Tuesday, April 20, 2021

Chinese BRI Model Seems To Be Winning As The World Turns To BRI To Beat COVID-19 Challenges

Trains connected to China’s Belt and Road initiative (BRI) are suddenly in demand as the coronavirus pandemic has crippled international travel by both air and sea.

Businesses that transport merchandise between Asia and Europe have fallen back on one of the oldest means of transport, the railways. It tends to be a highly flourishing prospect for China’s Belt and Road project as trains along that region have been linked to China’s billion-dollar project.

Akos Ersek, chief policy adviser to a Brussels-based industry group said: “the carried volumes, utilization, regularity and reliability on the China-Europe rail network have been positive in recent weeks.”

He added in context to air transport that “the price volatility caused by the pandemic makes transcontinental rail more attractive.”

Since the outbreak of coronavirus, air freight prices have been skyrocketing. The grounding of passenger flights that originally carried around half the cargo has been curtailed by 95%. The remaining ones are left in an unsystematic and disorderly manner.

Nevertheless, shipping is still the cheapest transport system but, the lockdowns and restrictions at ports have led to a highly disruptive schedule apart from the general decline of demand for services. It is estimated by the investment bank Jefferies that the global sea freight capacity has plunged almost 30%.

All favourable conditions have been set for railway transport to flourish. Tim Scharwath, chief executive of global freight forwarding at German logistics operator DHL says “These days, many European customers are exploring rail freight on the New Silk Road as an alternative transport mode.”

Previously, trains that arrived in Europe with packed freight cars used to return with several carts empty, however, the effective affordability of trains over air prices makes the former indisputably a wise choice.

If evaluated for prices, it is observed that overall rates for shipping cargo by air transport from the Airport at the German city of Frankfurt to China fell at an average of $3.24 per/kg in early March. Although, the Hong Kong air cargo data service TAC Index indicates that the rates had fallen back to $1.03 per/kg by last week.

Freight Rates for trains have remained constant throughout time. An Australian supply chain firm states that the trains have held steady at around 24 cents per kilogram.

Due to the viral outbreak, some train services had rather been stopped between Duisburg and Wuhan, however, they were all restored by the end of March when Wuhan was back into the business.

In April, operators were seen to be opening several new routes. From China’s city of Ji’nan to Germany’s Hamburg, a new freight train service was launched by Shandong Hi-speed Group. Similarly, Switzerland’s Hupac Group started a train service between Xi’an in China and Warsaw in Poland. Weekly links were also established between Hefei, China and Duisburg along with Xi’an and Linz, Austria by an Austrian logistics company.

 It is argued that China’s new routes represent propaganda to illustrate the success of the Belt and Road Initiative. Jonathan Hillman writes in a report for the Center for Strategic and International Studies that “politically, China has used the announcement of new routes as evidence that the BRI is succeeding.”

An estimate by Andre Wheeler suggests that from Xi’an to the U.K., the original price of shipping a  standard 20-foot shipping container by train comes around $4,500, however with the subsidies from local administrative authorities, the charges fall down to mere $3,000.

He further suggests that, with that support being cut back and demand rising, rates have risen to $4,320 which is almost twice the price of sending containers by sea from China to the UK.

Jens Kastner, Vipasha Kaushal. Nikkei Asian Review / EurAsian Times

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