The South Gobi railway cut the cost of moving coal to China to about a quarter of the road rate and helped double exports in two years. With a collapsing coal price, Jim Blaze and Ganbat Chuluunkhuu* investigate whether the corridor can run a hard daily cadence when the margin no longer forgives a missed train.

EVERY railroader knows the case for moving bulk freight by rail rather than road. Few markets have demonstrated it as clearly as Mongolia’s Tavan Tolgoi - Gashuunsukhait railway over the past three years. But with coal prices under pressure, the railway is now facing a tougher test: whether its cost advantage can be converted into sustained throughput.

The cost case needs a caveat. Figures published for the Tavan Tolgoi - Gashuunsukhait railway are project-promoter estimates and do not fully tally. Mongolia’s railway authority has cited roughly $US 8 per tonne by rail against $US 32 by road, while the engineering, procurement and construction (EPC) contractor has published $US 12.1 against $US 46.8.

These figures should be treated cautiously, particularly as at least one excludes border transshipment. The important point is that rail costs roughly a quarter that of road over this 233.6km haul. For a commodity sold on thin margins, cutting logistics costs by three to four times can determine whether coal is shipped or remains at the mine.

Rail’s advantage has become more important as coal prices have fallen. Mongolian Mining Corporation sold 8.6 million tonnes (Mt) of coal in 2024 at an average hard-coking-coal price of about $US 168 per tonne and recorded net profit of around $US 242m. In 2025, sales increased to 10.1Mt, but the average price fell to about $US 82 per tonne and net profit at $US 6m almost disappeared. Chinese customs data tell a similar story, with the average price of imported Mongolian coking coal falling by about $US 51 per tonne to around $US 74 per tonne in 2025. Against that backdrop, saving more than $US 30 per tonne on transport can determine whether a shipment remains commercially viable.

Rail has already demonstrated its ability to unlock volume. The Tavan Tolgoi - Gashuunsukhait line is rated for 30-50Mt a year, while Mongolia’s total coal exports by road and rail reached about 31Mt in 2022, 70Mt in 2023, 83.7Mt in 2024 and around 90Mt in 2025. The sharp increase demonstrates what happens when corridor capacity is released for a commodity already available at the mine.

Demand is also supported by coal quality. Mongolian hard coking coal is naturally low in ash and sulphur and typically has a coke strength of reaction (CSR) of 63-66, below the roughly 70 of premium Australian grades but suitable for Chinese steelmakers. Its combination of acceptable quality, low mining costs and a short overland route to China gives the corridor a durable demand base.

For railways the critical issue is cadence. The 1520mm-gauge line is designed for 25-tonne axleloads and speeds of up to 100km/h, giving a transit time of about four hours. Trains comprise 100 wagons hauled by two EMD locomotives, carrying around 10,000 tonnes. A loading facility commissioned in 2024 can crush, sort and load at up to 3500 tonnes per hour, or roughly one wagon a minute.

At 30Mt a year, this implies roughly eight to nine loaded trains daily. Reaching 50Mt requires the loading facility, locomotive fleet, crews and border operation to sustain a substantially higher rhythm, including through winter. The limiting factor is therefore the railway’s ability to maintain a reliable daily cycle.

A higher axleload offers one possible route to additional capacity, although it must be approached cautiously. Today, 32.5-tonne axleloads are widely established on heavy-haul networks. But economic returns diminish as axleloads rise beyond 30-32.5 tonnes. Higher loadings require increasingly substantial infrastructure investment and are not universally appropriate.

Break of gauge
The more immediate constraint is the break of gauge (to standard gauge) in China. Until recently, southbound coal could involve rail to a border terminal, road transport across the frontier and another rail movement in China. Transloading has been estimated at around $US 3 per tonne. Even with that cost, the rail-plus-transload route remains cheaper than road, but the additional handling reduces efficiency and constrains throughput.

The cross-border connections now under development, including the final section between Gashuunsukhait and Gantsmod, are intended to create a more direct rail interchange. Expansion at Ganqimaodu should add around 30Mt of annual capacity when completed next year. Industry projections suggest Mongolian coal exports could reach 95-100Mt in 2026 and 130-165Mt after 2027 as rail projects come online. These industry outlooks underline the importance of resolving the border interface.

The conclusion is therefore relatively straightforward. The rail cost advantage is compelling and the response in coal volumes has already demonstrated that capacity, rather than geology, was the original constraint. That constraint has now shifted towards price and sustained throughput.

The 30Mt annual target on the Gashuunsukhait line appears achievable. The frequently quoted 50Mt figure is more demanding under the present single-line, single-loadout and border-transshipment configuration. It is likely to require a more capable cross-border interchange, further loading capacity, disciplined winter operations and, where engineering permits, incremental increases in axleload.

The deposits were never the main issue. The real test is whether the railway can maintain a hard, repeatable daily cadence through a Gobi winter when temperatures can drop to -40°C while coal prices leave little room for inefficiency. That is a challenge the heavy-haul industry knows how to solve, and one that will determine whether Mongolia's rail revolution becomes a lasting freight advantage.

*Jim Blaze is a railway economist and analyst and Ganbat Chuluunkhuu is a former infrastructure and capital-markets advisor who worked on Mongolia’s railway and industrial development strategy.

Published Date:2026-09-17