In Europe's east, a border town strains under China's Silk Road train boom
S E E D E D C O N T E N T
It's doubtful that many American's understand what this new rail service between China and Europe means. The route is the old silk road and has now connected China with London England and points in between. This opens all three legs of transport from China to Europe. Water, air and now rail.
As stated in the article the growth of rail transport between China and Europe has grown more quickly than anticipated and will continue to grow.
YIWU, China/MALASZEWICZE, Poland (Reuters) - When cargo trains from China began arriving at the Polish border town of Malaszewicze almost a decade ago, they were considered a novelty - able to ship laptops and cars to Europe in as little as two weeks, but extremely infrequent, with one service a month.
However a surge in the number of trains over the past year, fueled by Beijing’s plans to grow trade along ancient Silk Road routes to Europe, has left authorities scrambling to meet demand that has ballooned to as many as 200 locomotives a month.
Rail shipments have experienced delays of over ten days at land ports in both Europe and China, bogged down by insufficient infrastructure and paperwork pileups, shippers say. That congestion is anticipated to worsen as Chinese authorities encourage a further ramp up in volumes.
The situation illustrates how China’s Belt and Road initiative is delivering some successes but also how its partners are struggling to keep up.
The rail network, used by companies like Hewlett Packard, the sports gear company Decathlon and the carmaker Volvo, handled 3,673 train trips between China and Europe in 2017, up from 1,702 in 2016 and just 17 in 2011, according to China Railway, the national operator.
To view a graphic on China-Europe Railway Express img, click: tmsnrt.rs/2txkLZJ
The network remains unprofitable and heavily supported by subsidies, but Chinese city authorities have launched new services with fervor after it was subsumed under the four-year-old Belt and Road initiative.
In 2016, China’s top state planner named the network “China Railway Express” and said it wants train trips to hit an annual number of 5,000 by 2020.
By April, the number of regular rail services linking China and Europe jumped from just one in 2011, between Chongqing and Duisburg in Germany, to 65, connecting 43 Chinese cities and 42 destinations in 14 countries including Spain and Britain, China Railway said on its website.
Carsten Pottharst, managing director of InterRail Europe, is among a number of freight forwarders who expressed frustration to Reuters about congestion on the network, citing insufficient government investment in European railway infrastructure.
“They believed that they would come, but they didn’t believe that it would become that big,” he said.
CONGESTION
While congestion occurs across the network, much of the shippers’ frustrations are being directed at Malaszewicze, which handles roughly 90 percent of the cargo.
The land port processed nearly 74,000 containers in 2017, four times the volume it handled in 2015, earning Poland nearly 400 million zlotys ($109.02 million) in tax and customs revenues last year, Polish tax and customs authorities said.
But PKP Cargo, the Polish state-controlled rail operator that runs the main terminal, said in March that the current infrastructure was unable to handle the anticipated growth. Europort, which runs a private rail terminal, said that in late 2017 there were queues as long as 100 trains awaiting entry to Poland from Belarus.
“This is a huge challenge and a huge chance,” said PKP Cargo’s chief executive, Czeslaw Warsewicz in March.
PKP Cargo said in an e-mail that there were currently no queues at its terminal, and that it was looking to expand capacity and cooperate with private terminal operators to shorten loading times. Poland’s infrastructure ministry, meanwhile, said the government was considering opening a second border crossing with Belarus.
However, shippers say they are concerned that the improvements will not happen fast enough.
This is worrying locals such as Krzysztof Iwaniuk, mayor of Terespol Municipality, which includes Malaszewicze, who has seen the town and surrounding areas benefit from the rail trade.
On a recent visit to Malaszewicze, Reuters saw navy blue shipping containers emblazoned with the China Railway Express logo stacked up in rail terminals, as well as new roads and a local government headquarters.
Iwaniuk said he was worried that PKP Cargo’s upgrade plan would not meet anticipated volume growth and that the town would lose traffic to other transhipment hubs.
“We are sounding an alarm that we use this historic opportunity,” he said. “If we don’t properly use these five minutes in history, it will be over.”
AMBITIOUS TARGETS
In China, meanwhile, the flood of containers into Europe is expected to keep surging as city authorities try to outdo each other promoting Belt and Road, President Xi Jinping’s signature foreign policy initiative.
