1. Prof. Stane Božičnik, PhD University of Maribor, Slovenia
Is Rail a Realistic Option for Transport of Goods between China and Europe
Prof. Stane Božičnik, PhD
University of Maribor, Slovenia
2014 Forum on Euro-Asia Transport Internet of Smart Cities (EATISC),
Hong Kong, March 17th 20140

2. Contents
Driving forces for EU-China transport (rail freight) needs growth:
globalisation
market potential growth
automotive industry
Modal split /development trends of EU China freight transport
Characteristics of the two prevailing transport modes (sea, air)
Rail freight – advantages, disadvantages
Three basic Asia – Europe land bridges
How to evaluate quality of a corridors on land bridges ?
Competition to rail freight Euro-Asia – climate change
Conclusions ?

3. Driving force for EU-China transport needs growth - globalisation
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Driving force for EU-China transport needs growth - globalisation

4. Globalisation – reason for EU- China transport growth
Strategically important factors for China - Europe foreign trade relationships growth (since the 1980s) are:
the evolution and growth of international supply chains .
Supporting concepts in management:
keep to core business,
out sourcing, (3 PL, 4PL…)
from push to pull strategy, lean manufacturing…
shift from company logistics to supply chain management
“tube” logistics economics….
Supply chain informatics and data exchange ..EDI…ESAP ..etc.

5. Globalisation – reason for EU- China transport growth
Constant fall of transportation costs (economies of scale) – will be explained later
New international competition model: international competition amongst national manufacturers at the sectorial level (Phase I)
i.e., Swedish cars (Volvo) versus Japanese cars (Honda).

6. Globalisation – reason for EU- China transport growth
Fast technological developments enabled competition of production processes within supply chains, where:
different stages of production of a single good take place across multiple (international)locations (Phase II)
i.e. Swedish cars contain Chinese components and vice-versa
rapid technological change (development), particularly
in the field of ICT technologies
have marked the second wave of globalization !

7. Globalisation – reason for EU- China transport growth
Result of this processes is: global production and global consumption of (global) products (interdependence)
multi-national companies spread out different stages of production to different countries in order to become more efficient. Taking advantage of:
low-cost labour on the global level and
low-cost (maritime) transport – economies of scale !
Result : countries compete to attract different stages of production within the supply chain (e.g. automobile industry)

8. Globalisation – reason for EU- China transport growth
China and Asia in general (consequently), became the global production centre !
This led to China’s remarkable economic boom and huge transport growth between EU – China
Annual average transport growth rate is 25 percent (last decade), which is:
double world trade growth rate!

9. Globalisation – reason for EU- China transport growth
Consequences: congestion in the ports !
World Bank study, China’s demand for container port services is almost twice as high as the available supply
Result: significant delays in shipments.
Over-congestion in Chinese ports and other advantages make rail freight as an important alternative for transport of goods between Europe and China.

10. EU – Asia trade volume today
~51% of world sea container flows are Asia-related
Asia - Europe Trade Volume about 553 Billion EUR /year
The volume is growing
About 20% of total trade value - automotive industry

11. Market potential of China
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Market potential of China

12. China – Economy - today The second largest economy of the world
The biggest exporter in the world
Experts estimates predict China may be on track to become the world’s biggest economy within the next 10 years,
internal market of 1.35 bn consumers
China and the EU are trading more than €1 billion every day

13. China market potential - tomorrow
In the long term, China’s importance as a strategic market of the EU can only increase
Every year, 20 million Chinese households pass the threshold of household income of USD13,500
At this level families are able to afford key consumer goods and services, like cars.
even if China’s GDP growth rate is gradually slowing down, its nominal GDP is continuing to grow rapidly!
90 % of global economic growth in the next years is expected to be generated outside Europe,
a third of it in China alone!

14. Potential for future co-operation between EU – China
EU-Switzerland economic co-operation – as basis for comparison of EU-China trade/transport potential
EU still exports more goods and services to:
Switzerland, 8 million inhabitants,
€216.3 billion, than to
China, 1,35 billion inhabitants,
€173.7 billion
There is a great potential for co-operation in FUTURE !

