In addition to sea and air freight, there is another attractive modality for the transport of goods between China and Europe: the railways. In fifteen to eighteen days, trains from, among others, the Chinese and Russian railway companies bring containers from North and Central China to Europe. In this article we will go into more detail about this type of transport and the benefits of this modality. In addition, the challenges of freight transport by train to and from China are also discussed.
Two decades ago, trade between China and Europe was still in its infancy. This is in stark contrast to the current situation, in which China and Europe form one of the largest economic partnerships in the world. In a short time, the two superpowers in the infrastructure area are economically integrated and cooperation is indispensable.
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Trade between China and EU 2004-2014 (in billion EUR):
The physical distance between China and Europe is great. This can be a challenge for companies in optimizing their logistics chain with regard to lead times and costs. Because of its cost-efficient nature, sea freight is currently mainly used for freight transport from and to China. However, the lead times for this are long and when they play a more crucial role in the logistics chain, air freight becomes a serious option, even though the costs are considerably higher. Recently there has been a modality that precisely positions itself between air and sea freight for shipments to and from China, namely the train. It is cheaper than air freight and faster than sea freight.
The silk route rediscovered
To strengthen economic ties with Europe, the Chinese government, under the leadership of President Xi Jinping, has given new life to the land route between Europe and China, formerly known as the Silk Road, in recent years.
There are two main routes for transport by train with different sub-routes. The southern route via Kazakhstan and Russia is especially suitable for transport to and from the interior of China, such as the regions around Chengdu, Chongqing and Zhengzhou. The northern route via Siberia is ideal for container transport to and from the North Chinese regions around Beijing, Dalian, Suzhou and Shengyang. In Europe the most important terminals are in Duisburg and Hamburg. From here goods depart to China once a week.
The train is an ideal modality for companies that deliver goods that have a life cycle that is too short for transport by sea. The train is also interesting for products with a low profit margin, for which air freight is too expensive.
In addition to solutions for Full Container Loads (FCL), solutions for Less than Container Loads (LCL) have recently been introduced, whereby logistics service providers consolidate the partial loads into Full Container Loads. This makes the train an attractive alternative for smaller shipments. LCL solutions are currently offered on the following sub-routes:
- Zhengzhou -> Hamburg
- Wuhan -> Duisburg/Hamburg
- Chongqing -> Duisburg
Enormous growth potential
In 2014 the bilateral trade volume between Europe and China amounted to more than 600 billion dollars. Of this, around $ 5 billion was transported by train. Although this represents only a small part of the total trade volume, transport by train is on the rise: in 2014 a total of 308 freight trains ran on the China-Europe route, an increase of 285% compared to the previous year.
Compare apple to apple
An average freight train transports 51 containers with one ride, which equals nine flights with a Boeing 777. When comparing the train with a container ship, the story changes: the largest container ships can now carry around 19,000 TEU. This is equivalent to 186 freight trains!
Intermodal freight transport: from door to door
When goods are transported with multiple modalities and the same loading unit, the transport is also called intermodal transport.
Just as with air and sea freight, you must take account of pre-transport and post-transport in both China and Europe when traveling by train. For transport by train, the goods must also be loaded in a container. You can rent containers for this at the container depot of the rail operator. In comparison with shipping companies, rail operators have fewer container depots. Therefore, careful consideration must be given to pre-transport and post-transport. The container depots of rail operators are almost always located in port areas or at the terminals. For companies that do not have warehouses near a container depot, it may be cheaper and / or faster to transport the goods by trailer to the terminals and transfer them there in a container, instead of an empty container to the warehouse to be delivered and loaded there and transported to the terminal.
The same applies to post-transport. The container must ultimately be returned to a depot. If there is no depot in the area, it is better to transfer the goods near the terminal and to complete post-transport by trailer.
Advantages of freight transport by train
Faster than sea freight
The transit time for rail transport is 15 to 18 days, depending on the route. That is half the time that large container ships have taken since the introduction of super slow steaming to sail from China to Europe. Thanks to this shorter transit time, companies can respond faster to changing demands from their market.
Moreover, a shorter transit time leads to a higher rotation and therefore to fewer stocks in the chain. In other words: companies can free working capital and lower their capital costs. The shortened rotation also results in a cost saving on the interest on the stocks. The train is therefore an attractive alternative to transport by sea, particularly for high-quality goods such as high-tech and electronics. Transport-train-china overview
Decrease working capital:
Supply in the chain
Train = 50% less working capital
Cheaper than air freight
Of course, it takes the train longer than the plane, but on the other hand the transportation costs are considerably lower. Companies that saw their goods from China literally miss the boat, have until now been forced to book an expensive air freight shipment. By train they now have a solution to get their goods to Europe on time and many times cheaper.
How do the transport costs of transport by rail compare with the costs of air and sea freight? That of course varies per departure point, final destination and volume, but a simple rule of thumb is that transporting a door-to-door container via train is only twice as expensive as transport by ship and four times as cheap as transport by plane. This is partly thanks to the Chinese government, which keeps the costs of rail transport artificially low.
The load-bearing weight of a 40ft container is around 22,000 kilos. Transport costs about 8,000 dollars per train. Via sea freight the transportation costs of the same cargo amount to approximately $ 2,000 and via air freight around $ 45,000.
More environmentally friendly than air freight
Transport by sea remains the most environmentally friendly form of transport, but CO2 emissions from rail transport are considerably lower than those from air transport, an argument that is becoming increasingly important.
That the rail link between China and Western Europe has a future is clear, among other things, from the announcement made by Chinese President Xi Jinping at the beginning of November. He said he wanted to invest around $ 40 billion in the rail link between China and Europe. The money is put in a fund (Silk Road Fund) that is used to give financial support to Asian countries that want to invest in the infrastructure on the silk route.
China is also investing heavily in better rail lines and rail terminals. As a result of these investments, transit times will become even shorter in the long term and the costs will be even lower.
There are also more options in the train's product range. For example, reefer containers can be used on a larger scale in the future. This allows the train to better serve a large market for goods that spoil quickly, such as flowers and fruit. Now, mainly air freight is used for this, which is an expensive solution.
In addition, options are being considered for shipments that are not suitable for standard containers and for the transport of dangerous goods by train to and from China.
Challenges for train transport from / to China
Not applicable everywhere
The train is a modality that can be used optimally for a part of China. Advantages can be achieved especially for transport to the northeast. For certain regions, such as the south of the country, the lead time advantage is less, while the costs are considerably higher.
Some countries on the route are boycotted by European countries and vice versa, which means that for some products a transport ban may apply to certain countries. In addition, the infrastructure in Russia is very outdated and investments in the railways lag behind, for example, in China.
Account must also be taken of the fact that several national borders are crossed that do not have trade agreements with each other. To prevent delays in transport, it is therefore important that the documentation is in order.
When goods are transported by train, large temperature differences during transport must also be taken into account in a relatively short time. High temperatures can occur in China, while temperatures below freezing are possible in Russia. These temperature differences may cause problems for some products.
Rail transport can be a reliable, fast and cost-efficient alternative to the existing modalities. With it you can save money compared to air freight and gain efficiency benefits with regard to your inventory management compared to sea freight.