Business World

Wednesday 18 July 2018

Bottlenecks on the Silk Road as Chinese freight hits Europe

China's leader Xi Jinping
China's leader Xi Jinping

Andrius Sytas

When cargo trains from China began arriving at the Polish border town of Malaszewicze almost a decade ago, they were a novelty - able to ship laptops and cars to Europe in as little as two weeks - but with just one service a month.

However, a surge in the number of trains over the past year, fuelled by Beijing's plans to grow trade along the ancient Silk Road, has left authorities scrambling to meet demand that has ballooned to as many as 200 trains a month. Rail shipments have experienced delays of over 10 days, bogged down by insufficient infrastructure and paperwork pileups, shippers say. Congestion is anticipated to worsen as China encourage a further ramp up in volumes.

The situation shows how China's Belt and Road initiative is delivering, but also that some partners are struggling to keep up.

The rail network, used by companies like Hewlett Packard, sports gear company Decathlon and car-maker Volvo, handled 3,673 trips between China and Europe in 2017, up from 1,702 in 2016 and just 17 in 2011, according to China Railway, the national operator. Rail is attracting business because cargo can reach Europe as much as 20 days faster than sea at a lower cost than by air.

The network remains unprofitable, and is heavily subsidised by Chinese authorities, but growth is taking off. By April this year, the number of regular services linking China and Europe jumped from one in 2011, between Chongqing and Duisburg, Germany, to 65, connecting 43 Chinese cities and 42 destinations in 14 countries including Spain and Britain, China Railway said.

Carsten Pottharst, managing director of InterRail Europe, is among a number of freight forwarders who expressed frustration to Reuters about congestion, citing insufficient government investment at the European end. "They believed that they (Chinese trains) would come, but they didn't believe that it would become that big," he said.

Much of the shippers' frustrations are being directed at Malaszewicze, which handles roughly 90pc of the cargo. There, containers which travel from China through Kazakhstan, Russia and Belarus on Russian gauge tracks are transferred to other trains running on European standard rails.

The land port processed nearly 74,000 containers in 2017, four times the 2015 volume. It earned Poland nearly 400m zlotys (€91m) in tax and customs revenues last year, Polish authorities said.

But PKP Cargo, the Polish state-controlled rail operator that runs the main terminal, has said its infrastructure was unable to handle the anticipated growth. Europort, which runs a private rail terminal, said that in late 2017 there were queues as long as 100 trains awaiting entry to Poland from Belarus.

Poland's infrastructure ministry, meanwhile, said the government was considering opening a second Belarus border crossing.

As trains pile up in Malaszewicze, some shippers are looking to move goods through Finland, Lithuania and Estonia. "We need the entire network to be upgraded and more railway stations to be built," said an executive at Wuhan Asia-Europe Logistics, which manages trains from Wuhan, in central China.

Ronald Kleijwegt, the managing director of Jusda Europe, a logistics unit of the contract manufacturer Foxconn, said that would be an uphill task in Europe.

"It's a win-win if we start ironing out all these bottlenecks," said Kleijwegt. "But the demand and requirements of supply chain are sometimes difficult to understand for politicians to understand." (Reuters)

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business