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China conference: New Silk Road gets back on the rails

20 April 2016 | Rachael Hogg

Automotive LOGISTICS (Chen Zhongwei)20160420-6334

Updated April 24th to correct a quote misattributed to Gefco

Long-distance rail freight between China and Europe is coming on apace, delegates at this week’s Automotive Logistics China 2016 conference, held in Chengdu, have heard.

Over the past few years, the Chinese government has been ambitious in promoting its ‘One Belt, One Road’ plan to revitalise and modernise trade with other countries. Around $40 billion worth of investment has been talked about to develop intermodal routes across China, south-east Asia, Russia, central Asia, the Middle East, Africa and Europe.

Long-distance rail movements between China and Europe are certainly attractive to the automotive industry as a faster alternative to sea transport and a less costly one than air freight. While it is still early days and the volumes are still small, there are now plans to develop and increase this over coming years, particularly from several locations in western China such as Chengdu, the capital of Sichuan province in south-west China, and nearby Chongqing, at the western reach of the Yangtze River.

Speaking at this week’s conference, Chen Zhongwei (pictured), director of the Chengdu Municipal Port and Logistics Office, outlined proposals to develop and improve rail freight links to multiple points in Europe, with plans to run as many as 3,000 trains a year by the end of the decade.

Since 2013, the city has been a key point in the ‘New Silk Road’ with the establishment of the Chengdu-Europe express rail link, a service that runs from Chengdu through Russia and eastern Europe to Lodz, Poland which has already been used to move automotive spare parts for export from China. Since last year, the route has also been running services on the return leg from Poland and will move to daily services from May. Later this year, Chen revealed, two new routes will also begin services to Moscow, Russia and Istanbul, Turkey, with feeder lines servicing the entire European continent.

“We will form a Pan-Asian European network that will cover as many areas as possible along express lines,” he said.

Although Chengdu is far from China’s seaports and not directly on a major river, Chen said the city was trying to become an international logistics hub, with the goal of becoming the busiest rail hub in China. Automotive parts and finished vehicles are among the target industries, both in Chengdu and the wider region, with a number of automotive services already moving to Chongqing.

Chengdu Municipal Port and Logistics Office is currently pursuing aggressive expansion of its rail links and services. Last year, there were 103 freight trains between Chengdu and Europe. This year, Chen forecasted, there would be 400 trains – 250 outbound from Chengdu, and 150 inbound from Europe. In 2017, meanwhile, this should increase to 1,000 a year, or three pairs of trains every day, with a further goal of 3,000 a year by 2020.

To help manage this growth, Chengdu has established the Chengdu-Europe Fast Express Company, which will help to provide door-to-door services along the route. Transit times between Chengdu and Poland are currently ten days but Chen said there were plans to reduce this to nine. “This year we hope to optimise the efficiency of rail transportation… in the future, there will still be room for improvement,” he said.

The train from Chengdu to Poland is direct, with no stopovers, but for the southern line to Istanbul a stopover will be made in Almaty, Kazakhstan. Once the cargo has reached its final destination, it can be loaded onto new trains for onwards transit by other companies.

Chen added that he was visiting Warsaw this week to look at the possibility of setting up an indirect rail link between Chengdu and Nuremburg, Germany that would take fewer than 20 days. “Once we have trains connecting Chengdu and Nuremburg, we will have a twice-weekly service whether it is loaded or not,” he promised.

A long way to go
Although Chengdu has ambitious plans to develop its rail links, automotive logistics trials have actually been taking place between China and Europe for around a decade already and other routes have already been established. And the automotive sector’s interest is rising.

“Although the traditional way of coming to our plant in Chengdu would be sea or air, rail connections are becoming more and more household,” Magnus Ödling, director, inbound logistics APAC at Volvo Car, told the conference.

Uti Worldwide (acquired by DSV recently) has partnered with China’s Beijing Changjiu Logistics to offer an ‘Iron Silk Road’ service between Harbin, in north-east China, and Hamburg, Germany; and the Trans-Eurasia Logistics link between Chongqing and Duisburg, Germany is also now running. Meanwhile, DB Schenker has been working with China Railways in building rail infrastructure across China and Gefco has been working with majority shareholder Russian Railways (RZD) to offer a number of services across the Trans-Siberian Railway, as well as to western China and across central Asia.

David Zhang, director of integrated supply chain for Asia Pacific at tier supplier Delphi, revealed that his company had recently started using a regular, weekly rail service between Hamburg and Chongqing as an alternative to a combination of sea and air.

Delphi uses a full container-load on a train made up of freight from other companies and commodities. According to Zhang, the total lead time for the rail service is around 25 days, compared to 60 for sea freight. Zhang said Delphi chose the route to Chongqing rather than Chengdu because the tier supplier currently had significantly more production there.

Yves Suinat, network sales steering director at Gefco, said his company had privileged access to 85,200km of railways operated by RZD and can transport cargo between China and Moscow, Duisburg and Hamburg. The company is currently running trials moving finished vehicle imports into China to Chongqing from Germany with BMW, for example. Gefco has also run services that combine two-wheelers, automotive parts and general cargo exports from Europe to China.

Automotive LOGISTICS(Yves Suinat) 20160420-6565

Gefco’s Yves Suinat and Andrew Liao said that the company currently had a 0% damage rate on finished vehicles moved via long-distance rail from Europe to China

While such services have been reliable, there are of course challenges in such a long, complex transport route, including different rail gauges, difficult winter weather conditions and the need to be compliant with procedures, regulations and customs across multiple companies. However, managing such realities were part of the door-to-door service and expertise that third party providers such as Gefco offer, according to Suinat.

In response, the company has implemented strategies such as using an integrated control tower to oversee each leg of the service, with custom clearance a specialisation in each relevant country. And while weather could extend lead times in winter, the overall delivery time compared to sea freight was still less than half, he said, helping to save working capital. The use of specialised racks for carrying finished vehicles has also allowed up to four vehicles to be loaded per container. “On trials for moving BMW vehicles, we have had a 0% damage rate,” said Suinat.

While automotive rail freight volumes between China and Europe are still relatively low, interest among manufacturers and logistics providers has clearly grown and, encouraged by government interest, it seems little can now derail this trend.

 Click here for a full report from Automotive Logistics China.

Click here to view video recordings of the main sessions.

Tagged with: Africa, Asia, Asia Pacific, Chengdu, China, Europe, Exports, Finished Vehicles, Imports, Inbound, Middle East, New Silk Road, Outbound, Rail, Rail Freight, Service Parts, Tier Suppliers