Stefan Reidy
Stefan Reidy,

03 Oct 2017

The New Silk Road is a resurrection of the ancient trade route called to action by President Xi Jinping. Its purpose is to reinvigorate the once ancient commerce relationship between the east and west and to streamline the transport of goods from Asia to Europe by connecting European cities and Chinese metropolies. The initiation of this double trade corridor covering both land and sea routes is intended to open up and facilitate trade between the two regions through investment in infrastructural development. The multi-billion-dollar project is estimated to encompass over 60 countries benefitting a large chunk of the population and affecting the global GDP.

The Belt and Road initiative, as the Silk Road of the 21st century, is otherwise termed, covers both the land going Silk Road and the Maritime Silk Road. Part of the vision for the new Silk Road is a long-distance rail connection across the east and west trade fronts. Because the rail freight is the part of the project that currently taking all the limelight, this article will detail the prospects of the new Silk Road given the rail freight services from China to Europe and back.

Revival of the Silk Road_Reuters

Revival of the Silk Road_Reuters

Shipping goods from China to Europe

Currently, shippers of goods from Asia to Europe have two options to deliver their goods to the West. They either opt for the cheap but slow ocean-bound route or decide to ship their goods via air which is a way faster but a considerably more expensive solution.

The New Silk Road train that is faster than marine transport and cheaper than air transport appeals especially to customers who have time-sensitive goods, such as merchandise to be sold as part of special promotions in the apparel industry or capital-intensive goods such as automotive parts or electronics. The surplus costs of rail transportation compared to the marine routes can be offset by the reduction in inventory costs and timely delivery. On average, the transit from China to Europe on the New Silk Road is about 14 to 18 days for block-trains and 18 to 21 days for single container shipments.

 

China Europe Transport Options Comparison

China Europe Transport Options Comparison

 

The market dynamics are slowly bowing to the promising prospects of the new direct China to Europe trains as seen in the steady growth of the China-Europe express trains. The trans-Eurasian rail freight services are gaining popularity by the day, so it is about time that different stakeholders began to consider this option.

There are two major routes to the new Silk Road; the first is called the northern route. This route connects to the Trans-Siberian railways in Russia. The second is the southern route that passes through Kazakhstan into Russia before ending in Europe.  Several European terminals are connected to the Silk Road rail system.

A few of them are:

  • Moscow
  • Brest
  • Warsaw
  • Hamburg
  • Milan
  • Madrid
  • London

Benefits of Rail Freight Transport via the Silk Road

  • Reduction of transport time

Sea transport has been conveniently labeled for transportation of bulk cargo from China to Europe and back. However, that notion is about to change. While the maritime Silk Road takes about 35 days for cargo to arrive, it takes the rail freight just about 18 days to hit the UK from China. Offering a slash of almost half the time that was before needed, rail freight is thus gaining popularity. Thus, rail freight has taken a medial position between sea and air letting air handle the very perishable products like agricultural produce while the rest are moving away from shipping to rail transport.

  • Reduction of transport costs compared to air freight

Forwarders are registering an increasing number of inquiries from shippers into the China-Europe rail route as an alternative to the costly air freight services. The onset of the financial crisis put air freight at an unaffordable level, and so shippers opted for ocean transportation which was extremely cheaper but slow. To make matters worse, slow streaming made the journey even slower. This fragmented a luxurious market niche for rail transportation; not as expensive as the air freight option and not as slow as the shipping route.

Customers are thus passionately pushing shippers to include the China-Europe rail in their catalogue. A comparison done by a forwarder stationed in Hong Kong and Shanghai considered a 40-foot container. The chargeable weight for such a container is approximately 9600 kilograms. On the rail transit, it would cost $8000 per FEU while the charges for the same FEU would be $5000 less on ocean freight. On air freight, charges would soar to over ten times that charged on ocean transit. It is thus conclusive to say that rail transit averages the two:  offering a cut down on air freight service prices while also cutting down on transportation time from the maritime route.

  • Reduction of CO2 emissions

Greencarrier Freight services, a Scandinavian Freight Forwarder operates container services out of China via the north corridor destined for Warsaw in Poland. It has adopted the China-Europe rail route as part of their green transport solutions towards their goal of reducing CO2 emissions by 15% before by the end of 2017.  The reduction of the mileage the cargo covers being transported on the roads has helped cut down on carbon emissions.

Though not the most environmentally-friendly mode of freight transportation, it beats air transport. If a 12-meter container with cargo weighing 20 tons were to be ferried via rail freight, it would account for about 4% of CO2 that would result from the use of air transport. In the case of ocean transport, the level of emissions would be cut in half again.  Additionally, according to Far East Land Bridge Ltd., the New Silk Road train journey also saves 75% of the carbon footprint of the ocean route while running only 11,000 km instead 22,000 km on the sea route. It reduces the severe congestion which exists in and around the seaports involved in the east-west container trade, by moving containers from truck to rail.

  • Option for Full and Less than Container Services

Another advantage offered by the China-Europe rail system is the availability of options to utilize full container load or less than container load shipping solutions.  Less than container load refers to small shipments that do not have to meet the full capacity required for a container sailing through the ocean. The less than container load service is intended to be a cheaper alternative to air freight for lower capacity shipments. The option saves time as shippers do not have to wait for a container to be filled before they can send it through the rail system.

Shippers are ensuring the safety of the cargo on the Silk Road by monitoring the location and condition of shipments

Cargo monitoring and tracking services, such as Arviem’s supply chain visibility solution, involve tracking and tracing of the movement of cargo across the Silk Road. Factors like temperature, humidity and even levels of shock are put into consideration to determine the state of the transported goods. Arviem’s global reach and extensive experience on the market makes Arviem stand out as the best solution provider for challenges cropping from the China-Europe rail route. Arviem’s monitoring team is not bound by geographical restrictions or cultural backgrounds. The company’s core service is cargo tracking and monitoring and thus has directed its focus and finances to provide quality, reliability, and precision.

Download our White Paper about the New Silk road and learn more!

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