- ASTANA in Kazakhstan is one of the world’s most
remote capitals, surrounded by thousands of kilometres of empty steppe.
This summer Astana attempted to launch itself onto the global stage by
hosting the World Expo, which closed on September 10th and underwhelmed
many attendees. But there are other ways to have an impact. On the
city’s north side, away from the Expo’s exhibits, a series of diesel
trains, each pulling dozens of containers, roll through the old railway
station. Most are heading from China to Europe. Last year over 500,000
tonnes of freight went by train between the two, up from next to nothing
before 2013. Airlines and shipping firms are watching things closely.
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- The trains rumbling through Astana result from a
Chinese initiative, in tandem with countries like Kazakhstan, to build a
“New Silk Road” through Central Asia. The earlier overland routes were
once the conduits for most trade between Europe and China and India;
they faded into irrelevance when European ships started circumnavigating
the Cape of Good Hope.
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- China has long wanted to develop its inland regions
and push industry to “go west”, in order to spread economic growth more
evenly. Manufacturers have been loth to shift, in part because of the
higher cost of moving goods to ports for export. Developing a
rail-freight network to Europe—an important part of China’s “One Belt
One Road” policy—opens up a new route to market for its poorest areas.
The land route through Central Asia is relatively short. A container
ship too large for the Suez canal must make a 24,000km journey to reach
Europe. Trains travel no more than 11,000km to reach the same
destination.
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- Kazakhstan has spent over 1.1trn tenge ($3.2bn) on
upgrading its railway lines and rolling stock since 2011. That includes
$250m on the Khorgos Gateway, a dry port at the border with China that
lifts containers from Chinese trains onto Kazakh ones to overcome a
change in track width (a problem that has stymied previous efforts to
build railway routes between Europe and China).
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- Volumes of freight travelling between China and
Europe by rail are rising quickly. Between 2013 and 2016 cargo traffic
quintupled in weight. In the first half of this year the value of goods
travelling by train rose by 144% compared with the same period in 2016.
Western firms have been keen to embrace rail freight because it helps
them to lower costs, says Ronald Kleijwegt, an expert on the industry.
In the case of high-tech electronics, for example, which consumers like
to receive quickly, making them on China’s coast and air-freighting them
to Europe is extremely pricey.
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- How worried should shipping firms and airlines be?
Kazakhstan’s national rail company, KTZ, says it will have capacity for
1.7m containers to pass through the country between Europe and China
each year by 2020; that is a tenth of the volume currently carried by
sea and air between the two. In the longer term, a full modernisation of
the existing main three rail routes from China to Europe could produce
3m containers a year in capacity.
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- But there are reasons to doubt that will happen. For
one thing, China plans to stop handing out government subsidies for
additional rail-freight capacity from 2020, which will slow the
network’s expansion. Sea freight has little to fear in the near term,
says Soren Skou, chief executive of Maersk, the world’s biggest
container-shipping line. Trains may take away some future growth from
ships, he concedes, but not their existing business.
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- Air cargo is more vulnerable. Last year, 180,000
tonnes of cargo travelled on trains to western Europe from China (the
remainder was destined for Russia and eastern Europe). That is a small
fraction of the 52m tonnes that came by sea, but a big chunk of the
700,000 tonnes that came by air. Much of that air cargo could switch to
rail in future, says Mr Kleijwegt, with one important proviso—that
Russia would need to lift the retaliatory sanctions it placed in 2014 on
imports of Western food, which stop most foodstuffs from travelling by
land between Europe and China. That is unlikely for the time being. But
it was only a decade ago that people thought the idea of freight trains
between Europe and China was a joke, says Mr Kleijwegt—and no one laughs
at that any more.
The opinions expressed herein are the author's and not necessarily those of The OLO News.
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