15. China – EU trade volume – a potential for rail freight
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China – EU trade volume – a potential for rail freight

16. China – EU Trade Dynamics
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China – EU Trade Dynamics
Just three decades ago, China - EU trade was more or less of symbolic value !
2000 – 101 Bill. EUR
2009 – 297 Bill. EUR
2012 – 434 Bill. EUR
Sustainable growth, expected also in future!
In terms of volume of transported goods 2012:
90,6 million ton of goods

17. Forum 2013
EU – China trade volume 2012
EU imports from China in 2012: 299,9 Billion EUR
Machinery and transport equipment:
145,5 Bill. EUR (50,2%)
Miscellaneous manufactured goods:
86,7 Bill. EUR (29,9 %)
Manufactured goods/classified by materials
35,9 Bill. EUR (12,4%)
Chemicals 12,9 Bill (4,5%)
Food 4,1 Bill. EUR (1,4%)
Source: Eurostat

18. China – EU trade volume 2012 China imports from EU 143,8 Billion EUR
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China – EU trade volume 2012
China imports from EU 143,8 Billion EUR
Machinery and transport equipment
84,1 Bill. EUR (58,5%)
Chemicals and related goods
16,8 Bill. EUR (11,7%)
Manufactured goods/classified by materials
13,7 Bill. EUR (9,6%)
Misc. Manufactured articles 11 Bill. EUR (7,7%)
Crude materials 9,8 Bill. EUR ( 6,8%)
Food 2,8 Bill. EUR (2%)

19. China – EU trade volume 2012

20. EU trade deficit with China
Record of €169.3 billion in 2012!
Europe´s trade deficit with China is mainly caused by sectors like:
office and telecommunication equipment,
shoes and textiles,
iron and steel.
Evaluation of Trade deficit is of crucial importance for transportation industry!
Empty run of transport vehicles in one direction !

21. China – EU automotive industry trade volume trade perspectives
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China – EU automotive industry trade volume trade perspectives

22. Automotive industry trade growth
Automotive industry – accounts for 20% of total EU – China trade volume today
Is expected to grow by 2018
Automotive industry is one of the main potential transport demand generators for rail freight transport between EU-China.

23. Global market development trends in car production
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Global market development trends in car production
TODAY: 82 million cars/year
103 million cars/year - is expected global production in 2018
50% of global production outside EU
Component suppliers – have to master requirements of global market and production/logistics complexity

24. China‘s vehicle import and export – (in 2010 about 110 Billion)
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China‘s vehicle import and export – (in 2010 about 110 Billion)

25. Transport modal split of China – EU trade (2012)
Euro-Asi Economic Forum 2013
Transport modal split of China – EU trade (2012)

26. Forum 2013
Distribution of EU-China Trade by Mode of Transport in 2012 (in € and %)
TOTAL EU-27 - China value of trade billion € , (China-EU 300 Billion, China-EU 143,8 Bill.)
Total trade volume by mode:
Sea € 268 billion 62%
Air € 99.8 billion 23%
Rail €1,7 billion 0.4%
Road € 31 billion 7%
Other*€ 34 billion7,6% (post, self-propelled..)
Rail freight of minor importance so far !
Source: Based on Eurostat data Available from:
(Accessed on 10/07/2013).

27. Euro-Asi Economic Forum 2013
Market characteristics and trends of the two prevailing transport modes (sea, air)

28. Two prevailing transport modes
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Two prevailing transport modes
Sea transport
basic transport mode for transport of goods between China and Europe
62% of transported value between China and EU
Low cost (maritime) transport also contributed to globalisation processes of the last two decades
Development trends in terms of costs/unit ?

29. BIGGER VESSELS SIZE TO REDUCE SLOT COST – ECONOMIES OF SCALE

30. VESSEL SIZE - Grow consistently in the last 15 years
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VESSEL SIZE - Grow consistently in the last 15 years

31. Economies of scale - ships and ports-transport cost/unit decrease
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Economies of scale - ships and ports-transport cost/unit decrease

32. Maritime transport vs Rail
Low cost (Maritime) transport significantly contributed to globalisation processes !
Economies of scale caused by constant growth of vessels and transport demand growth enables decrease of maritime transport costs / prices
Because of crisis – “low steaming”, longer transport time
So far there was no serious competition except air transport
Rail could be real challenger in a certain market segments

33. Air transport

34. Two prevailing transport modes
2013
Two prevailing transport modes
Second: air transport 2012
23% of total transported value between China and EU
About 2,1 million tons out of total 90 million tons of transported volume, represents in terms of physical transport
About 2,2 % transport of the total transport volume between EU and China.
What are expected development trends in future?

