Get ready for a recovery in demand 2016-04-20 15:59
The monthly meeting of AmCham, the American Chamber of Commerce, was held on April 20. The Executive Director of Energy Resources LLC, G.Battsengel, economist Ch.Khashchuluun and senior economist at Erdenes Mongol LLC Ch.Otgonchuluu participated in the meeting discussing prospects for Mongolia’s mining industry.
Many agreements, deals and projects were on the agenda when the prices of commodities were high, but many of them have not been fully realised as of today, the most noticeable projects being Oyu Tolgoi and Tavan Tolgoi. Recently, the Fifth Power Plant, the oil refinery and the TT power plant have been more discussed. However, major projects are not moving forward due to an unfavourable business environment, decrease investor interest and weak governance. During the AmCham meeting, economist Ch.Khashchuluun noted that many changes both favourable and unfavourable have been made at a time when domestic and foreign investors are closely watching.
"There is a certain link between the past and the present,” stated Khashchuluun. “The mining industry needs to become more open to foreign direct investment while the government needs to keep its involvement as little as possible." In addition, he noted that the economic growth of China, the biggest buyer of Mongolian mining products, will only moderate, and stated, "Although it may not grow as fast as it used to, it will still continue to grow." Executive Director of Energy Resources G.Battsengel noted that the availability of raw material and geographical location being near China are the biggest advantages for the country. Thus, Mongolia has the opportunity to regain the status of the nearest supplier by using its advantage when Chinese demand recovers. According to recent news, the price of iron ore has risen on the global market on the back of China's slight increase in demand for the commodity.
Mongolia’s domestic market demand is limited by a population of three million. Thus, the participants of the meeting said that domestic businesses face the challenge of diversifying their activities as it is difficult to focus on one sole area. They mentioned that the mining industry has the full potential to meet the domestic needs for shale and crude oil instead of only coal. By doing so, dependence of crude oil and energy imports would be reduced.