European inland hub boosts rail container trade from China

European inland hub boosts rail container trade from China

The China-Europe rail option continues to prove a popular alternative to expensive air freight and lengthy ocean shipping. Photo credit: Shutterstock.com.

Europe’s inland hub of Duisport has grown its containerized rail trade with China in the first nine months of the year as shippers seeking alternatives to disrupted air and ocean transport kept overland demand elevated.

The largest inland port in Europe did not give actual figures for its January through September volume, but in an update said container throughput was 2 percent higher than the same period last year.

“The volume of [overall] traffic via the New Silk Road has almost doubled compared with the previous year and already accounts for almost 8 percent of the total container turnover of the Duisport group,” CEO Erich Staake said in the statement. 

Duisport reported that the number of trains running to and from China during the nine months reached record levels, with one-third of the total volume of trade by freight train between Europe and China passing through the Duisburg, Germany, logistics hub. Again, no numbers were provided by Duisport for the first nine months, but along with Europe’s seaport hubs of Rotterdam and Antwerp, Duisport attributed rising demand from China as a traffic driver.

However, despite the positive nine-month performance, Staake was cautious in his predictions for the year. “This is gratifying, but by no means a foregone conclusion in view of the current situation,” he said. “What will be decisive is that we can confirm this positive development up to the end of the fiscal year. I am confident that we will be able to do so.”

His confidence is well-placed. Soaring air freight rates amid a chronic reduction in capacity and high demand keeping ocean freight full have forced shippers to seek out alternative transport options. While expedited ocean shipping is booming on the trans-Pacific, it is the China-Europe rail network that provides the alternative on Asia-Europe.

Rail between China and Europe gives shippers a cost and speed option to air and ocean transport. But travel bans have removed half the available air cargo capacity and pushed rates up, while peak season demand and blank sailings has limited ocean freight capacity.

Forwarders use agents in China to arrange their China-Europe rail rates and all offer different prices, but UK-based forwarder Davies Turner said its rail freight rate from China to the UK equated to about $0.24 per kilogram with a transit time of 22 days. By comparison, average air freight rates from Shanghai to North Europe assessed by the TAC Index are currently at $4.20/kg, with average long-haul air freight spending six days in transit.

Ocean freight takes about 34 days from China to North Europe, and spot rates are currently at $1,084 per TEU, according to the Shanghai Containerized Freight Index (SCFI). 

The rising demand for rail was confirmed by forwarders. Jan Harnisch, global COO of air and ocean for Rhenus Logistics, said the land bridge was in heavy demand from customers.

“The demise of the air freight trade is leading to a very strong push towards the Silk Road out of China with many more enquiries from customers to move their cargo by land because of the faster transit time,” he told JOC.com.

“Shippers are fed up with the lack of reliability and see the land as a more viable option, even with the higher rates,” Harnisch added. “For certain emergency shipments we even organized trucks between Europe and China. It is not really an alternative to rail, but it is more an alternative to air.”

Long list of reasons behind rail’s popularity

Tony Cole, head of supply chain services at Davies Turner, said their express China rail service was continuing to show strong growth since container volumes soared in the second quarter. He said a long list of container shipping issues facing European importers — blank sailings, rolled cargo, poor on-time performance, and loading delays — made the China-Europe rail service attractive.

“Unlike the ocean freight alternative, there are no disruptions affecting the overland rail service, which typically saves clients up to 22 days [compared to ocean],” he told JOC.com in a recent interview. 

There is a lag in the official volume data for the rail network provided by China State Railway Group, the state-owned operator of the rail network, but UTLC ERA, a joint venture of the Belarusian, Kazakh, and Russian railways, said in a recent statement that 277,600 TEU were carried on its network in the first seven months of 2020, an increase in volume of almost 70 percent year over year. July volume was up 76 percent to 54,200 TEU.

In the first half of the year, China State Railway Group data shows 5,122 China-Europe freight trains were operated, a 36 percent increase year over year. The busiest border point in the network was at Khorgos on the China-Kazakhstan border, where the 2,000 trains handled in the first half was almost 50 percent more than in the first six months of 2019.

Demand is also growing on the backhaul route, according to Austrian fiber producer Lenzing Group, which has contracted two block trains to China with logistics provider cargo-partner. The first train from Vienna to Shanghai departed in August, and the latest train from Linz to Qingdao left Oct. 9 and will arrive Oct. 25.

Lenzing Group spokesperson Marco Schlimpert said in a recent statement there was high demand from Chinese brands for the fibers that go into textiles and apparel, and rail was the most efficient way to deliver the cargo.

“This allows us to transport our goods in an environment-friendly way, and moreover it ensures that the goods reach our customers in China twice as fast as on the usual sea route,” he said.

While some forwarders have told JOC.com of congestion building on the China-Europe rail network at the two gauge-changing points on the China-Kazakhstan and Belarus-Poland borders, others say transit times are being sustained.

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