Iron silk road delivers trade edge

Companies in central China are benefiting from a quicker freight service to Europe, bolstering Zhengzhou's bid to become a logistics hub

PUBLISHED : Monday, 09 September, 2013, 12:00am
UPDATED : Monday, 09 September, 2013, 3:44am

On a sultry summer morning at the rail container terminal in Zhengzhou, the capital city of Henan province, an engine driver in a blue uniform climbs agilely up the locomotive of a freight train, wiping dust from its windshield with a cloth before the train sets off.

The train, loaded with more than 40 containers, then heads northwest along the first rail line linking the central province with one of Europe's largest traffic hubs - Hamburg in Germany.

Hailed as a "new silk road" by the provincial government, the cross-border rail route has provided a short cut for transporting made-in-China products to Europe since the service was launched on July 18.

It is part of a growing trend, with an increasing number of manufacturers in Germany and other European countries also considering turning from time-consuming sea freight to rail freight as they tap the Chinese market.

The largest city along the Yellow River, Zhengzhou is not only hoping to boost local trade with the new rail line, but also has a bigger dream of becoming a global logistics hub.

"Zhengzhou is neither a coastal city nor a place along the border," said Jing Jianxun, a deputy general manager of Zhengzhou International Land Port Development and Construction. "A railway extending into the heart of Europe will add a leg for us to go into the global logistics market."

The company is the domestic operator of the Zhengzhou- Europe freight line with partner DB Schenker, the operator for the European part of the route.

After leaving Zhengzhou, their home base, the trains cross the border at Alataw Pass in Xinjiang and pass through Kazakhstan, Russia, Belarus and Poland on their way to Hamburg.

The whole journey takes 15 to 18 days and covers 10,214 kilometres.

The latest train to Hamburg left Zhengzhou on August 28, carrying 516 tonnes of items such as apparel, shoes, car parts, electrical products and leather goods produced in the provinces of Henan, Shandong, Fujian, Zhejiang and Guangdong.

Before the freight train began running, manufacturers and logistics companies had to transport their goods by road to port cities such as Tianjin, Qingdao and Shanghai and then ship them to Europe. The whole process often took as long as 40 to 60 days.

Song Liyong, a manager at Zhengzhou International Land Port Development, said it cost about US$5,000 to ship one container of goods from Zhengzhou to Hamburg by road and sea.

The rail line charged US$7,000 for a container but could save clients about 25 days. Air freight took only four to five days, but the price was about five times that of rail, Song said.

"Rail transport is especially suitable for goods with relatively high added value or which need to be delivered within a short period of time," he said.

Twelve more trains will leave Zhengzhou for Germany this year. The company then plans to increase the frequency, with a weekly service running by the end of next year. It will also launch three spur lines, to Almaty in Kazakhstan, Moscow in Russia and Klaipeda in Lithuania.

Harry Yue Chaojie, a sales manager of Qingdao-based logistics agent OEC Group, is a potential customer for the new rail line. His company provides delivery services for a number of car parts makers in Zhengzhou.

"It's much faster and not expensive at all," Yue said. "We really want to try. Our only concern is whether it can operate in a stable and smooth way."

In addition to Zhengzhou, four other cities - Chengdu, Chongqing, Wuhan and Shenyang - have launched freight lines to Europe in the past couple of years. But not all of them have worked well.

The rail line between Wuhan and Pardubice in the Czech Republic has been suspended since the first train set off in October last year. Complicated clearance procedures and relatively high costs are the two major obstacles for operators hoping to fill their containers. Another line, from Chengdu to Duisburg in Germany, is facing similar problems.

"We believe we can do better," Jing said.

He said Zhengzhou enjoyed a geographic edge because it was right at the crossroads of the country's major railways and highways and also had one of the largest airports on the mainland.

Several major rail lines go through the city, with high-speed trains creating a "three-hour economic circle" covering Beijing, Shanghai and key economic zones in the Yangtze River and Pearl River deltas and Sichuan.

"So far, the other cities are heavily reliant on one or two big electrical products to support their freight lines," Jing said. "But we are targeting a wider range of customers."

The company said the city government had provided subsidies for the rail line's operation, which would help it maintain a competitive pricing level.

"Although the rail line cannot make a profit for the moment, it may bring more business opportunities for Zhengzhou," Jing said. "It's hard to measure the benefit it can bring."

The company had been in talks with German carmakers Audi, BMW and Mercedes-Benz about importing high-end vehicles through the Zhengzhou-Hamburg line and a proposal to establish the country's second land port for imported vehicles in Zhengzhou had been submitted to the State Council, he said.

More mainland cities are now applying to open cross-border freight lines.

Dong Wanxu, the chief executive of Trans Eurasia Logistics Asia, said Yingkou, in Liaoning province, might be the next city to run cross-border rail freight to Russia.

"In China, most coastal cities have been developing fast and better than inland cities," Dong said. "One important reason is because coastal cities can transport local goods easily to overseas markets. Now many inland cities are building cross-border rail lines, which could be a big opportunity for them to catch up."