Integration on the Journey to Digital Transport Corridors
Joint Stock Company United Transport and Logistics Company – Eurasian Rail Alliance (UTLC ERA JSC) provides services for transit container traffic by regular container unit trains on the China – Europe route via Kazakhstan, Russian Federation and Belarus. The company was founded by Russian Railways OJSC, Belarusian Railway and NC Kazakhstan Temir Zholy JSC.
– Mr. Grom, what was 2021 like for UTLC ERA?
– 2021 saw the rapid recovery and growth of the global economies. In its turn, quickly growing economic activity entails the commensurate growth in demand for logistics services. Given the current changes in the international cargo traffic market, development of the EAEU transit potential becomes more relevant than ever.
The segment of container traffic along the New Silk Road may easily be ranked among the fastest-growing sectors both in the Eurasian and global transport industry. The growing volumes of transported products were to a large extent due to a stable position of the rail transport during the crisis. The pandemic highlighted the best competitive qualities of the rail transport, such as reliability, regularity, environmental friendliness, speed of delivery and price stability.
At the same time, we should be ready for future changes, remain flexible and open to the customers. We need to facilitate access to the Trans-Eurasian corridors, including through a wider service digitalization, thereby raising effectiveness for all market players: regular users, potential stakeholders, our shareholders, customers and partners.
Over the last five years of its development, UTLC ERA JSC achieved almost 20-fold growth of traffic in the transit corridor via Kazakhstan, Russia and Belarus. The annual cargo traffic growth in the company’s services exceeded 45%. Making the corridor more attractive is a complex process to be jointly implemented by all parties involved in the traffic operations. It is necessary to be part of the international transport corridor system, ensuring interaction among all parties in the Eurasian territory, raising the capacity of the land logistics chain, and creating favorable conditions for transit of cargoes in case of international traffic. In the Trans-Eurasian rail transit corridor, we address these tasks on a day-to-day basis jointly with our shareholders, customers and partners.
In 2021, the traffic volumes on UTLC ERA JSC transit routes also show significant growth.
In total, for 11 months of 2021, UTLC ERA JSC services transported over 632,000 TEUs, and in November 2021, the number of trains dispatched by UTLC ERA services exceeded 6,000 per year for the first time. The total traffic volume of UTLC ERA for 2021 is expected to exceed 680,000 TEUs and grow by 25% as compared to the previous year.
The total cost of all cargoes that we transported in 2020 exceeded $31.5 billion, while the total cost of all cargoes we expect to transport in 2021 is already approaching $45 billion. We are proud that world-famous brands trust UTLC ERA to transport their cargoes. However, while goods with high added value previously accounted for 80% of the traffic volumes, today their share is close to 40%. The cargo range is becoming considerably wider. Our services have also begun to transport low-priced cargoes, including goods with a value comparable to, or even lower than, the traffic cost.
This year, the network of UTLC ERA routes and locations has also been expanding at a record pace. 17 new locations, out of which ten are in Europe and seven are in China, have been added to our services since the beginning of the year. For 10 months of 2021, our transport network has been supplemented with 40 new routes, out of which five are in the Europe – China direction, and 35 are in the China – Europe direction.
–Do the current infrastructure capacities meet the cargo traffic requirements?
– At present, the available capacities meet our needs. But the capacities should be developed on a continuous basis, both in terms of infrastructure and digital technologies. New terminals are being opened and the existing ones are expanding their capacity. For example, the major reconstruction project was completed on the terminal at the Brest-North station of the Belarusian Railway; and a new terminal was launched in Kaliningrad Oblast at the Skandava – Zheleznodorozhny border crossing.
However, I believe that the potential growth of the order volume outpaces the land infrastructure development. Moreover, the trends accompanying the rail container traffic growth have clearly demonstrated that the efforts should be focused on debottlenecking and cargo traffic diversification rather than on increasing the train speed.
Thus, the Kaliningrad direction, which UTLC ERA has been developing since 2018 when the first container unit train was dispatched in this direction, currently shows exponential growth. Transportation through the region’s territory has a great potential, as it is possible to use both the land border crossing infrastructure and the multimodal service through the ports. The transit corridor through Kaliningrad enables to access many European countries: Northern Europe, Scandinavia, Southeast Europe.
Kaliningrad Oblast has become competitive for European, South-Asian and Chinese customers in terms of prices, technologies and transit time. We expect that this year, UTLC ERA traffic in the Kaliningrad direction may exceed 120,000 TEUs.
This year, we also began delivering cargoes from China to Slavkov, Poland, using the Goryn/Udritsk border crossing (Belarus/Ukraine). The service passes via Kazakhstan, Russia, Belarus and further via Ukraine and Poland without the need to transfer from the “wide” gauge track to the “narrow” one.
– The memorandum on sustainable rail transport development, which was signed at the meeting of the Eurasian Intergovernmental Council in Cholpon-Ata, Kyrgyzstan, cemented the support expressed by the parties for UTLC ERA joint project and outlined its development prospects. How is this document implemented?
– Its main objective is to ensure consistent and sustainable integration development of the Eurasian railway infrastructure. In this document signed by the governments of Russia, Belarus and Kazakhstan, the parties stated their commitment to developing cargo traffic containerization and digitalization, including creation of a unified digital ecosystem. It will provide additional competitive advantages for the Eurasian transit railway routes and will boost further implementation of advanced technologies. UTLC ERA will become the driving force behind digitalization in the EAEU sustainable transport and logistics sector. We are ready to offer our services for testing pilot projects and technological solutions on our journey to implementing the unified digital Eurasian railway system, which will definitely contribute to sustainable development of both Eurasian transit and the end-to-end logistics chain in the China – Europe trade.
