New China-London and China - Europe rail - On the Right Track : Trains will steal air and sea freight volumes

NEW CHINA- LONDON & CHINA - EUROPE RAIL SERVICES: 
ON THE RIGHT TRACK

China Freight train, China freight train!  Where have you been? I have been to London to sell my cargo!

The first freight train from China pulled into Barking in East London this week after an 18-day journey, marking a milestone in Beijing's push to build commercial links across Europe and Asia.

The train had set off on Jan 1 from Yiwu, a wholesale market town in the eastern Chinese province of Zhejiang. It passed through Kazakhstan, Russia, Belarus, Poland, Germany, Belgium and France, then crossed under the English Channel before arriving in London on Jan 18.

Yiwu Timex Industrial Investments, which is running this service with China's state-run railways, says prices are half that of air cargo, while journey time is two weeks shorter than that by sea.

With the UK's future position with the EU looking uncertain due to Brexit, a potentially new paradigm for the island nation's international relations is gradually revealing itself. And right on cue, China was at its doorstep!

With the new rail route to London, 16 cities in China are now directly connected with 15 cities across Europe. China is planning another 20 European routes, according to BBC.

China is scripting a new economic geography!

2017 will be the year that China-Europe rail services shift supply chain patterns

As the first train from China rolled into London today, having left on new year’s day, the CEO of Kazakhstan’s dry inland port, Khorgos Gateway, informed that the services would eat into sea and air freight volumes. “We now have two trains per day, with about 80 teu and 41 containers per train,” explained Karl Gheysen. “It runs three times a week to Duisberg, but we have also have services to the Netherlands, Madrid, Iran and now the UK.

The capacity of Khorgos Gateway is 540,000 teu a year, but it could be ramped up to a million TEUs ! Khorgos Gateway was built by the Kazakhstan government where the rail gauge changes – making it a good point for transhipment. There are now some 10 rail lines from the gateway, opening almost limitless options around Europe, the CIS and Asia.

Forwarders are increasingly using the service, while DHL has plans to build warehouses for its customers at the dry port. Its real advantage is 15 days’ transit over 45 days for sea freight. Khorgos is making requests for backloads now.

The service costs roughly twice as much as port-to-port sea freight, but about half the cost air. Some estimates suggest the rail connection could take as much as 10% of sea freight volumes on the relevant trade lanes.

Electronics Shippers turn to China Duisberg rail route

Hewlett-Packard (HP) was one of the first shippers to use the service and now accounts for 30-40% of total capacity. 

The rail advantage over sea was not just time. It is cost-effective for some products, but not all. It’s more expensive than sea, but HP, for example, manufactures more than 1,000 km from a seaport. If you add inventory costs during transport, and first and final mile, sea becomes less cheap, especially for higher-value goods. It’s the perfect middle ground. And there are different product groups that fit in that pitch.

Air freight will be more affected than shipping with the launch of these rail services. Shippers now see the route as a viable alternative to air freight and air-sea freight into Dubai-Singapore-China, he added. Meanwhile, postal services are increasingly taking notice of the rail services. Also Alibaba.com is thought to be very interested.

Challenges: Extreme weather conditions!
The service was hampered in its early days by extreme weather conditions in winter. My Gheysen revealed that Toyota had tested it for car transport, but found that the viscosity of brake fluid changed in sub-zero weather conditions. In response, the Kazakh government invested in more than 1,000 reefer containers, for both summer perishables and winter use.

The containers also have GPS monitoring, which reassures shippers with concerns over the security of the route.

There have also been concerns over lack of competition on the routes, with national railways offering services and a single company, UTLC, managing the rail tracks in the CIS region. Geodis and DB Schenker have been keen users of the service. Also Block trains have been given priority. Schedules are set, customers have their slots. The frequency is there now. By 2020 it will be at full capacity.

It is all about China flexing its muscles with block train diplomacy and reaching out and linking all important markets in Europe & Asia. Way to go !