DHL’s direct rail service between Mongolia and China is now operating on a scheduled basis as a result of strong customer demand since it was launched at the end of May 2011, reports Yangtze Business Services.
The Genghis Khan Connection between Ulan Bator and Tianjin was originally intended to last for a six-month trial period during the high season. However, high booking levels have persuaded the logistics company to run the service to a fixed schedule of three departures a week on Tuesdays, Thursdays and Fridays.
Average cargo load factors on train services from Ulan Bator to Tianjin operated by all logistics services providers and rail operators now exceed 80 per cent, according to DHL, and they stand at 50-60 per cent on trains running in the opposite direction.
“We have achieved a good performance so far,” says Ambrose Linn, DHL’s Head of Road and Multi-Modal Freight, North Asia Pacific. “We have been moving at a much faster rate than expected and we find that our customers are increasingly accepting rail transport.”
Mongolia’s growing importance as a production base is driving economic growth. According to statistics from the country’s National Statistics Office, Mongolia’s GDP increased 14.3 per cent year-on-year in the first half of 2011, its best performance in a decade.
Commodity sectors such as oil, iron ore and rare earths are of prime importance, but the country is also becoming an increasingly attractive destination for manufacturers of consumer goods, auto spare parts and machinery.
Major export markets include the EU and US, as well as South Korea, with which Mongolia has a number of bilateral trade deals. Some products on the rail service are also destined for the China market, including woollen fabrics, finished garments and auto parts.
DHL established the service to provide a reliable and cost effective outlet for manufacturers in Mongolia to export their output.
Each train has a capacity of 50 FEUs, with customers offered up to two containers each. On average it takes 28-30 days to cover the 6,000km journey, which includes four to five days at Customs. From Tianjin, it typically takes another 23 days to sail to Europe, giving a total transit time of about 53 days.
“We have managed to maintain transit times and offer a very punctual service” claims Mr Linn.
The connection helps customers avoid peak season congestion at regional border towns, seaports and airports, which can sometimes delay shipments substantially.
The only realistic alternative for exporters in Mongolia is to air freight cargo, since the road infrastructure in Mongolia is not well developed. It would take more than 35 days to cover the journey from Ulan Bator to Tianjin by truck, according to Mr Linn, and the costs would be far higher than by rail.
Customs clearance delays were an initial stumbling block for the service but these have already been dealt with, according to Mr Linn. A remaining challenge for DHL is to expand the customer base and to build volumes through its international sales teams.