China's Coal Imports Surge, With Mongolia Gaining Ground Over Russia

China’s coal imports hit a new record in 2024, with substantial contributions from Australia and Mongolia, while Russian shipments saw a decline. As China’s demand for coal stabilizes, Mongolia is poised to potentially increase its market share at Russia’s expense, especially with its strategic proximity to the Chinese market.

According to customs data released on Monday, China’s total coal imports surged by 14% to 543 million tons in 2024. Notably, Australian coal shipments saw an impressive rise of nearly 60%, while exports from Mongolia increased by 19%. Despite these gains, Indonesia retained its position as China’s largest coal supplier, although its year-on-year growth remained modest.

The dramatic rise in Australian coal imports highlights the improved diplomatic relations between the two nations, particularly after China imposed a ban on Australian coal shipments earlier this decade. However, Russia is losing out due to the high cost of its coal and the potential impact of new US sanctions, which may further deter Chinese buyers from considering Russian supplies.

Mongolia, on the other hand, benefits from its geographic proximity to China and has been working to strengthen ties through improved rail infrastructure. While Australia can respond to rising prices across Asia due to its extensive global shipments, Mongolia primarily serves China, which provides a steady and focused market for its coal.

The shift in trade dynamics comes at a time when China’s coal import demand is expected to moderate in 2025, thanks to a glut of domestic coal. This oversupply could put pressure on coal prices, impacting profits for exporters. However, China still faces a shortage of higher-grade coal used in steel production, a sector that relies heavily on supplies from Australia and Mongolia.

In 2024, Mongolia accounted for 60% of China’s coking coal imports, crucial for steelmaking. Notably, Mongolia’s objections to aligning its rail track specifications with China’s have been resolved, and the government is now prioritizing enhanced rail links at the border. These improvements could potentially double the coal cargoes to China, according to a parliamentary resolution passed last month.

China’s steel industry, however, is facing challenges, with production expected to decline in the coming years. Despite this, Mongolia is also eyeing opportunities to expand its thermal coal exports to China. Mongolia’s parliament has approved 16-year supply agreements from its largest coal miner, Erdenes Tavan Tolgoi JSC, to four Chinese companies, including China Energy Investment Corp. These deals are expected to deliver up to 20 million tons of coal annually once fully operational in five years.

As the global coal market shifts, Mongolia’s strategic positioning and strong trade relations with China may allow it to solidify and expand its role as a key supplier in the region. Meanwhile, Russia’s coal exports face increasing challenges as China diversifies its sources of supply.