Silk road: how to lure Chinese cargo

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The Union conversation: what should be the dialogue between the EU and the Eurasian Union 15 Dec 2016, 18:33

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In the case of the solution of logistics problems of the land routes across the Eurasian region can delay to 4% of goods going by sea between China and Europe

For two years in Russia to discuss the Chinese initiative of the Economic belt of the silk road (SREB). Talk about the prospects of participation in this project, political scientists, economists, transport. From the angle of view in this debate depends on many things: it is understandable for specialists in one area things are not so obvious for specialists from the other. The biggest difference in views and positions between the transport (railway, logistics companies, specialists in road transport, port workers), on the one hand, and political scientists and economists shared profile.

Politicians live in their world, the concept of pairing and major geopolitical designs. Trade economists have advocated an increase in trade flows and discuss than to fill a trade and economic agreement with China. Experts on the regional economy in favor of strengthening the competitive advantages of the territories, which has no outlet to the sea, linking transport corridors with dot projects, dry ports, warehouses and terminals. And transport workers do not understand what they can say and work in his world of big practical problems and real achievements.

Try at least to identify the bridges between these worlds, of course, to the best of his understanding.

The history of the container

Containerized freight is actually the only way to transport goods in the Eurasian transit. The container ensures the safety of the cargo, the standard dimensions, reduced costs on packaging for the goods, the accelerated pace of loading and unloading operations, unified transport documents and forwarding operations. The bulk of the movement along the axis EU — EAE — China if you go by land, it is in 20 – and 40-foot containers. Bulk cargo will not.

Currently, inland transportation of cargo along the axis of China — the Eurasian economic Union — Europe volumes are insignificant compared to marine transportation. So, in the traffic between Russia and China on Maritime transport accounts for 77%, overland transportation through the Russian-Chinese and Russian-Mongolian border — 21% of freight and for transit through Central Asia is only 2%. Yes, Chinese shoes and toys are coming by sea from Shanghai to Rotterdam, from Rotterdam to Saint Petersburg and then by road or railway transport in Russia. The distance is about three times longer than directly by land through Kazakhstan or Siberia. But it is cheaper and more convenient. Sea route Shanghai — Rotterdam shipping one 20-foot container costs $700. The price can’t beat. Moreover, even Chinese exports to Kazakhstan by 60 per cent goes via St. Petersburg or Vladivostok! And to complete the picture of the Eurasian Union, the overwhelming part of export turnover between Belarus and China is by sea (via Klaipeda, Gdansk and Saint Petersburg).

Is it possible to change the situation in favor of the land? Yes, it’s partly possible.

The development of the provinces

SREB for China — a history of the development of the Western and North-Eastern provinces. China is interested in using land routes to move goods from the Western (Xinjiang Uyghur Autonomous region, Tibet Autonomous region, Qinghai) and North Eastern provinces (Inner Mongolia, Heilongjiang). For China it is strategically important to overcome the imbalance in the economic development of inland regions of China, primarily the backwardness of the Western provinces from the East. To do this, China is developing a new transport infrastructure that will boost traffic to the West. Now Chinese companies, such as Xinjiang, are higher costs, annually directing of the container train with the products by $15 billion over 3,000 km on the East coast for sending goods by sea.

Nobody will carry a standard cargo from the seaside industrial areas of China by rail in Europe is unjustified in all respects. But the West and North-East China is a niche for us in the totality of the factors cost and time. Incidentally, these are areas with a population of about 200 million people.

Silk road for expensive goods

Transportation by land through Russia and Kazakhstan fell markedly over the past two years in dollars — helped the weakening of the ruble and tenge, respectively, increased competitiveness. The land routes along the axis between Europe and China remain significantly more expensive than sea, but a shorter shoulder to Moscow, the Urals, Kazakhstan — logistics is already something to think about.

Promising transport of goods with a high cost per kilogram of weight and the container. According to experts, if in a container you can put a product for $50-60 thousand, this is getting interesting. According to our estimates, promising the item is about. First, is the export products of the Western and North-Eastern provinces of China. Secondly, it is a narrow range of export of “expensive” goods from Central and Eastern provinces of China. Such a product can be attributed primarily electronics, automotive components, pharmaceutical products, cosmetics, jewelry, etc. And this applies to traffic in both directions. Not casually now from Europe to China by Railways are container trains (two to three staff per week from Poland and Germany) with a computer (Hewlett-Packard) and car components (BMW, Audi). Thirdly, land routes can be useful to suppliers of goods, which are important for high speed delivery (of the food products; textiles premium). Fourth, the increase in transport efficiency, speed and convenience for shippers may open niche mailings (DHL, Alibaba, etc.), of course, not to Europe, but, perhaps, to the European part of Russia.

Time

Land routes can win for time factor, but this advantage still have to implement. This factor plays in favor of transit by land, but requires additional conditions. For example, logistics specialists argue that trains should be linear and go through the schedule and preferably every day. Only in this case the factor of speed of delivery starts to work in favor of land transport.

While at the conferences to discuss the concept of pairing, we see that the volume of container transport by land routes China — Eurasian economic Union — Europe is growing every year, albeit from a very low base. Since 2013, the flow of freight trains through Dostyk (border of Kazakhstan and China) each year is doubled and has reached almost 100 thousand containers. Flows through Zabaikalsk (exit from the North-Eastern provinces of China to the TRANS-Siberian railway) and Naushki (exit through Mongolia, again on the TRANS-Siberian railway) is growing annually by 20-30%. Reacting to the changing price environment, shippers begin to more actively use land transport routes.

Containerization of the economy

Successful “development” theme of silk road economic belt will be connected with progress in the Russian economy, which now “decontainerization” and that’s a big systemic problem. In the system of Russian Railways container transport is only 2% of turnover and 6% in value terms. The level of containerization in Russia gives the United States more than doubled, and China — more than three times.

Unrealized potential of containerization is associated with infrastructure limitations. There is a problem of under-investment in the container freight station (logistics centres) and the lack of small and medium mechanization for cargo handling. In some regions of Russia, station work, or to only accept containers, or only on departure. In some regions large container business is not in principle (to the South and South-East from Moscow to the border with Ukraine and the Volga). Transshipment of cargo is done by trucks is expensive, and there is no alternative.

The real goal

We believe that the land routes across the Eurasian region can delay to 4% of goods go by sea between China and Europe. Sounds modest, but this is the most high-margin products. So interesting the niche is. Disclosure of potential land routes need systemic efforts on the development of container traffic and eliminate bottlenecks in the infrastructure of Russia and Kazakhstan.

Ultimately the main thing in this thread is not a nice looking picture of container trains, transit arrow whizzing through the Eurasian expanses. The main thing — the solution of internal problems of transport and logistics infrastructure, economies of containerization and optimization of regulation of the industry, customs administration, etc. This will lead to intensive growth of inter-regional transportation, increase connectivity of the regions, improve the logistics position of the regions, not landlocked — the Russian Urals and Siberia, and Central Asia.

The authors ‘ point of view, articles which are published in the section “Opinions” may not coincide with ideas of editorial.

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