35. Europe-to-Asia air transport volume and structure of transported goods
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Europe-to-Asia air transport volume and structure of transported goods

36. Europe–Asia- Europe air cargo market
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Europe–Asia- Europe air cargo market
traffic has grown
10.4% per year

37. Europe-to-Asia air trade (forecast)
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Europe-to-Asia air trade (forecast)
with average 5.6% growth per year through 2031

38. Asia-to-Europe air trade (forecast)
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Asia-to-Europe air trade (forecast)
with average 5.8% growth per year through 2031

39. Euro-Asi Economic Forum 2013
Railways – as a new (third) freight transport option between EU and China

40. Basic rail freight advantages
Price (air) and time (maritime)!
Suitable for bigger quantities, longer distances (two drivers)
One container shipping costs/time from Chongqing to Western Europe:
The carbon footprint of rail, is about one-thirtieth that of air freight.
Price
Transport time
Sea
$ – 3.000
38 – 45 days
Train
$ – 5.500
16 – 20 days
Air
$ –
1 – 2 days

41. Reasons for rail freight option
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Reasons for rail freight option
Increasing volume of goods,
Congestion in the EU and China ports
Increasing value of traded goods per unit
Two basic transport options prevailing
Low cost and long lasting sea (40days)
Expensive and fast – air
Faster than sea and cheaper than air option is looked after – solution rail transport
First transport -several good practices VW, HP..
Optimal link central Europe – central China

42. Comparative Advantage of Rail Corridors
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Comparative Advantage of Rail Corridors
Connection of Mainland Industrial Regions

43. First transport of container trains
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First transport of container trains

44. Rail freight disadvantages
Naslov
Rail freight disadvantages
Different gauges /transhipment/wagon change
Different rail systems
Customs procedures on borders
Administrative /legal procedures
Time consuming procedures on borders
Security issues etc.

45. In spite difficulties - good results!
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In spite difficulties - good results!
VW, HP-TransEurAsia Railways,…
HP - Pilot – March 2011 (Chongqing, Kazakhstan, Russia, Belarus, EU)
40% shorter than sea transport
Running now 9 months (Winter solution is looked after), plan to run 12 months
All pilots: time advantages confirmed, in about 60% also cost advantage.

46. Different gauges

47. Three possible transport corridors
Three basic Asia – Europe land bridges

48. Three Euro-Asian land bridges

49. The first Euro-Asian land bridge -Trans Siberian railway
built between 1890 and 1905 connect Moscow with Vladivostok km
Nowadays, the Trans-Siberian railway has connections to Berlin, Kiev, Budapest, Helsinki and Beijing.
less known is the role of the Trans-Siberian Euro-Asian freight option

50. Technological level of Trans-Siberian railways
Information technology enables:
full monitoring of trains and the status of cars and containers;
following of consignments in real time along the whole route electronic goods declaration, thus reducing freight inspection times from 3 days to 1.5 hours;
monitoring the security of goods in transport and transit etc.
Modernisation plans : Fast train – co-operation China Russia.

52. The Second Eurasian Land Bridge
2011 China completed a “Second Eurasian Land Bridge” running from:
port of Lianyungang on the East China Sea
to Kazakhstan’s Druzhba and further to Central Asia, West Asia and Europe.
Km long, running about 4100 Km in China.

53. The Second Eurasian Land Bridge
is linking also:
Tashkent in Uzbekistan, and
Ashgabat -Turkmenistan’s capital and further to the border of Iran
With some additional investment, these links, could open new economic possibilities in much-neglected regions of Central Asia.

54. The second Euro-Asian land bridge

55. The second Euro-Asian land bridge is crossing six countries
China, Kazakhstan, Russia, Belarus, Poland and Germany
Photo: Freight train in rural Kazakhstan

56. The second Euro-Asian land bridge

57. The Third Eurasian Land Bridge?
In 2009 announced accelerated construction of the third Eurasian continental land bridge that will link:
south China and Europe via Turkey. Starts with the Port Shenzhen and will connect Bangladesh, India, Pakistan, Iran, Turkey and Europe
will cross 20 countries in Asia and Europe, total length of about 15,000 kilometres.
Total annual trade volume of the regions the route passes through was nearly US$300 billion in 2009.
Ultimately the plan is for a branch line start in Turkey, cross Syria and Palestine, and end in Egypt

58. Economic potential of the new “iron” silky road Euro-Asian space
40% of total land in the world, (prime uncontaminated agriculture land!);
¾ of the entire world population,
¾ of known world energy resources
all minerals needed for industrialization are available in the region.

59. Naslov
The third land bridge

60. Links to 3rd (in red) land bridge
???

61. “The Railways of the Middle East, Visions 2025,” UIC strategy, February 2008,

62. The third land bridge tomorrow
China-Turkey agreement ( 2010) for high-speed railway link across Turkey (about 35 BN EUR), will be the largest railway project ever.
Decreasing travel time through Turkey from 36 to 12h.
Will run from:
Kars on the border with Armenia through to Istanbul
connect Marmaray - recently finished rail tunnel under the Bosporus and link
Edirne near the border to Greece and Bulgaria in the European Union.

