Rail transportation to China along the New Silk Road is growing extremely fast. The Covid-19 pandemic has only accelerated this process. What are the advantages of rail freight, says Pawel Moskała, president of Real Logistics company specializing in milk transport to China by this route.
Many companies that export milk and dairy products to China have been using the same tried and tested sea transport routes for years. A little out of habit, a little out of fear of the Russian embargo. And although sea freight still dominates trade with China, it's worth checking out emerging alternatives, one of which is rail transport, an option that has already been tried and tested to the point where there is no need to be afraid of it. But it's still new enough to have been overlooked by competitors.
First of all, it is fast
Transport by sea from Poland to China takes more than thirty days. In comparison, in the railroad solution it is only 14-18 days, i.e. half. What is more, in sea transport the goods have to be in the port about 2-3 days faster than in the case of closing by rail.
It is also worth mentioning that the so called "container rolling" (i.e. delays in ports related to cargo peaks) practically does not happen in rail transport to China. What is more - trains set off on the same route on average 2-4 times a week, so it is easy to match the most convenient departure for the exporter.
And because "time is money", you can react much faster to the demand coming from the Chinese market and recover your investments in exported goods in a shorter period of time.
Secondly, it is safe
Some products, such as powdered milk, should not come in contact with moisture. Moisture not only causes the product to clump, but also promotes the growth of undesirable microorganisms. Rail transport is therefore much less risky than sea transport in this case. Maritime transport is also slightly more exposed to stoppages connected with bad weather conditions or, as we could observe in March this year, to unexpected stoppages in key places of communication routes, e.g. in Suez Canal.
Third, it is affordable
It is often the case that the cost of transportation by rail is no different than the rates in ocean freight. This is because the Chinese government often subsidizes the trains going their way so that the containers do not return to China empty.
Rail freight rates do not change as quickly as those for sea freight. There are also no additional charges that can surprise an exporter. This policy allows for better planning of expenses and management of transportation costs.
And also well taken care of
Our company started to serve the New Silk Road as early as 2013, which is practically since its launch. This makes us really know all about it. We also have proven partners on the Polish and Chinese side, and our own branch, which we opened last year in the Chinese city of Chengdu, helps us to oversee the process on that side. Our own customs agency, which has already paved the way for all the necessary procedures, is also a great help. Thanks to our knowledge and experience we are able to transport Polish dairy products through Russia, despite the embargo still in force.
In addition to full container loads (FCL), we also have our own less-than-container load (LCL) service. This is a great solution for beginner exporters who want to ship small batches of goods and can share the transport costs with others. We collect and store such cargo, and then load it collectively into a container together with other shippers' goods. However, this form of transport can be used only for products not covered by the Russian embargo, e.g. baby formula milk products. Our groupage cargo on the Lodz - Chengdu route leaves every week.
Despite the pandemic, New Silk Road shipments in 2020 were up as much as 64% over the previous year. There is no indication that this trend is about to reverse. More connecting lines are appearing and more countries are joining the route. Both governments and exporters have become convinced of the attractiveness of this form of transport between Europe and China.
Rail transport stated record increases and forecasts for the coming years are equally optimistic.
2020 was a unique and difficult year at the same time, mainly due to the dynamical spread of COVID-19. The effects of this situation can be observed in all industries, but for rail transport on the New Silk Road it was a record year in terms of the transported volume.
Big increase in rail
2020 began good, but unfortunately the situation changed drastically when at the turn of January and February China decided to close Wuhan and suspend rail operations from this region. Initially, the reduction number of departing trains was expected. However, the impact of the pandemic on other means of transport benefited rail services.
According to data provided by UTLC ERA, there was an increase in transit transport on the China - Europe - China route, by 64% compared to 2019 (more than 45% increase in export to China and more than 77% increase in import from China to Europe).
The increase in export is also an effect of the Russia’s decision to allow the transit of products covered by sanctions so far through its territory.
