Europe needs to urgently improve the “massive structural inadequacies” that exist in its rail freight sector and have been exposed by the rapidly expanding China-Europe rail services, while at the same time all rail freight organizations on the route should reduce their tariffs.

This would guarantee the long-term and affordable services that would be supported by China’s state subsidies, said Hans Reinhard, president of the Group of European TransEurasia Operators and Forwarders (GETO) and vice chairman of the International Coordinating Council on Transsiberian Transportation (CCTT).

“There are diverse, and partly massive, structural inadequacies in Europe that have to be remedied urgently. We need additional railway lines, more locomotives, and wagons and additional locomotive drivers,” he told a plenary session in Beijing hosted by the China Railway Container Transport Co., a subsidiary of the China Railway Corporation.

"Basically, we need better coordination between China and Europe, between the departure platforms in China for a more balanced distribution of trains across all of Europe, but also between the platforms and the operators, most of whom actually come from Europe.”

However, the long-term guarantee of train services between China and Europe required a reduction in tariffs for railway lines, wagons, and containers so the current price levels, which Reinhard said were supported by state subventions, could be maintained.

"This means that all companies involved in rail traffic, but most especially the state run railway companies, have to provide lower tariffs, shorter transit times, and increased quality transparency,” he said.

“Intensified coordination between platforms, as well as between operators, is essential to improve the utilization of trains, especially along the CIS railway network with its bigger train units, but also for a more balanced distribution of the trains across all of Europe.”

By 2020, DHL estimates there will be 5,000 cargo trains running between China and Europe every year via three corridors: North, Middle, and South. Timothy Cheng, head of south district, for DHL Global Forwarding Greater China, said while it took a long time for the rail route to build momentum, the services are growing exponentially.

“It took 55 months to reach the first 1,000 westbound trains. Progress from train number 4,001 to 5,000 was achieved within just 3.5 months in 2017,” he told the JOC’s TPM Asia conference in Shenzhen.

Yet even with the growing business surrounding the China-Europe rail connections, trucking has a 70 percent share of Europe’s transport market and there are no indications that it is going to lose out to barges or rail wagons any time soon.

Rail continues to shed market share to trucks despite attempts by environmentally conscious governments to divert freight traffic from Europe’s increasingly congested highways to greener rail tracks and inland waterways. Not helping marketing efforts was the recent two-month closure of the crucial north-south Rhine Alpine corridor that exposed rail freight as the weak link within Europe’s integrated logistics chain, damaging confidence in a key part of the continent’s sustainable transport system.

The full length of the Rhine Valley Railway line, or Rheintalbahn, was opened on Oct. 2, but even though this was five days ahead of schedule, shippers and logistics operators have faced significant disruption trying to move cargo between Italy and ports in Northern Europe.

In his Beijing address, Reinhard also looked at container block trains operating between China and Europe, as questions have been raised about their prospects for the future. Block trains are competing with rising demand from shippers looking for less-than-container-load cargo, but in the past 12 months Reinhard said a huge increase in railway connections between China and Europe had been registered, and because of significant investment pouring in from investors, led by the Asia Infrastructure Investment Bank, many new routes have been developed and old ones are being revived.

“Yiwu has done unique pioneering work in this respect with destinations in Europe that have met with enormously positive acceptance in the market, like for instance Madrid, or more recently, London," Reinhard said. Trains to Madrid and London were block trains.

Border controls remain a key challenge faced by rail operators, and Reinhard said another measure to reduce costs and strengthen competitiveness was the installation of hub systems at CIS border entry and exit stations. This would allow bundling train traffic and guarantee a better utilization of the wide gauge railway tracks, as Europe and China have different regulations governing the maximum length of trains.

Despite the challenges, services on the route continue to grow. Giant Swiss forwarder Kuehne + Nagel is the latest to announce  a strategic expansion and for the first time is offering shipments from North China, Japan, South Korea, and Southeast Asia to locations in Europe.

“KN Eurasia Express is a success story,” said Otto Schacht, board member of Kuehne + Nagel and responsible for sea freight. “Delivery times are much faster compared to sea freight, while costs are much lower than air freight, making it an attractive product for our customers. Now we're expanding this service to include commercial centres in northern China, South Korea, and Southeast Asia.”

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