Chongqing in southwestern China, which recorded 663 trips last year, is targeting 1,000 trips, while Xi’an, home to China’s terracotta army, also wants to hit 1,000 trips, according to state media and government statements.
Yiwu city in the eastern province of Zhejiang, home to one of the world’s largest wholesale trading centres, plans to increase trip numbers from 168 in 2017 to 350 this year, said Simon Jian, assistant to the chairman of Yiwu Timex Industrial Investment, a rail service provider.
Industry executives say the network is currently unprofitable as cargo volumes have not reached a sustainable level, and costs are higher than shipping by sea.
But it is attracting business from companies selling goods like cars and electronics because it can deliver them as much as 20 days faster than sea at a lower cost than by air.
“We’ve probably managed to reduce our logistics costs thanks to China Railway Express,” said Hu Jie, a Suzhou-based logistics director at Pegatron Corp, a Taiwanese electronics manufacturer that began using the rail route in 2015.
For now, Chinese government subsidies are supporting the rail operations.
A study published by the Shanghai-based Donghua University last year estimated that provincial governments in China had collectively spent $303 million subsidizing China-Europe block trains - generally those carrying goods to destinations without being split up en route - between 2011 to 2016.
Jian said that firms would likely need to charge $10,000 per container to make a profit but subsidies allowed many to charge about $3,000-6,000 per container. Some were offering rates as low as $1,000 per container, about the same as shipping by sea.
“It’s very chaotic,” he said.
INFRASTRUCTURE
There is currently far less rail congestion on trips back from Europe to China, reflecting the large trade deficit between two partners.
Polish government sources said there was concern that China was not doing enough to open its market to foreign producers. One official said there was growing concern that the new Silk Road might become a one-way gateway to flood Europe with China-made goods.
The United States is currently threatening a trade war with Beijing in a bid to cut its own trade balance with China.
As trains pile up in Malaszewicze, some shippers are looking to move goods through Finland, which launched a rail freight service with China in November, or Lithuania and Estonia.
But new transhipment hubs also had drawbacks, they said, citing longer travel times and less familiarity with services and issues like processing paperwork.
“We need the entire network to be upgraded and more railway stations to be built,” said an executive at Wuhan Asia-Europe Logistics, which manages trains from Wuhan, in central China.
Ronald Kleijwegt, the managing director of Jusda Europe, a logistics unit of the contract manufacturer Foxconn, said that would be an uphill task in Europe.
“It’s a win-win if we start ironing out all these bottlenecks,” said Kleijwegt. “But the demand and requirements of supply chain are sometimes difficult to understand for politicians to understand.”
Additional Reporting by Andrius Sytas in VILNIUS and SHANGHAI Newsroom; Editing by Philip McClellan
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When it comes to moving container via rail the U.S. is the gold standard. We invented the container trains, then the double stack container cars and many other inventions and improvements to rail transport.
The Chinese are taking this one step further with rail transport of 12,000 kilometers over two different gauge tracks.
This article was on my "To Seed" list. You put it up first.
Very significant.
I'm sure that Peter Navarro is fully up to speed...
By completing the third leg of transport the Asia/Europe route gives the shipper the added option of a speedier delivery (vs ocean) and slower but less costly (vs air).
This is a significant addition to logistics between the continents.
Yeah, like these guys,
Interesting.
Should things continue as they are,the folks in Malaszewicze stand a chance for significant economic growth, IFF they can meet the demand facing them now.
Also, interesting, the silk road appears to have reversed roles on China's terms.
Will Europe blend into a "Pan China" economy?
That is a great question!
Or maybe... Will the entire world blend into a Pan China economy?
I am sure that would please China.
It wouldn't doubt it. I've always had the feeling before it's all over " we'll all be eating rice."
China seems to think and plan in centuries here we're lucky to think in moments and just push anything really important down the road, and again and again.....
The irony of that is truly interesting.
Great question. As this progresses we may just see that. On a side note China has increased it's oil from Russia via pipeline. No need for ocean transport and China said it will double it's purchases of oil from Russia.
Russia becoming a satellite of China. Now there's a bit of irony....
Indeed it is.
China has built economic and military momentum for quite a while now. The not too distant future may see a big leap.
