Over the past few decades, Mongolia's economy has transitioned from being primarily agricultural to one dominated by mining. In 2000, the mining sector represented just 5.4% of the country's economic structure; today, it accounts for 30%.

In recent years, the mining sector accounts for around 90% of total exports and 70% of foreign direct investment. Mongolia's heavy reliance on the mining sector leaves its economy highly vulnerable to fluctuations in commodity markets and external economic conditions. In 2015-2016, global commodity price declines, and in 2020, border closures due to the pandemic, plunged Mongolia's economy into turmoil.

Mongolia's main export products are copper and coal, accounting for 18% and 59% of total exports, respectively. Issues related to port caused Mongolia to miss out on the commodity supercycle boom of 2021 and 2022. Structural reforms in both political and port operations have stabilized export volumes, reaching historically high levels.

Copper ore and concentrate exports surged to an all-time high with an increase in average prices. China's imports of unwrought copper increased, driven by seasonal demand in China and an optimistic outlook for the industrial metal. Despite the decline in unit prices, coal exports have remained at a high level except for September.

To promote open and transparent trading of mining products and to establish a market-driven pricing environment, Mongolia began facilitating the trading of mining products through the Mongolian Stock Exchange at the start of 2023. In the first ten months of 2024, 19.4 million tonnes of coal were traded on the exchange, marking a twofold increase compared to the same period last year. Erdenes Tavantolgoi LLC, Energy Resource LLC and Tavantolgoi LC account for the majority of coal traded on the stock exchange. In October, the exchange traded 2.0 million tonnes of coal across 37 successful transactions, making it one of the most active months since the start of the year.

China's coal imports, which elevated in 2023, are expected to remain strong in 2024. The surge in import was largely influenced by price advantage against domestic coal. Over the past three years, Mongolian bituminous coal has supplied 25% of China's total bituminous coal demand and has been 40.6% cheaper than other major exporting countries.

The government of Mongolia expects coal prices to decline in 2025; however, due to China's new economic model, demand for steel is anticipated to remain steady, which should drive an increase in the physical volume of Mongolia's coal exports. It also plans to advance its port reform policy by digitizing port operations, increasing the volume of cross-border vehicle traffic, accelerating the development of cross-border railways, and enhancing the efficiency of the mining products exchange. The government projects coal exports to reach 83.3 million tonnes next year.

(By Tsogbadrah Naranmunkh, Ard Securites)