One Belt, One Road adds new London rail link

On 18 January, China’s “One Belt, One Road”overland development initiative achieved a new milestone when a freight train that originated in the Eastern Chinese city of Yiwu in Zhejiang province, arrived at London’s Eurohub terminal in Barking. Although this was not the first overland cargo train to depart from Eastern Asia and successfully arrive in Western Europe, London is the westernmost destination reached thus far, and an indicator of the Chinese government’s commitment to increasing intermodal-connectivity between China and its trading partners along the Silk Road.

As rail capacity connecting major routes becomes more widely available, the pressing question remains, could rail erode air freight volumes? Looking just at Yiwu, the surrounding region produces mainly low-value textiles and consumer goods, and thus its exports seldom depart the city by air. The cargo aboard the first train was no exception, and likely would have traveled by sea otherwise. Still, priced at between 50-70% the cost of air, and traveling approximately twice the speed of ocean freight, rail is an increasingly attractive option for higher value automotive parts and electronics at other intermediate points along the journey—especially for interior cities which are far-removed from seaports.

Even with the availability of rail infrastructure however, moving cargo across multiple countries by rail is far from a simple endeavor, involving tracks of varying gauges, and unharmonized customs clearance procedures. The 12,000-kilometer journey between Yiwu and London required participation from multiple railway companies, numerous container transfers because of gauge variances, and special containers compatible with the Channel Tunnel. Switzerland-based InterRail Group operated the train on behalf of China Railway’s CRIMT, and DB Cargo stepped in to handle the final segment between Duisburg and London. Altogether the pilot train took 18 days to arrive in London, but rail operator and forwarder DB said this could be reduced to 16 days.

During a recent tour through Asia, forwarders told Cargo Facts that many of the initial kinks complicating shipments moving out of Asia by rail had been worked out, yet they were eager to add that the appeal and viability of China-Europe rail was still dependent on price. Shipments which once took 20-23 days to arrive in Germany, and required each container to be inspected after departing China now reach Western Europe in a fraction of the time and with less-frequent inspections, arriving at the destination station after just 12-16 days of transit.

Returning to cost, forwarders said that China/Europe rail service was heavily dependent on subsidies, and would likely lose much of its advantage over ocean freight if fhe subsidies were withdrawn. In the short-term however, the Chinese government is very dedicated to the ‘One Belt, One Road’ initiative, and shows no sign of ending its support of the rail service.

Last year, some 40,000 containers moved between China and Europe. By 2020, this figure could more than double to 100,000 containers, as trade flows which were previously one-sided continue to balance out. In the past, railcars were coming back to Asia nearly empty. Today however, with a weak Euro and heavy demand for European manufactures in Asia, forwarders are hard-pressed to find available space on the journey back to Asia.

Even as a more economic option than air freight, recent traffic statistics offer no evidence of modal shift to rail on China-Europe routes. Lufthansa Cargo for one, reported traffic between Asia and Europe up 7.3% in December. Other carriers have told Cargo Facts that the niche airfreight fills is still not threatened by the new rail options.

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.