1. Mongolia has a unique geography that lends itself to international trade.
Coal seams extend from Western Siberia, especially Kemerovo, to the Mongolian Steps. The coal seams are of very high quality and contain anthracite in large amounts. This is particularly advantageous for the export. The Chinese market is particularly important. Given Mongolia’s proximity to the Chinese market, it is likely that Mongolia will become more integrated into the larger trade networks of East Asia and the New Silk Road.
Other export markets like Europe and the United States are far away and not easy to reach. Transportation to these distant places is very expensive. After all, every kilometer causes additional costs and lowers profitability. Thus, China remains the most important market for Mongolian coal.
There has been a decline in coal consumption for power generation in China. Now there seems to be a slight reversal in fortunes. Coal consumption has picked up somewhat. The European market has actually dried up as renewable energy production has increased in the European Union. Nevertheless, coal remains an important part of the energy landscape. Many countries in the European Union rely on coal to meet their energy needs.
Geographically, Mongolian coal exporters have an easier time selling coal to East Asian economies. China takes the lion’s share. But because Mongolia has abundant coal reserves locally, coal is likely to remain an important part of Mongolia’s energy sector.
2. Heavy industry and steel manufacturing can have a bright future in Mongolia.
Due to the fact that Mongolia has significant coal and iron ore deposits, one could easily envision a future where Mongolia has a strong heavy industry. Mongolia could become a major exporter of steel to the East Asian market. Proximity to the East Asian economies also plays a role. This is an exciting prospect.
Manufacturers are now looking for locations where they can procure energy cheaply and have raw materials available.
3. The increasing integration of the Russian and Chinese economies should benefit Mongolia’s energy sector.
We see the growing interdependence of the Chinese and Russian economies. Mongolia lies between the two economies and can benefit from trade with both countries. Mongolia can also join many initiatives to expand trade relations and increase exports of energy commodities to East Asia. Further integration into RCEP can also lead to more trade with East Asian countries, including Vietnam and the Philippines.
These new trade routes depend on China’s commitment to RCEP and the Shanghai Cooperation Organization. China is the hub of trade in the region and a major buyer of raw materials. China is a major buyer of raw materials from the Russian Federation, Central Asian countries, and Mongolia. For energy trade, regional integration is probably a good thing. This is because energy trading also lowers energy prices. This is a prerequisite for more trade.
This may be the harbinger of further ventures. It could even lead to an integrated power grid in East Asia. This would be another milestone in regional integration and cooperation between the various players in the energy markets of East and Central Asia.
A mix of fossil fuels and renewables can ensure Mongolia’s energy security for many decades to come. Mongolia performs very well in both areas. Mongolia could also be more integrated into the Eurasian pipeline network. This would diversify Mongolia’s energy profile to include other energy sources such as natural gas.
Mongolia can maintain a wide network of trade links across Eurasia. Geography is on the side of Mongolia. Trade should be seen as a vehicle for the growth of the domestic economy, and the growth of the Chinese economy is likely to play an important role in promoting domestic production and consumption.
Due to Mongolia’s expansive nature, pipeline networks are well suited for commodity trading. They are also cheaper than other forms of overland transportation. Expansion of the pipeline network can be an important goal for the growth of the energy sector.
Deffeyes, K S 2006, Beyond Oil: The view from Hubbert’s Peak, Hill and Wang, ISBN 0-8090-2957-X, United States.