Massive congestion at major shipping ports in China has completely disrupted the supply chain and trade to Mongolia.
Mongolia mostly depends on its ports situated on the China-Mongolia border, particularly the Tianjin and Dalian ports as well as the Erenhort land port for conducting its national trade. Mongolia, which is bordered and landlocked by both China and Russia, relies exclusively on there Chinese ports for access to economic trade and supply with other countries.
The extended and prolonged congestion, especially at the Tianjin port, has created a multitude of issues for Mongolia as currently 4,378 shipping containers are congested at Tianjin which further require expenditure in the form of container rental payments and storage fees, increasing costs for Mongolia.
As per CEO O.Davaasuren of the Mongolian Association of United Cargo and Freight, an NGO, the rental costs have increased from $10 to $50 per day, in addition to which the CEO claims as Mongolia is a landlocked, developing country, transportation costs are high compared to other countries.
Davaasuren has gone on to further state that: “In addition, there is the issue of freight transportation on the Erlian-Zamiin-Uud route. The price of a truck used to be 7,000-8,000 yuan, but now it is 40,000 yuan. Shipments that arrived in Ulaanbaatar in 6-7 days have been coming for 20 days or more. It also takes goods from imported containers and returns empty containers by rail or road. This can also lead to agglomeration with export trucks. There are a lot of transportation and logistics issues like this.”
Davaasuren highlighted more pressing issues when asked about the number of containers stuck at the Tianjin port and how Mongolia intends to resolve the issue.
As per Davaasuren, an estimated 4,000 containers are stuck at the Tianjin port and since late April, the containers have not moved yet. He claims this is concerning as most of the cargo coming to Mongolia from countries such as Japan, Korea, Turkey and the US passes through the Tianjin port.
On an average, containers are transported to the port in 5-7 days, but now it takes up to 30 or sometimes upwards of 40 days which shoots up rental and storage costs by a significant amount.
When asked on solutions to be worked out with the Chinese foreign ministry, Davaasuren said their NGO had contacted the Chinese authorities and the Ministry of Foreign Affairs where they proposed that to reduce the congestion at the ports, it is important to increase the number of container trains to Mongolia by an estimated 2-3 times.
The NGO has also released a statement recently that only one train is going towards Mongolia, which has done little to help with the slowdown of movement of goods through the Tianjin port.
The lackadaisical efforts by the Chinese authorities have not made any significant impact in trying to resolve the Tianjin port congestion issue as despite other containers now commencing movement, the volume and pressure at the port has remained unchanged, which has caused a domino effect on prices of freight, containers, rentals, and storage which negatively affect import based small businesses.
The crisis between Mongolia and China has only worsened as COSCO Shipping Organisation, a CCP controlled transportation conglomerate that controls and oversees all sea freight by rail deliveries bound for Mongolia has recently appointed an exclusive agent to represent COSCO’s business interests in Mongolia, a move which has been criticised by manufacturers and traders in Mongolia.
As per a local news agency Monstame, this poses a bigger challenge for local freight forwarders as earlier they could receive containers directly from COSCO, but now all such decisions would be overseen first by the locally appointed exclusive agent which increases clearance and delivery timelines, along with additional costs that passed down to the general public.
Clearing the Tianjin port congestion is essential to the Mongolian economy as its landlocked layout forces the country to completely reply on China and Russia for conducting its global trade.