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    Logistics using rail services: The overland route along the New Silk Road

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    Rhenus News

    The mammoth project entitled ‘Belt and Road Initiative’ (BRI) between China and about 60 other countries in Africa, Asia and Europe was launched almost a decade ago: this involves developing the infrastructure along the New Silk Road, one of the oldest trading routes in history. In addition to reviving existing intercontinental trade and infrastructure networks, numerous new ports, roads, railway lines, logistics centres and trading places are being built. Countless volumes of goods have been transported along the land and sea routes since that time. The latest development is that the land route has become much more important during the Covid-19 pandemic. One large German logistics specialist recognised the potential of rail services at an early stage and adopted innovative measures to strengthen the ‘Silk Road Economic Belt’.

    According to the goals of the BRI, the New Silk Road is designed to create a Eurasian economic area, which runs from the eastern coast of China as far as the Atlantic Ocean and also includes countries on the continent of Africa. However, the New Silk Road passes through regions with very different climate conditions: ranging from arid areas and deserts to the highest mountains on the planet Earth with temperature fluctuations of between more than 40°C and -20°C, it is clear that transport operations along the old trading route are anything but simple. 

    The overland routes were considered more as a niche solution than a real alternative for transporting goods from east to west and vice versa for a long time. Running from China to south, west and central Asia and on via Iran, Turkey, Pakistan and western Russia as far as Central and Western Europe, the Silk Road Economic Belt tended to be more of a backup for the Maritime Silk Road, which runs from the Chinese coast and Southeast Asia as far as Europe via the Middle East and East Africa. The Maritime Silk Road is now the route for more than half of all containers transported worldwide. Demand is continuing to increase and trade along the New Silk Road could account for about 40 per cent of total world trade in future, according to some forecasts.

    The alternative overland route during the Covid-19 pandemic

    However, supply and demand along the Maritime Silk Road have increasingly suffered an imbalance during the Covid-19 pandemic and the crisis in ocean freight associated with it. Because of the shortage of shipping space, many companies have been looking for additional transport solutions – and the Silk Road Economic Belt with its very well-developed rail links has attracted a lot of attention. One German logistics company with global operations is demonstrating the many advantages that the overland route along the New Silk Road provides through its landbridge services.

    ‘Rail transport services are faster than ocean transportation and are also cheaper than shipping goods by airfreight,’ says Yannick Böttcher, Head of Landbridge Product Management Europe, Rhenus Air & Ocean. ‘During the last two years of the pandemic, there were even times when ocean freight was more expensive than rail freight. This led to a huge switch from the sea to railway services.’

    Forward-looking measures to expand the landbridge

    Even before the revival of the Silk Road, the company started to increase its use of rail freight services between east and west. Among other measures, it has created a database for customers, whose needs fit the services offered by the landbridge operations. The logistics specialist also has offices in all the countries along the New Silk Road and has invested in additional personnel and in establishing a strong product team there. 

    A Control Tower on both the Chinese and the European side is also designed to support the development of the railway routes that are already being used to a great extent. Roughly 12,400 trains operated between China and Europe and vice versa in 2020; this means that the total number of trains increased by more than 95 per cent between 2018 and 2020. The company itself is now organising more than 5,000 shipments on the overland routes along the New Silk Road every year, with an annual growth of approx. 30 per cent.

    The variety of goods being transported along the overland route has also grown significantly during the past two years: while the Silk Road Economic Belt was exclusively used for customers in the automobile sector at the outset, more and more firms from every conceivable sector, including manufacturers of machines, electronics and chemicals, as well as other fast-moving consumer goods, are now relying on this transport route. The logistics specialist is constantly enlarging its fleet of shipper-owned containers (SOCs) to confront the associated problem with the shortage of carrier-owned containers (COCs) that are available for rail services.

    Rail services are cost-effective, efficient and sustainable

    The different possible routes along the Silk Road Economic Belt have now turned rail services into a stable and reliable transport solution, which has made its mark by means of set departure times and reliable transit times. This significantly increases efficiency along the supply chain. As a result, the overland route no longer simply serves as a backup for undesirable conditions in maritime services. Instead, it now represents a genuine alternative. Another benefit created by rail services which should not be overlooked is the topic of sustainability. Railway transport services significantly reduce CO2 emissions in comparison to airfreight and therefore ensure a much lower ecological footprint.

    Landbridge options for individual selection

    Companies therefore have good reasons to make use of rail services along the New Silk Road routes in future. The landbridge service offered by the logistics specialist with international operations already offers a large number of individually selectable options and multimodal solutions. In order to guarantee an efficient supply chain without any avoidable delays, the company relies on high-quality operators and partners, which accept advance bookings and have insight into the transit time statistics over the last three months. As a result, they can analyse lead times and draw up the best possible solutions. The company is also able to keep its customers informed about their consignments at all times: GPS systems make it possible to track the progress of goods digitally during transportation. There are plans to extend this service to the Chinese section of the route, too.

    Conclusion: Demand for rail transport services is expected to continue after Covid-19

    The Covid-19 crisis and the interruptions to supply chains caused as a result have made the entire market aware of the need for additional transport solutions between China and Europe. Despite the fact that the railway connections are already well-developed, the pandemic has at times stretched the infrastructure capacity on the overland routes along the New Silk Road to their limits, too. The current major disparity between supply and demand as well as the enormously high costs of ocean freight will return to normal levels in the course of time, which will in turn increase cost pressure for railway goods traffic.

    ‘Despite this, we still believe that the many benefits of the overland route compared to the Maritime Silk Road will continue to draw the attention of many companies to railway services,’ says Carol Kong, Country Manager Greater China, Rhenus Intermodal Systems®. ‘The benefits in terms of transit times which the landbridge can offer compared to ocean freight will cause additional infrastructure measures to be adopted for rail services.’ These will include upgrading additional routes and borders for rail operations in order to prevent what has sometimes been congestion at borders in the past. This will certainly require a certain degree of coordination and commitment by the countries involved and the railway service operators. ‘However, we’re confident that rail services will become established as a reliable and worthwhile transport service along the New Silk Road with these conditions.’