63. The third land bridge tomorrow
Baku-Tbilisi-Kars (BTK) railway connecting Baku to Kars is under construction, which greatly increases the strategic importance of the Edirne-Kars line
high speed train connection Astana-Almaty line in Kazakhstan, 1050 kilometres, employing China’s advanced rail-building technology, is to be finished in 2015 , speed of 350 kilometre is to be finished in 2015!
Signed contract China-Egypt for high speed railway linking Alexandria-Cairo-Luxor-Hurgada (Strategic concept for connecting Africa with Middle East via Egypt !)

64. The third land bridge tomorrow
2010, China signed agreements with Iran to connect railways through Central Asia, as well as onto Turkey and Europe. 
recently inked deal to build Israel’s high-speed railway linking the ports of Ashdod and Eilat, with eventual connections
recent deal to build a high-speed railway linking Cairo, Alexandria, Luxor, and Hurghada,
with a longer-term view to eventually connect Africa with the Middle East via Egypt.

65. The third land bridge

66. Evaluation of transport corridors
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Evaluation of transport corridors

67. How to evaluate performance of a transport corridor ?
The following KPIs:
Out-of-pocket costs (excluding VAT), measured in €/tonne-km;
Transport time, measured in hours (or average speed, measured in km/h, depending on the application);
Reliability of service (in terms of timely deliveries), measured in percentage of consignments delivered within a pre-defined acceptable time window;
Frequency of service, measured in number of services per year;
Security
availability
CO2 (SOx) emissions, measured in g/tonne-km; and
Others suggest different indicators.
KPIs should be selected by the corridor management on the basis of the objectives being pursued
BESTFACT workshop on Co-modality & Green Logistics, Vienna, 20 September 2013

68. Corridor - crucial decision making elements
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Corridor - crucial decision making elements

69. Corridor performance - time distance?
Time components of a transport chain
BESTFACT workshop on Co-modality & Green Logistics, Vienna, 20 September 2013

70. Corridor performance - cost distance?
Cost components of a transport chain
BESTFACT workshop on Co-modality & Green Logistics, Vienna, 20 September 2013

71. A lot of problems on EU - China Intermodal Rail Corridors
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A lot of problems on EU - China Intermodal Rail Corridors
Problems:
regulations,
procedures,
national rail priorities,
Interoperability
Documents
Information systems
Gauges: China = EU; Russia, Mongolia, Belarus, Kazakhstan 1 520mm

72. Competitor to rail freight between Europe and Asia – climate change !

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Climate change
First Ship ( ) arrived to Rotterdam from China over North Pole,12-15 days shorter transport.
Climate change could allow ships to cross the north pole by 2040.

74. Conclusions
Land route between Europe and Asia (One of the oldest trade links in the world), is today not (yet) used to its potential to serve a large-scale inter-continental trade.
Maritime transport dominates in inter-continental trade. It is improving its transport prices by means of economies of scale.
international maritime companies have significantly expanded their capacities in order to meet the increasing demand on intercontinental level.

75. Forum 2013
Conclusions
Based on the several positive experiences rail transport could be considered as viable alternative for transport between China and EU.
Taking into consideration the price of transport and shorter transport times, rail can fill the missing gap between expensive air transport and low cost but slow sea transport. (Modal split analysis proves the idea)
Existing and expected growth volumes of transported goods give economic reasons further development of rail corridor connections.

76. Forum 2013
Conclusions
Quality of rail freight transport service is still hindered by:
current limits of rail infrastructure,
administrative procedures,
border crossing procedures,
different railway legal systems,
different track gauges,
non-physical obstacles, etc.
Systematic and organised approach of all relevant stakeholders along the land bridges for problem solving is advisable.

77. Conclusions
increase of value added of Chinese products is expected to increase demand for rail transport.
Container port capacities in China and Europe are reaching a saturation point, rail freight is a competitive alternative
volumes of container traffic grow at double-digit rates

78. Conclusions
Efficient rail transport is an important factor for further and faster development of Euro-Asian “Iron"silky road region.
China which is today one of the world’s most efficient railroad constructors and one of the best train producers can play in this development process a role of crucial importance. 

79. Conclusions
Following the examples of 19 century Europe, rail transport enabled “industrial revolution” of Europe.
100 years later the "Iron” silky road (in particular the second and the third mentioned corridors) open a new economic perspective for all today relatively isolated countries and to Euro Asian macro region as whole.
Rail is a realistic and promissing option for transport of goods between Europe and China!

80. Thank you for your kind attention! University of Maribor, Slovenia
2013
Thank you for your kind attention!
Stane Bozicnik
University of Maribor, Slovenia

81. Forum 2013
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