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Is Rail a Realistic Option for Transport of Goods between China and Europe

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 2014 0. Contents .

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Is Rail a Realistic Option for Transport of Goods between China and Europe

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  1. Is Rail a Realistic Option for Transport of Goods betweenChina 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. Forum 2013 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. Forum 2013 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 10-15 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. Forum 2013 China – EU trade volume – a potential for rail freight

  16. Forum 2013 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. Forum 2013 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. Forum 2013 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. Forum 2013 Global market developmenttrends 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. Forum 2013 China‘s vehicle import and export –(in 2010 about 110 Billion)

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

  26. Distribution of EU-China Trade by Mode of Transport in 2012 (in € and %) TOTAL EU-27 - China value of trade 434.5 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: http://epp.eurostat.ec.europa.eu/newxtweb/mainxtnet.do. (Accessed on 10/07/2013). Forum 2013

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

  28. Forum 2013 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. Forum 2013 VESSEL SIZE - Grow consistentlyin the last 15 years

  31. Forum 2013 Economies of scale - ships andports-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 • Sofar there was no serious competition except air transport • Rail could be real challenger in a certain market segments

  33. Air transport

  34. 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. Forum 2013 Europe-to-Asia air transport volume and structure of transported goods

  36. Forum 2013 Europe–Asia- Europe air cargo market • traffic has grown 1991- 2011 • 10.4% per year

  37. Forum 2013 Europe-to-Asia air trade (forecast) with average 5.6% growth per year through 2031

  38. Forum 2013 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.

  41. Forum 2013 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. Forum 2013 Comparative Advantage of Rail Corridors • Connection of Mainland Industrial Regions

  43. Forum 2013 First transport of container trains

  44. 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. Forum 2013 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 10 555 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.

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