China-UK railroad corridor spells trouble for airfreight

The first container train from China reached the U.K. today, arriving at the London Eurohub in Barking. Completed in 18 days, the rail transit connection threatens to disrupt China-Europe supply chains, with airfreight appearing especially vulnerable.

The 10,000- to 12,000-kilometer transit takes 12 to 18 days, depending on the route used, and is attractive for shipments of moderately time-sensitive commodities, such as clothing, and capital-intensive goods, such as automotive parts and electronics. Comparable maritime transit over that distance requires 45 days, but is 50 percent cheaper. Since time-sensitive shipments don’t travel via ship to start with, the doubled cost of rail will keep trains from pillaging maritime business, at least for now.

Airfreight, on the other hand, costs exponentially more than alternate modes and is only attractive because of the time it shaves off its maritime competition. That’s changing, however. A rail shipment by GEODIS, moving designer jeans from Wuhan, China, to Lyon, France, last year took 18 days and made news because of its inroads into the fast-fashion sector, which normally relies on airfreight.

A company called Unit 45 developed self-supporting, climate-controlled containers for rail shipments that cross the frigid region of the Eurasian Steppes during winter months, allowing shippers to send temperature-sensitive shipments.

This week’s arrival originated in Yiwu, in the eastern Chinese province of Zhejiang. The train carried textiles and other consumer goods. Containers required specifically for the UK were loaded in Germany to navigate the Channel Tunnel. Since the gauge of the rails changed across different countries and regions, multiple reloading and transfers are still necessary.

The U.K. transit adds to a list of cities and countries connected to the “One Belt, One Road” corridor that includes Duisburg, Madrid, Afghanistan and Riga. The massive infrastructure project is underwritten by the Chinese government, and backs up the pro-free trade and globalization message that Xi Jinping, General Secretary of the Communist Party of China, took to Davos this week, as his U.S. counterpart threatens to pull the rug out from under the whole arrangement.

With the rail corridor ramping up, China is reorienting world trade and bringing in Central Asian partners, like Kazakhstan, to become more than just hydrocarbon suppliers.

A record number of containers, around 40,000, were transported by train along the corridor in 2016. That number is expected to reach 100,000 containers by 2020.

Those interested in learning more about the One Belt, One Road initiative, and the implications for air freight in Asia should join us at Cargo Facts Asia in Shanghai, 25 – 26 April, where a session will be devoted to the topic.  To register, or for more information, go to CargoFactsAsia.com.