China-Europe rail attracts smaller shippers as services expand

Rail gauge changes in Poland and Kazakhstan now take two hours, a quarter of the time spent years ago.
Editorial credit: whitelook / Shutterstock.com

Containerized rail between China and Europe has evolved from a niche option with infrequent service and a small network, serving major high-value and time-specific shippers, to one attracting suppliers and second-tier companies with more and faster services to a wider array of destinations.

The vast majority of services are still block trains where the entire train is booked by one customer and bonded for the journey. Forwarders offer less-than-containerload cargo services, but availability is limited. That’s changing, though, as more services come online, their frequency and speed increase, and rail operators on the route expand their networks. Cargo clearance has also improved and so has security, particularly through Russia, thanks to forwarders offering real-time GPS tracking, monitoring, and intervention for shipments, with some systems notifying shippers if the seal on their container is damaged or broken.

David Smrkovsky, strategic procurement manager at HP, recalls “the beginning when there was nothing,” forcing the computer producer to work with rail operators, customs authorities, and others to build its own block train, with the first train leaving Chongqing for Duisburg in 2011. Now, the China-Europe rail connects 15 Chinese cities and 16 European services, with the latest being London after a train headed for the industrial center of Yiwu in the Zhejiang province in eastern China left DP World’s London Gateway terminal on April 10. And exporters in Japan, South Korea, Taiwan, Hong Kong, and Vietnam can tap forwarders’ ocean-rail service combos via Chinese ports.

How much of a threat the China-Europe rail option is for air cargo carriers and, to a lesser degree, container lines, is debatable. Proponents said it’s better poised to attract cargo away from freighters and the bellies of cargo planes, as the shippers are moving pricier goods with firmer deadlines for delivery on rail, rather than on ocean. But as rail services quicken and mushroom, some see an opening for shippers to shift goods from the water to the track, particularly if ocean freight rates rebound and slot space gets tight, as it is now for the backhaul from Europe to Asia.

As a result, in the last few months, forwarder Dachser “suddenly saw a surge of interest in rail from shippers that could not move cargo by sea,” Edoardo Podesta, managing director, air and sea logistics for Asia Pacific, told JOC.com.

There’s limited capacity on the rails, with each service generally handling just 45 feus. Even at full use, the network could only handle between 500,000 and 1 million TEU, according to an Organization for Economic Cooperation and Development (OECD) report. Comparatively, the largest container ship traversing the Asia-Europe trade has a capacity of up 22,000 TEU.

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