In search of the most suitable ‘Silk Road’

When it comes to freight transport between Europe and China, rail is faster than sea and more environmentally friendly than air. A growing number of companies are discovering the benefits of the new ‘Silk Road’, but logistics service providers still face a number of bottlenecks and delays. Various challenges were discussed at the European Silk Road Summit held in Venlo on 26-27 November.

By Marcel te Lindert

The ‘New Silk Road’ rail link is attracting growing attention from shippers and carriers alike. By the end of this year, 2,500 trains – 700 more than last year – will have made the journey between China and Europe, and there is no sign of the growth slowing down. There is more than enough demand, according to Markus Bertram from rail freight company LTE during the well-attended European Silk Road Summit in the Dutch city of Venlo. “China is like a huge bath tub. Once we remove the plug, trade automatically flows in our direction. We just need to channel the flow effectively.”

Wine and luxury cars

The problem is that the trade is largely a one-way street, with China as the main beneficiary. By far the biggest product categories transported from west to east by logistics company GVT are beer, wine and luxury cars – but the majority of the wagons in trains heading for China are empty. “It’s a big challenge to find return flows,” stated Joost van den Akker, representative of the Dutch Province of Limburg. He explained how LIOF – the regional development agency for Limburg – has set up an International Trade Development department in an attempt to tackle this. “There’s a huge imbalance. But we need to stimulate trade rather than fighting a trade war.”

Another problem is that the Silk Road’s revenue model is still largely dependent on subsidies. “Those subsidies are necessary to get the rail link with China off the ground, but they will be reduced in the future and we need to be prepared for that,” commented Peter Pardoel from Cabooter, a logistics service provider that is working to connect Venlo to the Silk Road. Van den Akker echoed his warning about declining subsidies: “New links with China are only interesting if they are profitable based on a sustainable business model.”

Alternative routes

Despite having a choice of 2,500 trains travelling between China and Europe this year, companies like Cabooter and GVT are still searching for the optimal route. After all, there is more than one railway line running between the two regions. Most trains go via Poland, but the border crossing from there into Belarus is a constant source of delays. One popular alternative is the route through the Russian enclave of Kaliningrad, but that is not without risks either; if the Russian customs office decides to check the goods, the containers have to be opened up. “Poland is currently investing heavily in the infrastructure, but mostly to create stretches of track where trains can wait. In my view, it would make more sense to invest in improving the processes to avoid those trains having to wait in the first place,” said Bertram with a hint of cynicism.

The burning question is whether a route is actually possible via Russia at all. Cabooter is exploring other routes to China from Venlo. “We’re looking in particular at multimodal solutions – such as by boat to Trieste or Piraeus, and then onwards by train from there. Piraeus looks particularly promising in view of the Chinese investment activities there. Venlo can then play a role in easing the burden on the hinterland,” stated Pardoel.

Via Istanbul and Baku

Another rail option is via Budapest and Istanbul to Baku, the capital of Azerbaijan. Cabooter expressed the intention to create warehousing and trucking capacity in Baku as a base for serving the Central Asian market. “Moreover, Istanbul is an interesting stop because a growing number of companies want to source from somewhere closer to home than China. That can make Turkey an interesting option, especially for fashion firms.”

Rail Cargo Austria’s first train took 18 days to reach China – which is too long, in Pardoel’s opinion: “We’re investigating how we can shorten the transit time to 14 days. That’s important to ensure a stable and sustainable link.”