Yes it has and it's reach is now into South America and Africa...Vast natural resources in both of these area's.
I have never looked into the natural resources China has. In this age of satellite observation techniques, surely there must be some guesstimate available.
With that in the back of the mind, it is easy to think of China on another long range plan of using the resources of others while preserving their own. A last man standing scenario.
Here is a link that will give you a fair idea of the natural resources of China.
Thank you Kavika. Looks like I have a little homework there to make some side by side comparisons without paying their fee. I can get what I am after.
LOL, you have to remember, China considered the Europeans who showed up at the wall to be barbaric compared to them, the Chinese didn't really want to do business with the Europeans but, some of them, including the Emperor at the time saw something in the smelly heathens at the gate and, let them in, after that, any resulting expansion of what the Chinese produced by the West was made better in China and, expanded on there, then was used to take over what the West had done. We invent, the Chinese take that invention and, improve on it.
It has always been my belief that the Asians are think twenty steps ahead while the rest of the world either only thinks three steps ahead or, is looking backwards, it will depend on how much help the Europeans are willing to get from the Chinese in upgrading the infrastructure of the European ports and, warehouses.
Actually if your speaking of ocean ports the Europeans have some of the finest in the world. The port of Rotterdam is always listed as one of the top 5 in the world via containers traffic and bulk traffic.
Their rail facilities are pretty good. I see the problem now as the Europeans not expecting the volume that is coming through. As the rail yards etc gear up I expect to see the situation stabilize. Improvements in that and equipment handling cranes should help cure the congestion problem.
Then it is just a matter of moving it by truck from the holding areas.
That should not be a problem since the movement of ocean containers from the ports has been done for years/decades.
It should be noted a major portion of the rail line moves through Kazakhstan huge investments are being made by the Chinese, Japanese and the Kazakhstan government to develop a ''dry port'' there which is basically a inland port that accommodates a transshipment yard with cranes, trucks warehousing and customs.
That would be a logicians dream come true or a nightmare.
Substantial growth for sure.
I believe the word is "exponential".
There was a gauge problem for this train because the gauge in Europe is not the same as what Asia uses. I wonder when that problem was addressed?
That may be the reason for transshipment.
I could me mistaken but I gathered from the article a switch over occurs at Malaszewicze.
That would be a logistical disaster that would add hours or even days to the shipping time.
Probably a big cause of the bottle neck. I found the note of switching the containers over.
I guess with trains sitting parallel and a crane is the best way to do it. Greater capacity for that at the station in Malaszewicze and some streamlining of customs processing is needed.
As for everyone switching to same gauge tracks, that is probably a long way out.
It is a bottleneck, but the switch can be made in relatively short period of time.
I was unable to find the number of units (cars) to each train. The less cars the quicker the transfer.
As dave mentioned the transfer is made by crane.
This is a photo of a gantry or straddle crane that can be used in the transfer.
I wonder how much the customs processing figures into the delays. the article seems to mention paperwork as a problem. I wouldn't be surprised.
I'm sure that it is part of the delay. The U.S. had the same problem for awhile with ocean transport, but improved custom requirements and technology solved the problem.
Currently the containers coming into the US via water are cleared when still at sea.
When I was driving truck we used what were called yarddogs to move freight around the yard, I guess something like that could be done in the railyards.
It's already being done and we used to call them ''yard goats''...
LOL, I guess different areas have different names for them, the same process tho' move the freight were the drivers or, the trains can get it loaded easily and, take off.
I am well aware of how it is done and the gantry cranes that would be used, either to unload and stack the containers in a transfer yard awating for a train to be put together to run them to their destination or the use of overhanging gantry trains on parallel tracks to load them directly on the train with a different gauge. If they are going to load them on parallel tracks, they would use multiple gantry cranes to speed the job up.
No stacking (grounding) containers is a waste of time and effort in this situation and used generally at yards ship side when space is a problem. The more direct transfer from car to car the better off they would be.
In this case if they had to stack them they would need chassis and yard goats to accomplish this. More time cost and effort.
As the volume grows they may have to rethink it. If multiple trains are arriving the need for spur tracks and yard space may become a necessity.
If I had a say, that is exactly how I would do it. Then it is a matter of having enough capacity to to run enough multiple sets of trains through at any given time.
