Although China’s passenger rail services dwarf those of the United States, its container rail connections dramatically lag its North American rival. To the chagrin of container shippers, the hundreds of billions of dollars spent on Chinese rail improvements have focused primarily on the transport of passengers, disaster relief and bulk cargo.
That’s changing. As China faces more manufacturing competition and as sourcing moves farther inland to tap cheaper labor, container rail services to ports have begun to improve, albeit slowly. The sluggish gains have pushed more shippers to move their goods by rail to Russia and Europe, a much-publicized route that is beginning to deliver on its promise.
One of the bright points of container rail service development has been at the Shenzhen terminals, which enjoys 15 fixed services to interior cities, including Nanchang, Changsha, Wuhan, Chengdu and Chongqing. Shrinking manufacturing in the Pearl River Delta is spurring the Shenzhen Transport Commission to provide more regular services within inland China.
Shenzhen also provides incentives to freight operators that use rail, and has awarded some $2.5 million in financial subsidies since 2009. More refrigerated container services also are needed, with OOCL helping lead the development of cold chains via the rails. The carrier offers regular reefer intermodal service from Xi’an and Chengdu to Shanghai, along with dry intermodal services from Zhengzhou to Hong Kong.
“The challenges that the sector is facing, and the Chinese government is very much determined to progress on that, are mainly to provide services more adapted to the customers and organize coordination with other important stakeholders like the ports for intermodal and the customs for cross-border operations,” Frederic Campagnac, general manager of Beijing-based transportation and logistics consultant Clevy China, said in an e-mail.
Despite the developments, too many of China’s export gateways are more similar to that of the Yangshan container terminal complex, 20 miles off Shanghai’s coast. The lack of rail connections at the terminal forces shippers to take on added costs for trucking goods between the facility and factories in Jiangsu province. Not surprisingly, more shippers are taking advantage of the expanding landbridge via Russia to Europe, particularly because they can save more than two weeks in transit time compared to ocean shipping.
The Far East Land Bridge is the pioneer in connecting China with Europe via rail, and since 2007 the company has provided two-way container rail services via the Trans-Siberian Railway route and European and Chinese rail networks. The carrier runs near-daily services transporting 40-foot containers, 40-foot high cubes and 20-foot containers to and from China as far north as Vostochyny, Russia, and as far south as Chongqing. The major European markets stretch as far west as Italy and Germany. In addition to serving major Chinese markets such as Beijing, Shanghai and Qingdao, FELB connects to South Korea.
Major customers include BMW, Audi, Volks-wagen and Samsung, and the FELB expects to handle between 45,000 to 50,000 20-foot-equivalent containers this year, said Gunter Heindl, a deputy with the company. Customs obstacles have stymied growth on the landbridge, but single waybill and electronic cargo manifests have mitigated delays. Radio-frequency indentification monitoring and full cargo insurance also have helped attract shippers to the routes.
DHL Global Forwarding, DB Schenker, Weiss-Rohlig, Russkaya Troyka and Eurasia Good Transport also have launched two-way container services from China to Europe, with many of them piggybacking on the FELB service.
Berlin-based DB Schenker, for example, has shipped more than 7,000 containers to Germany and Austria from the BMW plant in Shenyang since September 2011. The service allows BMW to receive automotive parts from roughly 6,800 miles away in 23 days, a pace twice as fast as traditional ocean shipping.
DHL, which began operating its China-Russia-Europe service 16 months ago, sees more shippers moving toward multimodal services and away from traditional ocean shipping and even air transport, according to Ambrose Linn, senior regional director of road freight and multimodal strategic accounts for the Asia-Pacific. Shippers of consumer electronics, advanced technology, auto tires, machinery spare parts and industrial project cargo dominate the DHL service.
“Recently, we have started picking up shipments from Japan for feeding to major China ports of entry (such as) Dalian, Yin Kou, Tianjin, Qing Dao and Lianyungang for further rail connectivity into Russia, Europe and Mongolia,” Linn said in an e-mail.
The emphasis regarding rail landbridge tends to be on reduced transit times, but the container rail services also can provide better guarantees on capacity and rate stability. Although overcapacity and weak demand has pulled down ocean shipping rates on the Asia-Europe trade lane, the choppy waters can make supply chain planning particularly tricky.
For shippers whose production lines depend on the timely delivery of parts, the landbridge service can ease potential volatility. In time, shippers using rail connections to Europe and networks to Chinese ports will demand a similar peace of mind.