Asia-Europe Rail Service Offers New Cargo Alternatives

November 6th, 2017

European freight forwarders add dedicated Asia-Europe rail options to cost, time and emissions considerations of air and sea transport.

For decades, businesses exporting between Europe and Asia have been limited to two freight options: costlier but faster air, or less expensive maritime taking nearly eight times longer. Under a project launched by Germany and China, however, rail now transports goods faster than sea, and at lower prices than air, while leaving a relatively small carbon footprint.

Initiated in 2013, the "One Belt, One Road" rail project links the Chinese city of Wuhan with Duisburg in northern Germany, transiting most shipments within 15 days. The roughly $8 billion initiative aims to diversify freight options for exporters, and reinforce cargo routes across Asia. A maritime leg, meanwhile, links Africa and the Middle East to that trans-regional rail system.

Initially introduced and funded by China, the project has attracted financial backing from governments and business across Asia and Europe that view strengthened rail capacities as beneficial to trade. When previously used for cargo between Asia and Europe, rail was limited to large industrial groups periodically using entire trains when necessary. Now freight forwarders in Europe provide service on regularly scheduled trains for multi-container shipments down to parcels.

"At first rail volume was primarily East-West, but we've really developed the European side of the service, and believe our success offers an example Asian partners could further build on," says Gert Schwarz, the Frankfurt-based commercial director of Central Europe for Bolloré Logistics who helped launch the company's rail operation in 2015. "The response to rail services has been encouraging."

There are good reasons for that enthusiasm. Both air and sea freight sectors have experienced price volatility, swings between capacity excesses and shortages, and saturation of some assets – especially during peak surge periods. Rail is therefore being embraced by sector actors as a welcome addition to the diversified menu of cargo choices.

Air freight – which requires four total days between China and Europe, at six times the price of rail – will remain favored in cases where speed is vital. Sea, by contrast, is 30% cheaper than rail, but involves 30-35 travel days – too slow for some companies. Rail provides a new alternative for exporters juggling time-cost priorities.

"Product type is less a factor in what's shipped by rail than time sensitivity versus suspended value ratios," explains Mr. Schwartz. "Freight that involved higher production costs will probably be sent by speedier train rather than slower maritime. It's a matter of how fast an exporter needs the investment getting to market."

Not all types of products will be a good or immediate fit for rail, however. Pharmaceuticals, many chemicals, milk products and lithium batteries are prohibited as train cargo, for example. By contrast, improvements in refrigeration and temperature monitoring are permitting a growing array of cold chain freight on rail. Similarly, increased security and real-time digital surveillance technologies are making train transport of expensive automotive and high-tech goods, cosmetics and quality clothes more dependable.

Rail also features added conveniences and services. Products transported from around China to Bolloré Logistics' Wuhan and Chongqing hubs are quickly prepared for rail containers, and loaded on trains at stations just a kilometer away. Once those weekly shipments reach Duisburg, containers are unbundled at the Bolloré Logistics facility – just 200 meters from the station – where trucks quickly get merchandize moving to destinations around Europe.

And in addition to customs clearance and other added value services provided in China-Europe rail options, clients also benefit from a considerably reduced carbon footprint.

"All big multinational companies have sustainability and green energy plans involving carbon reduction, and all look to achieve gains in that with partners," says Mr. Schwarz. "This has given rail another advantage, and its green attraction has been important with large clients."

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