Logistics companies are looking to increase their rail freight operations to connect Asia and Europe through China, citing lower costs than air cargo, faster transfer times than sea and a relatively low carbon footprint.
So far, utilization of rail transport accounts for no more than 1.5% of transits between Asia and Europe, but industry players are optimistic about the segment, which is seen to derive up to 65% savings for companies when compared to air freight and offers a time-cost alternative for customers.
“The utilization of China-Europe rail freight has been growing constantly since 2013, with volumes doubling every year. The growth rate thus far is considered exceptional in the current global climate,” Steve Huang, CEO, DHL Global Forwarding Greater China told Asia Cargo News.
The main advantage of the rail service, he noted, is its flexibility, being cheaper than air freight and faster than ocean freight, hence offering customers an additional option to complement their air and ocean shipments.
Bolloré Logistics is also looking forward to expanding the rail segment. Timur Hijacent, head of rail freight Europe at Bolloré Logistics told Asia Cargo News that the French logistics firm has already opened its own divisions as a competence center for Europe (Dusseldorf) and China (Shanghai).
“Bolloré Logistics is very interested in this. The general market says that the proportion of rail shipments compared to sea and air freight is about 1%. This roughly matches the current volume we transport on the new iron silk way, but we expect a further increase in the next few years,” Hijacent said, noting that the segment is still relatively new.
Kasper Krog, global intercontinental rail product manager at A.P. Moller – Maersk, noted that despite being “one of the most fast, flexible and reliable ways to carry cargo, rail is still a small contributor of the global supply chain.”
“However, it is on the increase,” he said.
Low carbon footprint
“While rail’s share of overall cargo traffic between Europe and China remains small, about 1.5% versus 90%-95% for ocean shipping, transportation industry watchers predict volumes will continue to grow as businesses on both sides see the clear advantages of rail,” Krog added.
For Maersk, he said the company has expanded its use of rail freight as part of the non-ocean segment in logistics and services.
“Since launching our first block train service from China to Europe in 2017 we have seen ambitious increase in demands from our customers (especially for faster alternatives) leading to the launch of a weekly block train service on this route. In addition, we have also recently launched the AE19 service from Japan/Korea via Russia to Europe, which is allowing us to reduce transit time more or less in half compared to ocean, via a combined ocean-rail-ocean solution,” Krog said.
Huang said that in comparison to air freight, rail transit could reduce transport costs by “up to six, or even eight times, depending on origin and destination points.”
He added that transit time can usually be reduced by 50% or even 70% on some lanes, in comparison to ocean freight. Cost and transit time reductions are also strongest for inland locations far from coastal areas.
“Equally important is that rail freight helps to reduce carbon footprint by up to 90% as compared with air freight, making it an increasingly attractive option for SME and MNC customers alike,” Huang said.
Bolloré’s Hijacent also noted that the “low CO2 footprint of this [segment] is a big advantage in comparison to airfreight” making it a “very popular point” for customers in matters of environmental protection.
Scott Williams, UPS senior marketing manager, healthcare logistics strategy, said that aside from being more friendly to the environment, rail freight can also be more secure.
“Security features such as seal management, alarms and optional GPS container tracking to monitor location, temperature, humidity, movement and light” make rail freight an attractive option, he added.
Air freight – which requires around four days between Asia and Europe, at about six times the price of rail freight – will continue to be the preferred mode of transport when speed is top consideration. Transport by sea, meanwhile, is generally 30% cheaper than rail, but takes a longer transfer time of 30-35 days which could be too slow for some companies.
“UPS’s rail service presents a competitive solution – companies can save up to 65% in costs when compared with air freight and benefit from time savings of nearly 40% when compared to traditional ocean movements,” Williams said.
China government sources reported that in 2018, freight trains running from China to Europe made 6,300 trips and 2,690 return trips, rising by 72% and 111% from the year prior, respectively. Last year, container utilization rate of the cargo trains shuttling between China and Europe in 2018 was at 94% for outbound trips and 71% for returning trips.
UPS, which already offers a “full container load” service between Hong Kong to Europe, said rail freight usage could increase with implementation of the International Maritime Organization’s 0.50% global sulphur cap for marine fuel and an increase in the number of Free Trade Agreements or other agreements between Asia-Pacific countries and trading blocs and the European Union.
For Maersk, expanding its rail service is vital to its further expansion plans. “Rail is part of our vision of becoming the global integrator of container logistics where we offer a wide range of products meeting the needs of our customers, so this is definitely a service we expect continue to grow based on the needs of the customers,” Krog said.
Bolloré said more investments from Europe’s side is necessary to ensure the growth of the rail segment.
“To ensure that this product continues to grow and be successful in the market, large-scale investments, especially in Europe, have to be made by the local governments and the European Union, especially in order to guarantee the necessary infrastructure for further growth,” Hijacent said.
By Charlee Delavin
Asia Cargo News | Hong Kong