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Ovoot metallurgical coal to address forecast fat metallurgical coal shortage in China

Published by , Assistant Editor
World Coal,

As part of the Aspire Mining Ltd (Aspire) Ovoot early development plan (OEDP) Pre-Feasibility Study, the company has engaged Fenwei Energy Information Services Co Ltd to review and report on the Chinese metallurgical coal market and pricing expectations out to 2025 (Fenwei report).

The Fenwei report categorises the OEDP washed metallurgical coal as a moderate ash, moderate sulfur fat coking coal based on the following indicative washed metallurgical coal product specification. This indicative specification will be confirmed on the release of the results of the Pre-Feasibility Study due shortly.

This specification puts Ovoot metallurgical coal well within the marketable specification ranges for fat coking coal brands in China. Fat metallurgical coal is used in blends to produce coke for steel making in blast furnaces. Fat coal creates conditions for good meltability, improving coke’s wear strength and creates conditions for adding other coals with low coking capability.

The Fenwei report indicates fat coal as a percentage of total Chinese coal blends is to rise from 13.6% to 14.7% over the forecast period resulting in a total fat coal demand of 76 million tpy. Of this, only 11 million tpy of low sulfur (< 0.75%) fat coal is expected to be mined from Chinese domestic mines. Ovoot coal is considered to be medium sulfur at 1.2%.

Medium sulfur metallurgical coal makes up 44% of fat coal consumption in China’s steel industry with high sulfur coals starting at + 1.5% having a 28% share of the market. Given the forecast higher proportion in blends, demand for fat coal in China is rising at a time when domestic fat coal production is predicted to be stagnant over the forecast period 2019 to 2025. Price Forecasts Pricing in China aligns with seaborne metallurgical coal pricing benchmarks over time although from time to time there are short term divergences. With Mongolian metallurgical coals being delivered into end markets in China, prices for similar quality imported coals will essentially include seaborne transport costs, port retrieval charges and costs to move the coal off the receival port to customers. These costs can add US$20–US$25\t to FOB pricing depending on the end customer location. Fenwei have provided a price forecast of Rmb1307/t falling to Rmb1217/t excluding VAT over the forecast period 2019 to 2025 based on an equivalent fat coal benchmark product from the Hebei Province. Based on the current exchange rate of Rmb 6.9:1 US$ this equates to US$189/t falling to US$176\t. The current ex-VAT price for this benchmark fat metallurgical coal in the Hebei Province is Rmb1341\t ex-works or US$194/t.


The market dynamics for metallurgical coal, and fat metallurgical coal in particular, are expected to underpin relatively stable future pricing. While the Fenwei report focused on the Chinese market place, given the location of Ovoot in the north of Mongolia, there are also viable markets in Eastern Europe, Russia and the Russian Far East with new lower rail tariffs being offered by Russian Railways.

Fenwei noted in its report that: “Due to the stricter requirements on coke quality in large blast furnaces and the increasing blending ratio of hard coking coal, fat coal market may see a large gap of 16 – 22 million tpy in 2018 - 2025, which needs to be filled by imported coal, especially low and medium sulfur fat coal.”


Aspire’s Chairman David Paull noted that: “The targeted 3 - 4 million tpy of washed fat coal production from the Aspire OEDP will go part of the way to meeting this deficit.”

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China coal news