Mongolian miner signs deal to ship coal to North Korea
A Mongolian coal miner has signed a deal with a shipping company to deliver its coal via Russia to North Korea’s Rason port, part of the landlocked north Asian nation’s efforts to find new ways to reach overseas markets such as Japan and South Korea.
Miner Sharyn Gol signed a binding agreement on Friday with Mongol Sammok Logistics to ship its coal to Rason, where Mongolia already has an agreement with North Korea that gives its exporters preferential treatment at the port.
Mongolia currently ships the bulk of its mostly resource-based exports to China, leaving its economy dependent on its powerful southern neighbour and putting it at a disadvantage when it comes to negotiating prices.
“This is a pretty historic deal,” said James Passin, who controls Mongolian Stock Exchange-listed Sharyn Gol through the New York-based Firebird Mongolia Fund.
“This deal has to be viewed in the context of international relations and diplomacy,” he told Reuters on the sidelines of a signing ceremony.
Sharyn Gol currently has no sales agreements in place with any potential overseas buyers, Mr. Passin said, adding that he could not disclose any further details.
Mongolia once hoped to connect its Tavan Tolgoi mine to a rail network that would allow coal to be delivered to Asian customers through Far East Russia’s Pacific ports. But a 2010 World Bank study said the transport costs would stand at about $95 a tonne, compared to $33 a tonne for delivery into China.
Mr. Passin declined to reveal any estimated delivery cost for shipments from the Sharyn Gol mine to Rason, but pointed to the preferential treatment at the port and the Russia exports that already go through there to South Korea.
South Korea has at least twice in the past year taken deliveries of Russian coal from Rason, with steelmaker POSCO one of the regular buyers, according to a company spokesman.
Namgar Algaa, executive director of the Mongolian Mining Association, said opening up new markets would allow Mongolian miners to manage the risk of slowing Chinese growth.
China’s weakening growth this year has meant its coal imports from Mongolia fell 6.9 percent across the first four months of the year to 5.2 million tonnes.
Miners worldwide have cut thermal coal output this year to prop up prices amid weakening demand and a supply glut. Beijing has also sought to cut coal use to improve air quality.
Mr. Passin said he was expecting a turnaround as Japan switches from nuclear to coal-powered energy generation. He said he was also expecting China bring online a host of new, more environmentally friendly coal-fired plants.
“If the bullish conditions materialize, we’ll have a path for exporting,” he said.