China is one of Mongolia’s main trading partners, an economic powerhouse and the leading supplier of manufactured goods. China is also the main transit hub for landlocked Mongolia – other than Russia – providing access to most of Mongolia’s economic activities and trade with other countries. However, prolonged maritime congestion, especially in the ports of Tianjin and Dalian and the land port of Erenhot on the Sino-Mongolian border, is disrupting the supply chain to Mongolia, and the two sides are looking for ways to overcome this unexpected challenge.
Since the end of April 2021, tens of thousands of shipping containers have been congested in the South China Sea, disrupting the distribution and supply chains of the global market. As a result, Mongolian shipments were disrupted at major ports such as Tianjin, Dalian and Erenhot. Since April, between 4,378 and 5,000 Mongolian shipping containers have been stranded at these main shipping nodes. All three are crucial for China-Mongolia trade and for Mongolian imports of goods from “neighboring third” countries such as Turkey, South Korea, Japan and the United States.
On September 16, Mongolian delegations attended the Shanghai Cooperation Organization (SCO) 20th Anniversary Summit in Dushanbe, Tajikistan. As Mongolian President Khurelsukh Ukhnaa joined the online summit, his representative, Deputy Prime Minister Amarsaikhan Sainbuyan, took the opportunity to meet with Chinese Foreign Minister Wang Yi to discuss short-term plans Sino-Mongolian exchanges, in particular concerning the congestion of the port of Tianjin and its economic impact.
During their meeting, Amarsaikhan specifically highlighted the economic challenges the two countries have faced since the start of the COVID-19 pandemic. In response to the virus, Mongolia closed its borders with its two neighbors – Russia and China – for four months. These unexpected changes have led to economic disruption between Mongolia and China. Amarsaikhan pointed out that China, as Mongolia’s comprehensive strategic partner, has supported Mongolia’s efforts to fight COVID-19 and thanked Beijing for its generous vaccine donation in early 2021.
However, Amarsaikhan also stressed the importance of Mongolia-China trade, especially the 4,378 sea containers currently stuck in Tianjin Port. The Deputy Prime Minister called on the two sides to focus on making real progress in accelerating the flow of goods at border posts, increasing coal exports and reducing the congestion of containers containing both professional and personal items shipped from neighboring third countries.
In response, Wang said China will continue to support Mongolia’s efforts in the fight against COVID-19 by providing vaccines and financial support. He also underlined the willingness of the Chinese government to pay attention to the acceleration of the handling of goods at the port of Tianjin bound for Mongolia.
According to the CEO of the Mongolian Association of United Cargo and Freight, a non-governmental organization, O. Davaasuren, “The currently crowded items in Tianjin, around 4,378 containers, require additional financial resources for container rental and the cost of storage. The price of rental and storage fees has increased from $ 10 to $ 50 per day. Before the shipped goods arrived in average 10 days, now it takes 40-50 days.
In addition, the Mongolian Association of United Cargo and Freight recently released a statement that although the goods are slowly passing through the congestion of Tianjin port, there is only one train heading to Mongolia. Thus, sea containers destined for Mongolia are moving but not fast enough to have a significant economic impact. Even if other containers start to move, the volume and pressure at the port remain the same. Rising prices for freight, containers, rentals and storage are starting to weigh on small, import-based businesses.
While the maritime congestion crisis will be resolved at some point, there is another important logistical problem that Mongolia and China must resolve. COSCO Shipping Corporation, the Chinese government-controlled transportation and logistics conglomerate, controls all ocean freight to be delivered by rail throughout China, including freight destined for Mongolia. During a EuroChamber Mongolia webinar in July 2021, the Mongolian side highlighted the growing challenges posed by COSCO’s decision to appoint an “exclusive agent to represent its business interests in Mongolia”. This created another hurdle for Mongolian shipping containers.
As the Montsame News Agency explained: “Before attempts to appoint an exclusive agent in Mongolia, local freight forwarders could receive containers directly from [COSCO]. Now they will have to go through the locally appointed exclusive agent. The result is increased delivery and customs clearance times, as well as additional costs that may already be felt by Mongolian manufacturers and the general public. “
The webinar highlighted a joint survey conducted by EuroChamber Mongolia and the Mongolian Freight Forwarders Federation, which showed that 20 percent of those surveyed experienced delays of 10 percent. Another 13 percent of respondents reported delays of between 50 and 75 percent. The investigation, however, was undertaken at the end of June; these numbers probably increased as maritime congestion increased.
For Mongolia, the security and openness of these sea routes are crucial. Mongolia’s landlocked geography forces it to rely on its immediate neighbors, China and Russia, as direct sources or transit partners for Mongolian world trade.
When it comes to China-Mongolia trade, despite intermittent disruptions from COVID-19 and congestion at Chinese ports, China remains Mongolia’s main export destination. According to the month of September 2021 report Mongolian Customs, in the first nine months of 2021, Mongolia exported 88.2% of its goods to China, while China was Mongolia’s largest source of imports, accounting for 39.9%. As global freight rates continue to fall, Mongolia and China need to step up economic activities to avoid additional financial burden on small businesses and the Mongolian economy as a whole.