Asia-Europe rail won’t dent ocean volumes

Commentators at last week’s London International Shipping Week are adamant that Asia-Europe rail services will not undermine the dominance of container shipping.

The reliability and quality of rail services between Asia and Europe has improved significantly in recent years offering lower prices than airfreight and faster transit times, of around two weeks, than sea freight rail is still comparatively costly.

In 2013 there were just 72 block train journeys between Asia and Europe, this year that number will exceed 1,500 with the value of cargo projected to reach £15bn.800px-China_-_Russia_Railway

While the stats are impressive, rail penetration is still at an early stage, with 10 cities in China running block rail services to 11 cities in seven European countries, representing just 2.2% of the total export market.

Currently there are 30 trains a week on the Silk Road providing a total weekly capacity of around 4,000 TEU.

By contract there are 270,000 TEU of weekly ocean capacity between Asia and Europe, and that will increase to 300,000 TEU per week next year as the mega-ships are deployed.

With trains carrying on average 120 containers there are inherent capacity limitations on the overland route and higher costs mean any negative impact on the volumes moving by sea are unlikely.

While experts expect the demand for rail demand to grow in certain industry sectors if it can address its services issues – such as JIT manufacturers – it will not be enough to make a sizeable dent in ocean volume.

The rail option between China and Europe is growing in popularity among shippers, particularly in Northern Europe and Scandinavia, Asia-Europe rail capacity is struggling to keep pace with demand and there is still no viable link with the UK.

Delays were reported through the summer on the European end on the Chiongqing-Duisburg route and at the Poland-Belarus border, which reduced the transit time advantage that train should offer over ocean and the justification for a premium price-tag.

Operators suggest that the main factor seems to be that infrastructure is not coping with the very accelerated growth in the number of block trains.China-rail2

Another factor that could limit the popularity of rail is its additional cost compared with ocean.

To transport a container by rail from China to Europe recently cost $6,000 to $7,000 per 40-foot container, as opposed to $1,500 by sea, although at 15 to 19 days, the rail transit time is half that of ocean.

Rail offers shippers from Asia a third option. One that is quicker than conventional shipping but cheaper than air freight.

In the absence of direct railer services importers could use rail for shipping cargo from China to continental European destinations and then switching to short sea shipping for the last leg.

The limiting factor is time, For every transit day added, the cost/benefit ration slips further.

A work in progress.