Mongolia had its oil blocks determined by the British Petroleum company from UK through research works of Mongolian and Soviet geologists, surface samples, and biochemical research. 24 oil blocks were classified in 1991 and the first Production Sharing Contract (PSC) was signed for Toson uul XIX and Tamsag XXI blocks in 1993. Then 1998 saw the first trial export of crude oil to China. Oil exploration activities took place between 1994 and 2010 and oil extraction intensified in 2012. This is the history of Mongolian oil exploration. It is commendable that now the time is nearing to have an oil refinery and gain almost complete oil independence from our neighbor in the north, Russia.

Iron ore, coking coal shrug off China coronavirus, look to stimulus www.reuters.com

It may seem slightly odd to ask if a commodity that has shed 15% of its value in a little over two weeks has actually fallen enough, but iron ore is looking quite resilient in the face of China’s coronavirus epidemic.

In theory iron ore and steel should be among commodities most exposed to the expected economic hit from the virus, which has killed more than 1,000 people and infected more than 42,000.

The epidemic has led authorities in Beijing to quarantine the central city of Wuhan, where the outbreak started, but more seriously for the economy, it has led to extended holidays after the week-long Lunar New Year break.

Given steel’s central role in construction, infrastructure and manufacturing, especially vehicles, it is likely that demand for the metal will slump in the first quarter.

How big a hit China’s economy will take is still subject to debate, with some analysts seeing growth in gross domestic product halving to about 3% year-on-year, while others expect the blow to be slightly more modest.

Even the best case scenarios are likely to prove deleterious to China’s steel sector.

Despite this, the price of spot iron ore has not been too badly pummelled by the virus fears.

Benchmark 62% ore, as assessed by commodity price reporting agency Argus, ended Monday at $81.35 a tonne, down 14.9% since Jan. 22, when the virus concerns really started to grab media headlines.

While a drop of nearly 15% is nothing to sneeze at, it is worth noting the price is still higher than the 2019 low, which was $78.15 a tonne on Nov. 11, when concern about a trade dispute with the United States was hitting sentiment.

The price action seems to suggest the market was more concerned by the trade dispute, which actually did not appear to have much impact on China’s steel production or demand, than by the virus, which is likely to have a very real effect on both.

It is also worth noting that while iron ore prices plunged when China resumed trading after the Lunar New Year break, they have since largely stabilised, staying in a fairly narrow $3 range since Feb. 3.

Domestic iron ore futures on the Dalian Commodity Exchange have outperformed the spot price recently, with their decline since Jan. 20 standing at only 9.2% by Tuesday.

Coking coal stable
Iron ore is only one component for the steel-making process, the other being coking coal, and here the price action is even more subdued.

Coking coal futures traded in Singapore, which are based on the price of Australian free-on-board cargoes, ended at $150 a tonne on Monday.

They hardly show any impact of the virus, with the recent low being just $146.08 a tonne on Feb. 4, and the contract is still up 10.3% since the end of last year.

Coking coal futures on the Dalian Commodity Exchange have also rallied, ending Monday at 1,225 yuan ($175.50) a tonne, slightly off the prior close of 1,227.5 yuan, but up 3.7% from the recent low of 1,181 yuan, and also up 5.2% from the end of last year.

The relatively sanguine performance of iron ore and coking coal in the face of the virus contrasts with Brent crude , which has dropped 18.3% since Jan. 20, and a steeper 22.7% from its high this year on Jan. 6.

While crude oil consumption in China is likely to be affected by the virus, its overall impact on imports may not be so dramatic as refiners and the government are likely to use the drop in prices to build strategic and commercial oil stockpiles.

For iron ore and steel, it would appear market participants are looking beyond the virus to the likelihood of increased stimulus spending by Beijing.

Once the virus is contained there is wide expectation for the government to announce measures to support growth, and steel mills will be hoping that infrastructure and other steel-intensive industries are favoured.

(By Clyde Russell; Editing by Clarence Fernandez)