– According to your forecasts, when will you be able to fully switch to electronic workflow in transit traffic?
– Today, we and our partners and neighbors in the Eurasian Economic Union are very close to implementing the unified digital waybill. This is our future, a common Eurasian standard, which we should implement as soon as possible. A digital waybill will enable all participants of the transportation process to exchange data and to track the cargo throughout the journey. Competitiveness of any international logistics chain is largely dependent on reliable and predictable traffic, which, in turn, can be achieved by effective communications, timely and convenient receipt of information by the transportation participants and the accuracy of such data. Hence, it is not just about developing transport corridors, but rather about developing digital transport corridors. The e-waybill is the cornerstone of this process.
UTLC ERA has already implemented a pilot project using only the e-waybill for empty fitting platforms. The train was bound from Brest to Dostyk/Altynkol. At the next stage, we intend to dispatch loaded containers in the same manner. This is the first step towards transition to a fully digital transit waybill format to transport cargoes in the EAEU member countries and, in the long run, on the entire China – Europe – China route. The challenge so far is that the European Union (EU) customs authorities do not recognize SMGS and CIM/SMGS e-waybills. This function might be implemented in the new EU transit system no earlier than in 2025.
– What state-of-the-art technologies does UTLC ERA use for transit traffic services?
– Implementation of digital solutions is a key driver for competitive transit rail container traffic service. It helps attract large additional cargo volumes to the railway. This year, UTLC ERA started working on an open neutral blockchain platform for transit traffic. Once developed, the system will serve as a single source of reliable data for the transit traffic participants and the company’s customers. The technology is implemented as a database where information is stored electronically. What makes it different from a conventional cloud storage is the information storage method: it is not recorded on a single administered server, but rather entered in distributed ledgers. Roughly speaking, the information exists simultaneously on all devices connected to the web. In addition, each subsequent information block contains all data from the previous one. The main advantage of such approach is that it guarantees data security. The participants do not need to enter into a lot of contracts. All rules are recorded in an electronic smart contract, including mutual settlements and automatic debit transfers in case of any breach of the contract.
– The memorandum mentions environmentally friendly transportation. How effectively does the rail transport use its advantages in the “green” economy?
– The environmental value of the rail traffic is turning into a true sustainable business philosophy on our continent. UTLC ERA specialists have developed an online CO2 emissions meter, which can be applied to cargo traffic in the longest segment of the New Silk Road from the European border to the Chinese border, and published it on the portal of the ERAI Rail Transit Index. According to the CO2 meter, in January to September 2021, when 513,700 TEUs (20-feet container equivalent units) were transited by rail from China to Europe (taking into account the transit via Russia, Kazakhstan and Belarus), 34,300 tons of CO2 were emitted into the atmosphere as a result of fuel combustion, whereas this figure would be 163,800 tons if the cargo had been delivered by sea, 3,052,000 tons in case of road delivery and 18,105,200 tons in case of air delivery, which is 527 times more than in case of rail transportation.
UTLC ERA services will shortly test pilot projects to implement technological innovations and carbon-free railway logistics principles in the Eurasian territories. UTLC ERA intends to supplement the shipping documents with the information about CO2 air emissions saved during transportation, because we believe it will additionally encourage freight owners to choose the rail transportation option.
– Consignors place emphasis not only on transport environmental friendliness, but also on security of their cargoes. To what extent does the rail transportation meet this criterion?
– As for the industry in general, rail transportation is considered one of the safest in terms of cargo security. A train cannot deviate from the route and is subject to 24/7 monitoring by the relevant organizations in charge of train security. If something goes wrong, an alarm is raised, and prompt action is taken.
Judging by our experience, cargo incidents may occur due to improper cargo placement inside the container, violations of the loading rules, overloaded or improperly installed containers. The relevant services then stop the train, perform an inspection, and, if necessary, change the packaging and the car and reload the cargo. These actions are monitored by the carrier, the security services and, if required, the customs authorities. The ratio of such incidents in 2020 was 0.00001, which means they are very rare.
– What are UTLC ERA’s plans for the near future?
– As we are dealing with the traffic volumes close to the peak capacity values, we have to create new back-up capacities, open new corridors and be ready for growth in 2022. Our agenda is focused on creating new back-up capacities and opening new corridors. For this purpose, we take up any opportunities that exist within our operating model and under the agreements with our partners and customers to provide more opportunities for the customers.
Today, UTLC ERA is in many ways the benchmark for other operators who now apply the technologies that we pioneered in respect of the train length, capacity utilization and double cargo operations on the border infrastructure. These technologies contribute to significantly reducing the cargo handling time and developing additional directions in order to diversify traffic flows and maintain a sufficient safety margin for future traffic volume growth.
I would like once again to emphasize the significance of coordinated efforts among all traffic participants, both in the 1,520 mm region and in the adjacent sectors with the 1,435 mm gauge track, in view of the relatively high load on the carrying capacities at the moment. We need to continuously improve the traffic process and raise the rail route competitiveness.
We would like to include a block on cooperation with the Belarusian Railway.
–The Belarusian Railway is one of our shareholders and reliable partners in terms of technologies, infrastructure and tariffs. Situated at the junction of Europe and the New Silk Road, Belarus plays a unique role in the development of the Eurasian economy and infrastructure.
Up to 90% of transit freight in UTLC ERA Europe – China and China – Europe services go via Belarus.
The country is fully oriented towards transit freight flows. This is clearly demonstrated by the development of Chinese-Belarusian bilateral project called Chinese-Belarusian Industrial Park “Great Stone”, and by sustainable participation of Belarus in the programs aimed at expanding the border terminal capacities in order to support and promote the current and future growth of transit traffic.