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Intermodal transport halves shipping time
China Shipping Container Lines (CSCL)  has  teamed up with the Ministry of Railways to provide the first intermodal container railway transport service between the mainland  and Russia, cutting  cargo transport time by more than half.
Moving cargo from Asia to Moscow was a herculean task that  could take 55 to 60 days, said Huang Xiaowen, managing director  of China Shipping.  Cargo from the east must first  go by ship to Hamburg via the Suez Canal and then to  St Petersburg. From there, freight travels some 1,000km  by rail to Moscow.
'But if we use  China's ports as an interchange point, the transport time will be cut by  half at least,'  he  said.
The designated scheduled route starts  at Jiangsu's Lianyun Port, where containers are unloaded and transferred to trains that  travel to Xinjiang,  Kazakhstan and Moscow. Mr Huang said cargo travel on the new route  would take just 26 days.
China Shipping  is expected to launch its initial public offering on the Shanghai Stock Exchange later this year. It will use the proceeds to help finance its  expansion to 630,000  twenty-foot equivalent units (teu) by 2011 from  430,000 teu,  and acquire container ports and manufacturing plants from its parent.
About US$1.35 billion will be payable to the company for eight gigantic vessels and US$800 million for 400,000 containers, said Mr Huang.
China Shipping, the  sixth-largest container shipping line in the world, launched the first scheduled intermodal container transport service between the mainland  and Russia on October 9. Its partner is China Railway Container Transport,  a state-owned container transport enterprise which controls all of the mainland's railway container assets.
'The economy in Moscow is so robust that  demand  for transportation will soon be beyond the reach of existing modes of transportation,' said Mr Huang.
Russia imported  US$95.5 billion worth of cargo in the first half, up 37 per cent from a year earlier. Japan exported nearly US$4.8 billion worth of goods to Russia in the first six months, up 54 per cent, mostly due to strong demand for  cars.
China Shipping  and  China Railway Container already offer domestic intermodal transport between Shanghai and several ports  including Dalian, Harbin and Hefei. Domestic shipments should grow 70 per cent year onyear to 150,000 teus this year, Mr Huang said.
'Rail container transport is very promising in China,' said Maria Cheung Yat-sum, senior manager for corporate communication at NWS Holdings. Annual containerised rail cargo volume is three million teus, accounting for 3 per cent of the total rail freight,  lagging behind the 20 per cent to 30 per cent in the United States and Europe.
NWS,  CRCTC and five other  investors signed an agreement in June to form a joint venture  to build 18 rail container terminals in  the mainland for a total investment of 12 billion yuan.
Analysts, however,  are  sceptical about  of the prospects for container railway transport.
'The railway capacity on the mainland is not enough for passenger demand, let alone cargo demand,' said one transport analyst.  'The market is premature and may take a long time to develop.'
Mr Huang said that the partnership must tackle a number of problems to make cross-border service smoother. At the top of the list is co-ordinating among the three countries.
Starting from scratch 10 years ago, China Shipping evolved rapidly into the world's sixth-largest shipping line. It began with 20 to 30 charter vessels, each with several-thousand-teu of capacity. It began building its own ships, including 4,200-teu, 5,600-teu and 8,500-teu vessels in 2000.
A year later, the September 11 attacks  caused a downturn in the industry. That trough in the shipping cycle enabled the company to expand at a low cost. Mr Huang said the average cost of the firm's vessels  4,200 teu or above was 50 per cent lower than most of  its rivals.
With 80 per cent of its fleet  made up of large vessels, the shipping line also can operate at lower unit costs. For example, the operating cost per container of a 13,000 teu vessel is US$3 per day, while a 9,600 teu is US$3.40.
Besides, Mr Huang said the surge in  rates for bulk shipments had shifted commodities  to container lines.
The trade imbalance between the mainland  and the US means that east-bound vessels are fully loaded but west-bound ships sail almost empty. As bulk rates surged to fresh highs every week for the past six months, some shippers chose to move their commodities in containers, said Mr Huang.
In the first half of this year, the company's volume of west-bound shipments increased to about 5,000 teus a week from about 1,000 teus  a year earlier.  Thirty to 40 per cent of the containers were filled with raw materials or agricultural products, said Mr Huang.
'It can reduce the loss-making  west-bound sailing and improve the efficiency of the whole trade lane,' he said. The improved west-bound traffic explains why the transpacific trade lane's average freight rate dropped 10 per cent in the first half. The west-bound freight rates are far cheaper than in the other direction. The blended rates  are lower because there are more shipments from the US.
On growth mode
China Shipping may launch Shanghai IPO to fund fleet expansion
Number of days cargo travel from Jiangsu to Moscow on new route takes: 26



CSCL kicks off rail-ship box service to Russia