Evolution of freight rail and how it may affect sea freight..
Located on the new Chinese Silk Road and the economic belt of the Yangtze River, the city of Chengdu is the capital of Sichuan province with a population of around 14 million.. Chengdu, is a vital cog in China’s economic growth and is an important free trade area seen as an industrial hub for international trade and logistics..
Situated on the Danube river, Vienna is the capital city of Austria with a population of around 1.8 million.. Vienna is the 7th largest city by population in the European Union (EU) and is considered to be an important international hub for the EU..
As the crow files, Chengdu to Vienna is a distance of 7,365 kms and takes 13.5 hours by air..
By sea, it is a distance of 11,098 nautical miles and at 15 knots speed, it would a ship about 30.8 days of pure sea transit not counting any waiting time, transhipments etc..
On the 27th of April however, the first intermodal freight train from Chengdu arrived at the South Container Terminal in Vienna IN JUST 14 DAYS covering a distance of 9,800 kms..
This 600m long train left Chengdu on the 12th of April carrying 44 containers with various types of goods such as tyres, machinery, electronic equipment, lighting materials, day to day commodities and other general household goods..
The train’s 14 day journey took it through Kazakhstan, Russia, Ukraine and Slovakia before reaching Vienna..
This Chengdu to Vienna train is one in the long list of containerised freight trains on the China – Europe route.. The first China-Europe line was launched in 2011 between southwest Chongqing and Duisburg in Germany..
As per China Railway Corporation, China-Europe freight trains have made around 1,000 trips in the first three months of 2018 which is up by a massive 75% percent compared with the same period last year..
As per the company, they attribute this growth to the increase in the number of routes between the two continents and also the increase in train speeds on the Chinese side.. As of this article, this cross-continent rail network connects 43 cities in China with 41 cities in the European Union spanning 13 countries totaling more than 7,600 trips since March 2011 when the cooperation started..
For its part, Rail Cargo Austria is said to be planning in the region of 400-600 journeys per year competing with sea freight..
Chengdu handles most of the trains from China to Europe.. The success of these rail freight ventures cutting transit times between these two continents at least by half compared to sea freight has made both sides confident about their capability to handle more on these routes in the future..
Not just in to Europe, but the China-Europe freight train service is also being extended into Southeast Asia.. In March 2018, one of the trains on the return journey from Europe picked up a cargo of mechanical and industrial equipment and carried it to Hanoi..
On its return from Hanoi, this train carried Vietnamese fruit, rice, coffee and electrical commodities..
More of the China-Europe lines are expected to connect more South East Asian countries such as Thailand, Laos and Singapore..
As per the Chinese National Development and Reform Commission, 3,673 trains were loaded from China to Europe in 2017 and the transport of goods from China to Europe has rapidly increased, both in terms of the number of trains and the value of the goods.
In less than two years, their travel time has been cut from 20 days to 12, while operational costs have decreased by 40 percent.
A container ship that cannot pass through the Suez Canal takes about 24,000 kms to reach Europe while the China-Europe train takes less than 11,000 kms to reach the same place..
The scope of the goods delivered has also been extended to include clothing, automobiles, grains, wines, coffee beans and wood, as well as electronic goods such as computers and mobile phones.
The China-Europe freight train service is being considered as the vanguard of China’s Silk Road ambitions and forms a part of the Chinese Government’s Belt and Road initiative..
As part of this initiative, the Chinese government is also encouraging multinational companies to use their inland provinces for manufacturing their products after which these companies may use the rail network to move their products to other continents..
Of course in terms of cost comparison with sea freight, the participants in this freight rail initiative are aware that this will not be possible without the heavy cost subsidies provided by the Chinese Government..
It has been reported that the subsidy may be as high as USD3500/40’ which sea freight cannot compete against..
So how significant will the freight rail revolution be over sea freight..
As per industry reports, on an optimistic basis, the volume of containers on the China-Europe rail corridor is expected to reach around 742,000 TEUs by 2027..
While these volumes may hardly put a dent in the sea freight volumes, the creation of these rail freight service and routes give customers the opportunities for multimodal shipping..
Shipping lines who have a good foothold in the multimodal shipping markets in China and Europe may also offer rail-ship options to their key customers.. Some of the freight rail operators are also exploring the options of offering LCL/Groupage cargoes to cater for smaller shippers.. Sounds very much like a sea freight movement..??
From out of almost nothing in 2013, there has been a significant rise in cargo volumes and values moved using freight rail.. CSIS reported that although maritime transport remained dominant, the volume of freight rail shipped during the first half of 2017 increased by 144% compared to the same period in 2016..
Although these freight rail services have been around since 2011, it is only now the momentum and impact on the trade seems to be picking up..
Eventually such competition between rail and sea will be good for the customer because they can have the option to choose between rail freight and sea freight.. High volume customers may choose the slower but substantially cheaper sea freight option whereas customers who ship high value and transit sensitive cargoes may choose the rail option..
