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Containerized cargo riding the rails between China and Europe has grown at a furious pace in the past year, driven by strong consumer demand, limited air freight space, and the benefits of overland shipping for products made in western China.
But even as cargo volume increases on the three main China-Europe corridors, the pace of growth is straining the available infrastructure and capacity at peak periods and taxing the ability of trade documentation procedures to ensure smooth trade flows.
Jing Men, director of the European Union-China Research Centre at the College of Europe in Bruges, said containers using the China Railway Express, the umbrella name under which Beijing has grouped all the rail services in and out of the country, were expected to grow by 15 percent per year for the next 10 years.
“By 2027, the total throughput will potentially reach 636,000 TEU, with cargo increasingly shifting from sea and air to the rail routes,” Men told a forum at The Belt and Road Initiative: EU-China Logistics and Supply Chain in Bruges, Belgium. The conference was organised by the College of Europe and the European Shippers’ Council.
Another academic, Thierry Vanelslander from the University of Antwerp’s department of transport and regional economics, also weighed in with numbers of his own. He said since 2011, $2.5 billion worth of goods have been shipped from China to Europe, and much of this could be put down to the geographic location of factories deep inside China.
“Production activities have been pushed inland because of rising labor costs and as part of the 'Go West' campaign of the past. Big cities have been booming in Western China, such as Chongqing,” he said. “HP has shipped more than 4 million notebook computers to Europe by rail since 2011, using the Chongqing-Duisberg rail route.”
The cargo is being carried on services arranged by forwarders, and a big player in the land bridge sector is DB Schenker, the logistics arm of German rail operator Deutsche Bahn. Jochen Thewes, global CEO for DB Schenker, said the number of trains to and from China and the volume of freight they carry was developing at breakneck speed. During the first six months of the year, the number of standard containers transported on its routes rose to 40,600 TEU, and the figure was expected to reach 82,000 TEU by the end of the year.
Thewes said Deutsche Bahn has announced a further increase in transport to and from China in the future. By the year 2020, the number of transported containers is forecast to rise to 100,000, three times the quantity carried in 2014.
But such growth does not come without problems. Minglong Tang, China’s head of economic development for the western region at the National Development and Reform Commission, told the forum that less than 1 percent of the total China-Europe trade volume went via rail.
“This has two meanings — there is great potential for the rail market, and it shows that we have a lot of challenges and difficulties to resolve,” he said.
Tang listed the challenges as a lack of infrastructure, especially in Russia and Kazakhstan, the need for three track changes from standard gauge in China to a wider track in Russia and back to standard in Europe.
“That increases the running time and the costs. At the same time, the train passes through different customs and all their different procedures, which also increases time and costs. Many countries also do not respect the same treaties, and the waybills can be quite different and the documentation processes, too. The waybills are also have to be in different languages, which is also complex.”
Ivaylo Gatev of the University of Nottingham said there were many other issues that had to be aligned on the rail route with many standards to be adopted and policy objectives to be observed. He gave examples of areas where local rules could impact an international cargo route.
“Axle loads differ between Europe and Russia. Limits of heavy cargo can differ depending on regulations. Maximum length of trains differs, too. Russia operates longer trains of 1,400 yards while in Europe trains are shorter. This leads to containers building up at border points and limits the capacity of the rail routes,” Gatev told the Belt and Road forum.
Further complicating the route were different procedures for maintenance, for domestic and international trains, and most importantly, for customs. “Customs clearance is a huge issue and differences in documentation have wide variations that complicate procedures. Different tariffs is another big issue to be resolved,” Gatev said.
Thewes, however, was upbeat. “We are seeing significant uptick in China-Europe rail and air demand. There has seen bottlenecks but new routes are helping reroute away from pressure points. Door-to-door via rail can still be done in 16-18 days, so there is not any significant delay in total rail delivery,” he told JOC.com.
This article first appeared on www.joc.com
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