Rail to service trade with China?

No one needs to be persuaded about the importance of the Chinese partner for the member states of the European Union.  In the decade between 2006 and 2015, the export of goods from the EU to China increased threefold. Almost every 10th product which leaves Europe finds its way to China, which makes this country the second largest importer from the EU, right after the United States. In terms of export to the EU, China is the lone leader which supplies the member states with more than 20% of goods procured by those countries overseas.  This generates tremendous volumes of commodities, whose transport poses a significant challenge. Particularly that we are dealing with poorly balanced trade relations. In the decade between 2006 and 2015, the deficit in turnover between EU economies and China oscillated between 132 and 180 billion euro and reached the average of over 152 billion euro. This means that over 43% of goods which travelled from China to Europe would have to be transported in the opposite direction.  This unbalance makes the effective organisation of transport really difficult.

Sea freight still dominates

Most European exporters to China and importers from China decide on sea freight. It has the undeniable advantage of being relatively inexpensive. It is estimated that at present approx. 80% of the world trade is serviced by sea freight. Therefore its position may seem to be unchallenged. Unfortunately sea freight has one serious downside - it is slow. When ordering goods from China using sea freight we must take into account 40-50 days of delivery. This decreases the flexibility of business and calls for increasing warehouse stocks. Not every sector can accept such a long delivery time. It is interesting that container connections between Europe and the Far East have been dominated by over a dozen ocean ship operators who are divided into three alliances. They account for 97% of all transports. This market therefore is more like an oligopoly than the perfect competition. Until recently, the only alternative to sea was air freight. It is much faster that sea freight but also accordingly more expensive, which substantially decreases its competitiveness and takes away any real chances of challenging the domination of container ships.

Time for rail?

Perhaps rail will be able to challenge the hegemony of sea freight? This is a compromise solution: faster than a ship and cheaper than an airplane. A train from China to Poland travels from 11 to 14 days (i.e. 3-4 times faster than covering the same route by sea) and the cost is 1/3 lower than air freight. Anyway, the potential of railway has been much discussed recently. The EU is promoting this mode of transport as economical and safe while China are launching more and more connections with Europe and are openly talking about the chances of further development under the banner of the New Silk Road. Actually, statistics allow for a bit of initial optimism. Since the launch in 2013, the connection between Chengd and Europe has serviced 300 trains. Chinese authorities declare that by the end of 2016, the total of 400 trains will have reached Europe in this way and in 2017 this number will grow to as many as 1,000. So the progress is impressive.

Numbers know no mercy

However, when we compare the capacities of trains with the cargo transported by container ships, it is clear that rail connections between Europe and China are still don't mean much. In Poland, only 8 companies offer rail transports from China (including Raben Group together with SHANGHAI EB & SFSC INTERNATIONAL LOGISTICS CO., LTD between Wuhan and Warsaw and between Lianyungang and Warsaw), and the transported volumes still impress no one. In 2015 the world longest, 13,000 km Yixin’ou railway line (connecting Yiwu and Madrid) transported 794 TEUs from China to Europe (and 146 TEUs from Europe to China). Whereas the largest container ships offer transport capacities at the range of 18,000 TEUs each! In view of such huge disproportions it must be clearly stated that at present rail is not able to challenge to dominating role of sea freight between China and Europe.  Nevertheless, it is worth closely following this development because both Chinese and EU leaders are determined to increase its importance.