This is a make or break situation fort the town of Malaszewicze.
Absolutely. To do it right, this needs to be in the plan now.
Here is a link to an article showing what China has done to build rail transport in Africa.
China's presence in Africa, a continent with vast natural resources, portends a Africa with a strong Chinese presence for decades to come.
Yup... gotta start teaching Chinese to all our kids...
From the linked article...
... Yup ...
LOl, a dozen years ago it was German now it's Chinese, guess language teachers will be in demand.
The US is once again pissing around building more unneeded weapons of war while our domestic infrastructure rots. The Chinese are building up their infrastructure networks for the 21st-century domination, both at home and abroad.
Actually the U.S. has been pulling back from investments in Africa and China has stepped in...Smart move on China's part stupid move on our part...
And welfare has nothing to do with this.
China does have a social safety net.
The amount that we spent on the poor is the US is minuscule, and they benefit farmers and others. Walmart is a great beneficiary of those dollars because people spend them at those stores.
More importantly, living conditions for "the average Chinese" continue to improve, rapidly. This is because... duh!! ... the Chinese government is firmly attached to making those living conditions better.
Meanwhile, living conditions for the average American have stagnated. This is because... duh!! ... the American government is firmly attached to giving all created wealth to the already-wealthy.
Above I referred to increased oil purchases by China from Russia. This is some interesting information on that.
New Pipeline Doubles Russian Oil Supply To China
By Irina Slav - Jan 02, 2018, 6:00 PM CST
An extension of the East Siberia-Pacific Ocean oil pipeline between Russia and China started operating on January 1, doubling the export volumes from 15 to 30 million tons annually, or almost 220 million barrels, Xinhua reports . The agency noted that the extension, agreed in 2013, would serve China’s Belt and Road initiative for expanding China’s regional influence in Asia.
At the same time, it will increase Russia’s market share in the world’s top consumer as China last year gobbled up more crude than the United States for the first time, posting record import figures as well, despite a much-publicized drive away from fossil fuels. The pipeline, which initially ran from the East Siberian town of Skovorodino to Mohe, a town on the Russian-Chinese border, was extended into China, to the city of Daqing in northeastern China.
Rosneft is the supplier of the crude via the ESPO pipeline, and PetroChina is the buyer. The oil will be processed at three refineries in the Northeast of China. Back in September, Reuters reported , citing refinery sources, that one of these was undergoing a capacity expansion upgrade that cost US$880 million. The upgrade should increase its capacity to 400,000 bpd by the end of this year.
Russia last year became China’s biggest oil supplier, holding the crown for nine consecutive months based on the latest data , released in the last week of December. In November, Russian crude exports to China totaled 5.12 million tons, or about 1.25 million barrels daily. That was 11 percent more than in November 2016. At the same time, Saudi imports fell by 7.8 percent in November, to 1.056 million bpd.
Higher imports have been necessitated not just by growing energy demand in China but also by falling production from mature field, many of them in northeastern China. But Russia is not the only one eating Saudi Arabia’s market share in the world’s top importer: the U.S. has been exporting crude at unprecedented rates. Last year, the average U.S. oil shipments to China stood at 180,000 bpd for January to September alone.
By Irina Slav for Oilprice.com
Interesting story..
With additional train lines.. this will make China a world player in Europe.. worth the investment to them.. could hurt us.
It's not just this rail line. They are building one that will run from China to Singapore and others that they are building in Africa with all it natural resources...
LOL My you do take the optimistic view dont ya ?
Another rail connection to and from China was started in November of 2017 with Finland being the other partner.
... across Russia, of course...
Lemme see...
Population... Russia 144 million ... China 1 379 million ... about ten times greater
GDP... Russia 1.283 trillion USD ... China 11.2 trillion USD ... about ten times greater
I wonder how this will work out....
Trump now thinks he has put a a roiling boil on the butt of China with his trade wars, but, it seems that he will be the one with the roiling boil in the 'end' (pun intended)
Dear Brother Kavika: Must read article.
Thanks for posting.
E.
Your welcome niijii,
I thought the link above about the new service between Finland and China was most interesting. This actually opens the opportunity for new products and new markets for the Finns.
The world is becoming smaller and smaller with each passing day.