[040120.EN.BIZ] New Silk Road to Use More Rail to China, Cut Transit Times

THE second half of last year's Eurasian rail freight traffic flows were sparked into action by major changes in Chinese support measures, Russian politics and a rapidly developing market.

"We have never seen so many requests like this year for China rail. Customers seem to have realised that it is possible to get goods to China by rail," said DHL Global Forwarding's Thomas Kowitzki at the European Silk Road Summit this November in Venlo.

"We have seen a drop in the number of empty containers going east. This time last year, we were sending hundreds of empty containers east," said DB Cargo Eurasia Dmitrij Hasaenkampf, while Roland Hawranek of DBO Bahnoperator pointed out the faster transit routes - like via Kaliningrad.

The three experts summarised a positive development on the New Silk Road. Volumes are rising and the quality of the services is improving, reported Railfreight, Breda, Netherlands.

According to China Railway Container Transport (CRCT), 6,700 trains go to and from China between January and October, a year-on-year growth of 6.3 per cent.

Furthermore, there are now 22 cities in China which have railway connections with Europe. China Railway Express connects 56 cities across these two continents. In 2018, 3.7 million TEU was transported across the corridor. It is forecast to swell to 8.2 million in 2020 and 11.4 million in 2035 (Prognos).

A noteworthy development in 2019 was the improved east-west balance of trains running between Europe and Asia. A lot more cargo was generated in eastward direction this year. On the other hand, the traffic moving in westward direction has become more controlled, to prevent empty train runs from China to Europe.

"Late 2018, China State Railway Group restricted the quantity of empty containers to the maximum ratio of 10 per cent of all containers in each block train. According to China Railways, the ratio of laden containers on westbound trains all exceeded 94 per cent in Chongqing, Chengdu, Zhengzhou, Wuhan, Suzhou, Yiwu and Xian in the first half of 2019.

"Block trains that departed from those seven locations have taken up 73 per cent of the total block trains departing from China," explained Mr Hawranek."

Most experts agree that such Chinese measures have had a positive effect on the market. It has filtered out the services that were not stable enough, while the strong players have remained. "It is expected that those trains with only one departure each week will come to a halt," Mr Hawranek said.

Although challenging at first, the market in the second half of 2019 looked more consolidated and mature.

The second remarkable development was that of the Chinese subsidies. In October the government announced that it would continue with its plan to lower the financial support for Eurasian rail freight.

Reportedly, local governments may not subsidise train journeys to Europe by more than 30 per cent of the original price in 2020. In 2022, the subsidies should be phased out altogether.

Source : HKSG.