Of course the fact remains that while the rail freight network can beat sea freight transit times convincingly, rail freight network cannot compete against the sheer volume that a ship can carry..
For example the freight trains on the China-Europe route carry between 41-44 FEUs (Forty-foot Equivalent Units) or 82-88 TEUs (Twenty-foot Equivalent Units) as opposed to currently the largest ships carrying about 21,000+ TEUs..
Of course, there is still a long way to go for rail freight option to pose a substantial challenge to sea freight transport..
Continuation of Chinese subsidies, trade imbalance, improvements in air freight movements, infrastructure developments along the freight rail route, lack of credible rate and volume data are some of the factors that need to be considered in the future of freight rail and how significant will the freight rail revolution be over sea freight..
All I can say is that interesting times are ahead for the shipping and freight industry.. Stay tuned..
What are your thoughts and opinions on this..??
The Third Industrial Revolution, the Digital Revolution, has made it possible for The transport of freight by rail. From the rail to competition from the ports; sea freight was less expensive than rail freight. where you can join railway and logistics experts from all over the world to send your consignment all over the world.
In my opinion, Rail freight will do a bigger role in the freight movement in the future. And this can be extended as a beneficiary for rail-sea shipments( same as present sea-air shipments). Shipments from China to US east coast and countries like Brazil, Argentina, and Caribean islands can move by rail-sea combination. As per 14 days to Vienna by rail and another 2-3 transit time by air from Vienna to the US and other countries. This could be a real alternative for sea freight service.
sea freight will remain important for the bulk cargoes be it minerals and raw materials/grains/ et al or liquids such as crude oil /products but the intermodal connections overland will take a considerable part from the existing sea lines business , especially when high value products are moved, due to easiest direct connectivity and shorter transit time. this of course applies for countries or areas which are connected overland and there is no water in between. if there is water, in between, it may create local strong port hubs which will connect the inter-rail systems between countries or areas connected by shipping.
with strong alliance ties between Russia and China , we have already seen that a great volume of crude oil , oil products and natural gas is now transferred to china via pipe lines.
As we all know railroad is a very reliable form of steady , almost un-interrupted, transport and its future is great for shipments from east to west … ( historically same had happened to USA , although there was a single country /authorities, and when the 2 coasts were connected ,USA started to have un-preceded growth ).
I am not sure if the existing rail system connecting the countries , can accommodate the increased volumes and this may will lead in extensive railroad upgrades to make it happen.”
Well put Kostas, thanks.. 🙂
I do not think rail freight has any chance of denting the fortunes of sea freight even in the long run considering the volume of cargo involved. However like others have said it will best serve some types of goods such like electronics. Better still shippers who will want to take receipt of cargo just In time for manufacturing or some other urgent service delivery can opt for rail freight.
Agree with you on that Nii.. Thanks for your comments..
It’s an interesting article which we heard earlier also.
A distance of 9800 km in 14 days in comparison to 11098 nautical miles in 30-31 days by sea. Yes this look fascinating but in reality, there are certain elements to consider such as the cost between the sea route and rail. Also the environmental issues which may create by rail movement.
Certainly the cost of movement by rail will be much higher hence cargo like perishable, seasonal and needed quickly etc all can use the this mode. On reading the article, we could see the growth rate which means that there are users and its growing.
Feel that the reason why China is pushing to develop this project has got some political angle too.
Hi Manohar, absolutely.. While rail freight has no chance of taking over sea freight, there is a big chunk of cargo that is moving by rail and that would definitely be a loss for sea freight, but this also shows that there is room for everyone and that customers can always choose what suits them best.. And yes this push from China could well be a political game as they look to enter other markets accessible by rail..
Great article! Indeed, the OBOR will bring a new dimension to the freight industry but as you put it in the end, the sheer volume that ships have compared to trains implies that it will not affect the shipping lines anytime soon (if ever…).
However, with this new silk road, could we see a rise in SOCs as it might be simpler to handle logistically?
Hi Axel, I don’t think the ownership of the container would make a difference as all containers would be handled the same logistically.. But the cost certainly would make a difference to the shipper/consignee..
Looking at the cost subsidies involved (up to US$3,500 per 40′ box, according to the article), I don’t see how this can be a sensible long-term alternative to sea freight, except possibly for some areas along the route which are much closer to the train lines than to a port. You just have to look at the numbers: 85 teu on a train compared to 21,000 teu on a ship, to see that is unlikely to make a big dent in the sea freight market.
Hi Tony, thanks for participating.. I do share your sentiments in terms of the subsidy.. The continuation of these subsidies is one of the uncertainty factors that I have listed.. But as I have mentioned in the other comment, while rail freight has no chance of taking over sea freight, there is a big chunk of cargo that is moving by rail and that would definitely be a loss for sea freight, and this also shows that there is room for everyone and that customers can always choose what suits them best..