Source: National Statistics Office of Mongolia

Coal remains the backbone of Mongolia’s economy, reflected in its outsized role in industrial output, exports, fiscal revenue, and the logistics value chain. The mining sector contributes roughly 70% of total industrial output, with coal accounting for about 43% of that output. Mining also dominates Mongolia’s export basket, making coal a key driver of foreign-exchange inflows and external liquidity.

Beyond export receipts, coal activity supports services through trade, transport, and employment. The sector’s throughput underpins rail and road freight demand, while higher mining activity typically transmits into broader labor-market strength and consumption.

Needless to say, coal performance affects the economy as a whole. As year end numbers are out, let's look into sector performance in 2025 and what we can expect in and what investors should monitor in 2026. Let’s dive in.

2025 Review: What actually happened?

Total coal export volumes rose 7% YoY, increasing from 83.8 Mt in 2024 to 89.7 Mt in 2025, and surpassing the government’s annual target of 85 Mt. In contrast, export value fell to $5.8 billion, down 34% YoY. Overall, 2025 was characterized by a widening gap between volume and value: shipments increased, but coal prices weakened materially.

According to the draft law on the 2026 State Budget of Mongolia, weaker activity in China’s steel and industrial sectors in 1H 2025 contributed to higher stockpiles and depressed pricing at the border. Prices then rebounded in 3Q as supply-side tightening measures and inspections reduced mining output in China, improving sentiment and lifting market pricing.

Importantly, 2025 marked the fourth consecutive year of rising export volumes — suggesting that logistics capacity and export execution efforts have been paying its dividends.

H1 vs. H2 Dynamics: The "V-Shaped" Recovery

Coal-sector performance in 2025 followed a “V-shaped” pattern: a weak first half (H1) followed by an acceleration into the second half (H2).

• H1 contraction: 1H 2025 was marked by a slowdown, with total coal production reaching 43.7 Mt—an 7% decline versus 1H 2024 (46.7 Mt). Coking coal exports to China also fell materially during the period.
• H2 rebound: Activity recovered meaningfully in H2. By September 2025, monthly output had swung back into growth to 89.7 Mt (+15.2% YoY).

This pattern underscores a key theme for investors: Mongolia’s export system is increasingly capable of ramping when demand/pricing conditions improve, but it remains highly sensitive to China-driven demand signals and border market microstructure.

Chinese Demand Conditions

With China purchasing nearly all of Mongolian coal exports, China’s macro and industrial cycle remained the decisive variable in 2025.

• Resilient coking coal intensity: Even as China’s crude steel output softened in H1, the implied intensity of metallurgical coal usage remained relatively supported—consistent with demand for higher-quality inputs in certain production chains.
• Strategic import shift toward land-based supply: China has increasingly favored proximate, land-based suppliers—particularly Mongolia and Russia—over seaborne supply in certain market conditions, reflecting delivered-cost advantages and shorter logistics chains.
• Macro headwinds: China faced broader economic slowdown during 2025, including disinflationary pressures and uneven manufacturing momentum, which contributed to weak pricing conditions across the bulk commodity complex.

Logistics Breakthroughs

The H2 recovery was reinforced by infrastructure progress and ongoing efforts to reduce Mongolia’s historical overreliance on truck-based transport. In particular, construction activity on the Gashuunsukhait–Gantsmod cross-border railway is positioned as a medium-term catalyst that could increase annual transport capacity and improve cost competitiveness for exporters. 

For investors, the key implication is that logistics constraints—while easing—remain a gating factor for monetizing volumes during upcycles. Capacity additions can amplify export responsiveness, but they can also contribute to localized oversupply at the border if demand softens.

The Impact of Coal on the 2025 and 2026 Budgets

Coal remains the one of the most important swing factor for Mongolia’s fiscal outcomes—primarily through price and volume assumptions embedded in budget planning.

2025: Price-driven fiscal stress

In 2025, the budget absorbed a material shock from weaker-than-expected coal pricing relative to assumptions:

• Price collapse vs. budget assumptions: The 2025 budget assumed coal prices near $105/ton, while realized pricing was materially lower during the year.
• Revenue shortfall and adjustment: The pricing gap reduced coal-linked revenues, forcing expenditure and revenue revisions and increasing deficit uncertainty.

2026 Budget Projections and Reliance

Despite 2025 volatility, the 2026 budget framework remains heavily reliant on coal export performance:

• Revenue and expenditure targets: The 2026 consolidated budget is planned with revenues of around MNT 31.6 trillion and expenditures of about MNT 33.0 trillion, implying a deficit near 1.4% of GDP. 
• Ambitious volume target: The Mongolian government is projecting 90 Mt of coal exports—an all-time-high target that would imply another record-year outcome.

For foreign investors, the takeaway is straightforward: coal prices and border execution will remain the primary determinants of fiscal performance, liquidity conditions, and FX dynamics in 2026.

2026 Outlook: What to expect and what to watch?

Mongolia’s coal sector forecast for 2026

The Ministry of Economy and Development projects 90 Mt of coal exports in 2026 at an average price of ~$70/t, implying export proceeds of ~$6.3bn. Looking ahead, the partial implementation of China’s “276 working days” policy (effective August 2025)—together with Beijing’s push for higher-quality steel output to support priority sectors (green energy, advanced technology, biomedicine)—is expected to underpin demand for Mongolian coking coal, helping keep prices broadly stable versus the 2025 price.

Domestic projections cite several supportive factors: maintaining/increasing export volumes, more stable pricing, and incremental supply gains (including operational developments at Erdenes Tavan Tolgoi). Diversification efforts—such as discussions around supplying coking coal to India—could add longer-term optionality, although China will remain the anchor market in the near term.

At the macro level, the base case for 2026 is steady growth, moderating inflation, a slightly easier policy stance, and a weaker currency versus the USD—with coal and copper still acting as Mongolia’s primary transmission channels to fiscal revenues, FX inflows, and activity.

Longer-term reference point (IEA)

Looking beyond 2026, the IEA projects Mongolia’s coal output to ease toward ~97 Mt and exports toward ~84 Mt by 2027, while metallurgical coal exports remain broadly stable at ~56 Mt as Chinese demand plateaus. This supports the base-case view: volumes can stay high, but price and end-demand growth are likely to be the binding constraints.