Central Asia containerized rail freight rocketing

Central Asia containerized rail freight rocketing

Transcontainer dominates the Russian rail market. Photo credit: Transcontainer.

Containers traveling on routes through Russia, Belarus, and Kazakhstan grew by 75 percent in 2017 compared with the previous year as demand continued to strengthen across Central Asia and along the China Railway Express network.

A total of 175,000 TEU were handled last year by the Eurasia alliance of United Transport and Logistics Company (UTLC) that comprises national operators Russian Railways, the National Union Belarusian Railway, and Kazakhstan Temir Zholy.

UTLC president Alexey Grom said the strong growth of 2017 had enabled the company to make “even more ambitious” plans for the next few years, although he never spelled them out.

“The result we reached at the end of the year set a new record for the amount of transit trains in the infrastructure of the track. The plan to reach a TEU volume of 1 million are without change,” he said in a statement.

A total of 2,102 trains were handled by UTLC in the three territories in 2017 with up to 15 trains every day. Regular routes across the company services increased from 19 in 2016 to 48 in 2017.

One of the problems being faced by shippers using rail to send their cargo from China to Europe via Kazakhstan or Russia is a lack of capacity at peak periods. The rail routes are alternatives to air freight and trains are typically 80 wagons long, but with airline capacity under pressure from rising demand, shippers are increasingly shifting cargo to the rails and those wagons are being quickly filled.

UTLC has tried to address this in its three territories with the deployment of the “XL train.” During 2017, 115 trains were organized that were 100 wagons long, which enables a better use of equipment and reduces cost and delays. This was helped by new technology partnerships that Grom said enabled the alliance members to make their services more accessible for customers and competitive for shippers.

Transcontainer, the dominant Russian rail cargo operator controlled by UTLC, reported international rail volume across its network growing by 19 percent in 2017. Throughput at its Russian container terminals was up 5.2 percent year over year to 1.3 million TEU.

The growth in containers through Central Asia is hardly surprising as the countries straddle the China Railway Express network that has become embedded in the supply chains of shippers over the past two years. Shippers are even moving from ad hoc shipments to service contracts with forwarders as they adapt their strategies to ensure pricing stability on what is now a mainstream transport option on the Asia-Europe trade.

China-Europe rail now connects 36 Chinese cities and 38 European destinations, with the number of weekly block trains expanding from 10 to 12 two years ago to 54 trains in 25 services. Westbound service speed is now 12 to 15 days from original transit of 25 days, and container volume is expected to grow 15 percent per year for the next 10 years to 636,000 TEU by 2027.

China’s state media has reported that freight rates on the China Railway Express have fallen by 40 percent since the services began in 2011, but forwarders and shippers using the route say prices have risen with demand. The rate per FEU weighing about 9,600 kilograms (21,164 pounds) is between $6,000 and $9,000 terminal to terminal.

Even though the rates are well above ocean, they are nowhere near shipping by air. “It is a super alternative to air freight,” said a German wholesale shipper. “And it is very helpful to be at final destination in Europe in less than three weeks. We will use this option, but it will really be an option used for things that are running late late.”

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.