Mongolia is to launch an open international bidding process to select a management team for major state coal mining company Erdenes Tavan Tolgoi (ETT).

ETT owns a large part of the sprawling six-billion-tonne Tavan Tolgoi coking and thermal coal deposit located near Mongolia’s southern border with China. The company was embroiled in the huge “coal mafia” corruption scandal that rocked Mongolia in late 2022.

Prime Minister of Mongolia Oyun-Erdene Luvsannamsrai has given instructions to officials to undertake measures to initiate the open bid, Montsame, the official state-owned Mongolian news agency, reported on September 26.

Oyun-Erdene has, meanwhile, reportedly asked Cabinet members to improve ETT’s corporate governance and increase its profit and value.

International consultants will be hired to help select the winning bidder.

The announcement of the ETT bid comes as Bloomberg reports that Chinese steel mills are snapping up so much coal from Mongolia that the country has displaced Australia as their top supplier.

The success is attributed to Mongolia’s cheaper coking coal prices and geographical convenience compared to Australia. Mongolia provided more than half of its giant neighbour’s steelmaking-coal imports last year.

As Beijing and Canberra entered into a diplomatic spat in 2020, China turned to Mongolia for the high-calorie coal commodity, also known as metallurgical coal, or “met coal” and used in making coke required by steel mills’ blast furnaces. Even as various difficulties in Chinese-Australian relations were resolved, Chinese steelmakers’ demand for met coal from Mongolia remained high given that demand from India and other markets kept Australian prices for the product high.

Mongolia’s less-expensive met coal, produced in open-pit mines, is delivered by truck or rail to China’s northern border.

“The supply is low-sulfur, low-ash. It’s even close to the delivery standard demanded by the Dalian Commodity Exchange’s futures contracts, and so it can be used by traders to offset short positions,” wrote Bloomberg.

Almost all of Mongolia’s coal shipments go to China and last year record coal exports amounting to 69.6mn tonnes drove Mongolian GDP to 7%.

For this year, Mongolia has increased its coal export forecast to a new record of 78mn tonnes. For 2025, the government estimates 83mn tonnes is achievable.

More than 90% of Mongolia’s export earnings derive from minerals, including copper, largely sold on the Chinese market. This week, Asian Development Bank (ADB) revised its 2024 forecast for Mongolian GDP to 5.5% to 4.1%, with the booming coal export sales a key factor in the revision.

“Dzud” weather conditions that have this year devastated much of Mongolia’s agricultural industry, killing millions of head of livestock, mean that last year’s GDP performance is unlikely to be matched.