Difficult access to containers
Despite the significant increase in rail transport, the transport market was also struggling with many problems. The biggest problem was undoubtedly the limited availability of containers. The problem began to worsen from October 2020, which resulted in an increase in freight prices by up to 264%, and container leasing in China increased by about USD 1,500 (+ 287%). There are several factors that led to this situation - the imbalance in trade between China and Europe; a lot of European countries closed or significantly limited the operation of their economies in the first half of 2020 and majority of orders for new containers were canceled; a significant slowdown in air transport, which resulted in the volume being shifted to rail transport.
Forecasts for the coming years
Currently, over 90% of imported goods are transshipped in Malaszewicze and unfortunately the operational capabilities of this place are not sufficient. According to the "Logistics Performance Index" report, Poland is currently ranked as 17th in Europe. The government plans to adopt a program for the construction of the Malaszewicze Logistics Park later this year. The investment would allow longer and heavier trains to be accepted. Currently, the maximum length of the train is 750 meters and the axle load is 22.5 tons. After the reconstruction, the length would increase to 1,050 meters and the axle load to 25 tons. Additionally, there are plans to reconstruct the track layout, overhead contact line and traffic control. Planned works are to start in early 2023 and end in mid-2026.
Real Logistics Poland also felt the impact of the transport situation. Being an expert of the New Silk Road rail service has helped not only to live through the difficult times of COVID-19 but also to get good financial results. In addition to that, interest in our complementary services (road transportation, warehousing, customs agency) has also increased, allowing us to make all the services even better to fulfil the needs of wide range of partners. Our frequent rail LCL services Chengdu – Warsaw and Lodz – Chengdu became very popular since they are a good alternative for a sea transport. Many new clients used this mean of transport for the first time and then kept using it. We expect the continuing fast development of the rail transport, not only through Malaszewicze but also through Slawkow this year.
This one of the largest events in the logistics business is carried out interchangeably - one year in Shanghai, the next one in Munich. The exhibitors were firms involved with transport, including forwarders, manufacturers of vehicles and containers, producers of fasteners, companies servicing IT solutions, developers and even publishers and training companies.
Transport Logistic 2019 in numbers:
- 2,374 exhibitors from 63 countries
- 10 percent more exhibitors than in 2017
- 64,000 visitors from 125 countries
- 5 percent more visitors than in 2017
- 125,000 square meters of exhibition space
Due to localisation, the largest group of exhibitors were European firms. 68 of them were Polish. Real Logistics were also prezent there. Its booth was dedicated this year to promote LCL rail consolidation to China, as a part of the New Silk Road. The booth was very popular, both among European and Asiatic enterprises.
A generous conference offer was also prepared for the participants. Two themes dominated: change and innovation. Issues such as: Brexit, new routes and transport directions, ecology and climate change, the growing role of IT and artificial intelligence were raised.
Looking at how much was invested in the appearance and promotion of booths, in the preparation of service and all types of gadgets and printed materials, we can confirm that the logistics business is doing well.
Since the idea of the New Silk Road in 2008 appeared, the rail connection from China has been developing very dynamically.
Since the idea of the New Silk Road in 2008 appeared, the rail connection from China has been developing very dynamically. Interest in this type of transport is growing so fast because it is a compromise between cost and transit time.
Another advantage of the constantly growing number of trains is that you can find a convenient connection. What’s more – this type of transport gives you high possibility of monitoring shipments and it’s more ecologic. The transport time between the main terminals of postage and collection in Poland is about 11-19 days, where the transit time in sea transport is about 35-40 days. The main reason is the growing number of companies in Poland and Europe that are interested in rail transport. This in turn causes a drop in prices, because it is easier to fill the whole train. From our observations, the price of rail transport from China in the last 5 years has decreased by half.
It is safe to say that the rail link from China to Europe is the most effective means of transport. What is important, the geographical location of Poland naturally favors that our country is the most important transit country for these loads.
Autor: Sofia Myhaluk