New Silk Road in 2020: Covid-19, increased traffic and empty containers
12.28.2020
2020 was a year of remarkable growth for rail freight traffic on the New Silk Road, despite the many difficulties. More trains, increased volumes, new destinations across the Eurasian routes, but also congestions, and imbalances compose the mosaic of the New Silk Road in the year about to end.

2020 started with the best indications for traffic on the New Silk Road, especially since 2019 was a year of growth. However, the situation changed drastically around the end of January/ beginning of February, when China announced the first lockdown in Wuhan and the postponement of rail freight operations.

The whole rail freight sector expected things to take a downward spiral since the closing of borders could not mean anything else but decreased train trips and massive financial losses. However, the overall impact of Covid in air, sea and road transportation ultimately benefited rail freight instead of wrecking it.

Significant shift

Air freight transport was among the hardest hit sectors of trade. Passenger flights got cancelled in their majority, and consequently, cargo capacities got dramatically reduced. Respectively, prices for the transportation of products by air skyrocketed due to the lack of space.

This development led numerous shippers to look for feasible and efficient alternatives to transport their goods across Eurasian corridors. Rail freight was there to undertake this challenging mission. Aeroplanes were stuck on the ground, while trucks were not allowed to cross borders due to numerous restrictions. Trains were thus the optimal choice.

Traffic and volumes

The so-called shift to rail transportation in the early months of 2020 brought great benefits to the sector. Rail freight saw significant increases in transported volumes and traffic between Europe-China. For instance, Russian Railways announced that container traffic carried on their network doubled in 2020. Specifically, on the China-Europe-China route, Russian Railways transferred 502,600 TEUs. Moreover, China Railways has seen an increase of approximately 3,000 trains this year with its total number of trains in Eurasian traffic being 12,000.

On the same wavelength, UTLC ERA, the main operator on the narrow gauge network between Europe and Asia, reached the milestone of half a million TEUs in early December. Additionally, DB Cargo Eurasia’s revenues exceeded 100 million euros and thus doubled compared to 2019.

Numbers indicate that rail was critical for the transportation of goods during the pandemic outbreak. Not only was it preferred due to the unavailability of other modes, but it proved that it could be a reliable long-term solution and not just an alternative. Consequently, its shares and profits grew too.

Transit countries

Transit countries along the New Silk Road were also significant for conserving high quality, speed and efficiency in rail freight services. Countries such as Kazakhstan and Mongolia saw huge volumes transported through their infrastructure. Even though they are not all the most technologically advanced, they managed to bare the weight despite some sporadically caused problems.

Kazakhstan is also among the countries composing the Middle Corridor. Together with Azerbaijan and Georgia, they provide an alternative, not so busy yet, route for Eurasian transport. Although Middle Corridor’s traffic is not so large, the fact that it put two Caucasian countries on the New Silk Road map is critical. Why? Because due to Eurasian traffic, alternative destinations can take their chances and claim their role on relatively equal terms.

Other countries that have not grown that much yet but drew attention in 2020 are Uzbekistan, with the construction of new infrastructure, Iran and Afghanistan which are now connected by rail, and Turkey which saw the fist train leaving Istanbul to reach China. Nevertheless, the more regional countries grow, the better this is for rail freight, since it can optimise its services and acquire more efficient links between Europe and Asia.

European additions

During 2020 numerous European cities acquired connections with Chinese hubs. For example, Liege and Amsterdam are among the first to come in mind with others equally important following. Even the UK saw the establishment of direct connections with China through European ports.

However, in terms of transit destinations and traffic gateways, the most significant development was the new service via Poland and Ukraine. The service happened to get launched last April when traffic from Asia to Europe was continuously rising. Phenomena of congestions in border-crossing like that of Brest/Malaszewicze led the search of alternative entrance routes in Europe. The route via Ukraine constituted the starting point of a link with great potential blocked due to political issues in the past.

Kaliningrad

An even more interesting alternative route in 2020 was that via the Russian enclave of Kaliningrad. Started in 2017, it was opened as an alternative route to the main corridor Brest — Terespol. Freight trains are routed through Lithuania after crossing Belarus. Kaliningrad’s service contributed the most in the decongestion of borders in 2020.

From the enclave, there are multiple options for further transportation. The territory lies on the Baltic Sea. From the sea port, freight is loaded on feeder ships to destinations in Scandinavia, Benelux or Great Britain. But also trains run via Kaliningrad to hubs as Duisburg. Some noteworthy routes that sprung up: Chengdu-Rotterdam, Kaliningrad-Rostock-Verona and the Xi’an-Neuss Express, the fastest rail link between China and Germany so far.

Container shortages

Among the negative observations regarding the New Silk Road in 2020 was the imbalance of full containers to and from China. Even after the pandemic’s first wave, the export/import balance between Europe and China was disrupted. Specifically, in November, China was sending approximately ten full trains to Europe per week. On the other side, eastbound trains did not exceed the number of two each week.

Not only was the number of eastbound trains significantly smaller, but also the capacities differentiated. In many instances not all containers carried by trains were full. Indeed, containers were returning empty to China and many times they did not return at all. As a result, China ended up suffering from a severe shortage of containers, while at the same time, European ports were pilling them up. This situation also impacted the costs related to the use of containers, and the conditions resemble a vicious circle that needs to brake. The issue of imbalances and container shortages constitutes one of the most critical things that need to be addressed by the rail sector in 2021.

Political aspects

Regarding the future of the New Silk Road, it is compiled by two different pillars: the first one is that of politics, while the second one is that of technological and regional advances. Concerning the political aspect, the EU acknowledges that China is an essential trade partner. Simultaneously, it is looking forward to a cooperation based on a mutual understanding that will benefit both partners. Consequently, the EU requires China to respect the implemented policies when it comes to transparency, sustainability and level playing field.

On its behalf, China is mainly focusing on balancing the flows between eastbound/westbound trains. Thus, the government is subsidising only complete roundtrips to reduce the risk of receiving empty containers on the way back to China. Additionally, subsidies do not apply to specific products, while higher-value goods receive special financial support. In this way, train capacities and, respectively, the number of outbound trips to Europe are better controlled.Regarding the boosting of eastbound rail freight, there is a firm belief that establishing a China-Europe cold chain train could provide the solution. That is why the country is promoting policies that could encourage the use of 40-foot self-powered refrigerated containers.

Simultaneously, China is attempting to build strong cooperation bonds with countries along the New Silk Road. Russia is among the players to which the Chinese government pays more attention. In this case, the approach concerns the sealing of regional agreements with the respective partners and not a compact and generally applied policy.

Possible advances

Furthermore, interoperability, digitalisation, and improved regional destinations’ infrastructure constitute the rail sector’s main objectives. The importance of competitive and robust transit destinations on and around the New Silk Road is frequently discussed. Many railway undertakings, logistics companies and shippers have realised that it is for everyone’s benefit to improve connections and infrastructure between regional countries, which currently do not possess a central position in Eurasian trade.

Such an approach could prove critical and beneficial in many ways. First of all, and as mentioned above, a variety of routes and transport options can help organise optimal and fast connections between the West and the East. Such a development could save money and time and could also contribute to establishing more frequent train trips. Additionally, the competition resulting from this status quo could help avoid monopolies and establish equal terms for all players.

All the above could be enhanced further by implementing digital and interoperable technologies across the New Silk Road’s routes. The facilitation of operations can certainly help transit countries grow and avoid disturbances. Combined with the right legal framework, the New Silk Road could flourish even more in the following years and claim a larger share of Eurasian transportation.

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