Growth of container transportation via railways between China and Europe is possible even without subsidies

Warsaw hosted a conference, organized by Joint stock company “United Transport and Logistics Company – Eurasian Rail Alliance” (JSC UTLC ERA) for European operators of railway freight transportation in Europe to discuss challenges and prospects for development of international container transit between China and Europe. A staff reporter of Rzeczpospolita, the largest public, political and economic publication of Poland, shares his impressions of the event and its key messages.

The Chinese government is gradually getting rid of subsidies for container railway transportation to Europe. This year the subsidies were cut to 40%, next year the number will get down to 30%, and in 2022 the subsidy program will be cut altogether.

Some forwarders and railway operators believe that this will put an end to railway transportation between China and Europe. Joint stock company “United Transport and Logistics Company – Eurasian Rail Alliance (UTLC ERA),” which controls 86% of this market plans to transport 322,000 TEU this year, which is 14% more than in 2018.The company plans to keep up the growth pace.

Alexey Grom, General Director of UTLC ERA, says that it is quite possible that by 2030 the volume of railway transportation will reach TEU 3 million. This means that one in ten containers sent from China to Europe will be shipped by rail, while in 2018 this indicator stood at 1.3%.

Reach Customers Faster

Head of UTLC ERA noted that new customers will soon appear, especially in the food industry. It is expected that by the end of the year the Russian government will publish normative acts regulating transit across the Russian Federation for commodities that fall under the Russian embargo regime.

Customers have been complaining about the slow transmission of information. For instance, storms in Kazakhstan can lead to suspended operations at the transshipment terminal for several days, and information on delays does not reach the consignee, leaving them to wonder what is going on. UTLC has found a solution: it invests into special software that helps manage transport more efficiently. “This is one of our most important competitive advantages,” Alexey Grom said.

German Railways had wanted see a similar solution enacted in Europe so that this section is no longer the slowest leg of the route. “We need to create the alliance of railway transporters in order to prepare a joint offer and show it to Chinese customers. This will be done just as it is done with airline alliances, such as Sky Alliance or Sky Team, and will help reduce the time needed to make the payment. Payment may take as long as 93 days, and this is unacceptable,” Uwe Leuschner, General Director of DB Cargo Eurasia says categorically. His office in China employs 55 people.

The factor stimulating use of railroads in transportation is the shorter transportation time. The route from Dostyk Station at the border between China and Kazakhstan to Brest is 5,300 km long, and it takes trains 4.9 days to cover it. The cargoes are delivered from China to Europe in fewer than 11 days.

Head of UTLC ERA, in his turn, expects that cutting the delivery time by another 2 days will make the route attractive even to consignors without co-financing.

Improved Service Quality

Pavel Lagov, an official responsible for railway communications of Hellman Company in CIS countries, says that what is considered high-class service today will become standard tomorrow, and therefore the time needed for transportation must be reduced.

Investments into infrastructure will allow to increase speed of traffic on broad railway tracks from 1,090 to 1,400 km per day. The changed procedure for customs clearance will cut the time needed to cross the border by 3 hours. In China, and along the broad-track system, trains cover more than 1,000 km per day, while in Europe the speed is on average twice slower.

RTSB Schweiz Intermodal Operator (Switzerland) has solved this problem on their own – in Małaszewicze the company’s cargo is transshipped on their own vehicles.In 2018 some 5,000 trucks were delivered this way. This year the number will increase to 11,000,” says Wolfgang Rupf, Managing Director of RTSB.

A large in-flow of containers has led to delays at the Małaszewicze terminal three years ago. Since then transshipment has been done flawlessly. “At the terminal we “unpack” long broad-track trains and create short European standard trains, we “combine” containers, that is, send them in the order as indicated by the customer,” Deputy Director of the Development Department at PKP Cargo said, describing the work of the terminal.

The transporting company’s expenses are increased because of the number of empty trips. “We must return empty train cars and containers back east. These are our costs but we prefer bearing them so as not to lose our customers due to lack of transport capacities,” the director of UTLC ERA said. According to the report of the Chinese Railways, in the first half of 2019 these indicators decreased accordingly to 2 and 18 percent.