Overland transport, including rail and truck, on the trade is not necessarily a threat to air and ocean transport as each mode offers its own perks for shippers. However, overland transport can provide a middle ground for shippers in terms of cost and transit times, coming in cheaper and slower than air transport, but more expensive and faster than ocean transport.
Additionally, overland transport allows shippers to detour around challenges in the ocean liner industry, such as dwindling options in recent years due to carrier consolidation and the use of larger vessels, which make fewer port calls and unload more cargo at once, as illustrated in the chart below, which was constructed using data from BlueWater Reporting’s Capacity Report.
The chart illustrates that the number of ocean liner container services on the Asia to North Europe trade has decreased from 30 at the end of 2010 to 18 at the end of 2018, giving shippers far fewer options.
Additionally, the number of container carriers deploying capacity on the trade also has decreased from 19 at the end of 2010 to 11 at the close of 2018. The chart below, constructed using data from BlueWater Reporting’s Carrier Trade Route Deployment Report, shows how much capacity these 11 carriers deploy each week toward the Asia to North Europe trade as of Jan. 20.
Adding fuel to the fire, the International Maritime Organization’s impending sulfur cap, slated to go into effect at the start of 2020, is bound to add further complexities and uncertainty to ocean shipping operations. Ocean carriers still have a lot of work to do to make sure they are compliant with the fast-approaching regulation.
In addition, overland transport is especially beneficial for goods that are already originating in western China since the farther westward in China the shorter the land transits are to North Europe. For instance, a DB Cargo spokesperson told BlueWater Reporting in January that transport by rail from Shanghai to Hamburg takes about 14 to 16 days. However, transport by rail from Alanshankou, a city in northwestern China that borders Kazakhstan, to Duisburg or Hamburg takes about 10 days.
By comparison, data from BlueWater Reporting’s Region to Region Transit Analysis by Service tool shows nine container services offer transits from Shanghai to Hamburg. The mean transit time for these nine services is 31.6 days (plus an additional three to four days for discharge from vessel and unpack), with a range of 28 to 36 days (plus an additional three to four days for discharge from vessel and unpack). This data does not include ocean liner services that involve transshipment. Meanwhile, data from Freightos’ transit time calculator shows that shipping goods from Shanghai Pudong International Airport (PVG) to Hamburg International Airport (HAM) takes about five to eight days.
The chart below compares the transit times of rail, ocean and air freight transport from Shanghai to Hamburg, with ocean transit times shown including an extra three and a half days for discharging and unpacking cargo.
Many companies in recent years have ramped up their rail services on the Asia-North Europe trade; however, the vast majority of cargo on the trade is still moved by sea. “Approximately 4.3 percent of cargo between China and Northern Europe is moved via rail,” Caroline Wu, area manager for Greater China at Damco, said in an October 2018 press release.
Deutsche Bahn last year established a new unit, DB Cargo Eurasia, to shift even more traffic to rail over the long term. “We can transport much more than a truck on our trains and we are twice as fast as sea freight and much cheaper than air freight,” a DB Cargo spokesperson told BlueWater Reporting in January, adding that rail also is more environmentally friendly.
Maersk’s third-party logistics subsidiary Damco also has been ramping up its rail operations between Asia and North Europe. In October 2017, the company launched its first block train service from China to North Europe, transporting products for sporting goods company Decathlon.
Kasper Krog, head of rail at Damco, told BlueWater Reporting in January that this block train service, which goes from Wuhan, China to Dourges, France, is 15 days shorter than ocean from China to France.
Damco launched another block train service from China to Europe in October. Krog said it had launched “due to the increased demand from our customers for a block train solution from China to Europe,” adding how this second China to Europe block train service “is for different customers.”
“We have multiple weekly departures from China to Europe in addition to weekly block trains,” he said.
International freight forwarding company Davies Turner & Co Ltd offers less-than-container-load (LCL) and full-container-load (FCL) overland services from Wuhan, China to Dartford, United Kingdom.
The service involves an 18-day rail transit from Wuhan to Duisburg, Germany. The container is then trucked from Duisburg to Rotterdam, Netherlands, where it is put on a ferry destined for Purfleet, United Kingdom. If the cargo is LCL, the container is then trucked from Purfleet to Davies Turner’s warehouse in Dartford, which is only a 15-minute drive. Davies Turner’s overland offering takes about 22 days in total, from departure at Wuhan rail terminal to arrival at its Dartford depot and provides greater security of goods. Traditional LCL rail services have required cargo to be unloaded and restowed in mainland Europe, but Davies Turner’s direct service eradicates this need with goods only being discharged upon arrival at its CFS warehouse in Dartford.
LCL departures destined for Dartford are offered from Wuhan each Friday (Monday cutoff), while FCL departures destined for the U.K. (or mainland Europe) are offered from Wuhan each Friday (Tuesday cutoff) and Wednesday (Sunday cutoff).
“Our aim is to increase our weekly LCL volume so that we are in a position to offer two departures per week and add a Wednesday departure,” Tony Cole, head of supply chain services at Davies Turner told BlueWater Reporting in January.
Davies Turner’s overland offering appears to be faster than any ocean liner service providing transits from Mainland China to the United Kingdom. Data from BlueWater Reporting’s Country to Country Transit Analysis by Service tool shows the quickest ocean liner transits are from Yantian to Felixstowe at 23 days port/port (plus an additional three to four days for discharge from vessel and unpack) on the OCEAN Alliance’s FAL5/LL1 service. However, of the 37 point-to-point origin and destination options from Mainland China to the United Kingdom offered by ocean liners, average transit time clocks in at 32.5 days port/port (plus an additional three to four days for discharge from vessel and unpack for LCL), according to BlueWater Reporting. This data does not include ocean liner services that involve transshipment.
In terms of rates, Cole said that Davies Turner’s LCL offering from Wuhan to Dartford is sold at a rate of $115 per cubic meter or 500 kilograms (whichever is the greater). This rate excludes a U.K. destination, terminal handling, customs clearance and door delivery charges. However, these rate levels are very similar to destination charges for ocean shipments, he said. In comparison, LCL freight shipped by sea from mainland China ports to U.K. ports usually costs about $40 per cubic meter or 1,000 kilograms (whichever is the greater).
“In light of the fact that many factories are located west of the main ports of China, further transit time, as well as cost savings are provided. Our origin partner in China (Air Sea Transport Inc.) offers a competitive tariff of origin collection charges,” Cole said.
Cole added, “Goods shipped using Davies Turner’s overland service from China to the U.K. (LCL and FCL) arrive ‘in bond’ in the U.K., and therefore, customs clearance is arranged upon arrival at the company’s warehouse in Dartford (LCL) or upon arrival at Purfleet’s ferry port (FCL).”
Comparing rail and air freight costs, Cole said, “the percentage savings via China rail versus air freight is very much dependent on the density of the cargo — the greater the density, the greater the financial savings via China rail. From our comparisons, the savings offered are up to 60 percent.”
Although rail freight transport from Asia to North Europe has been gaining traction over the years and the outlook for rail continues to look bright on the trade, trucking goods on this route also may become a more feasible option since in May China officially started Transports Internationaux Routiers (TIR) operations. The TIR Convention, which has more than 70 contracting countries around the globe, basically streamlines customs procedures. The International Road Transport Union’s (IRU) map, which may be found here, shows TIR acceptance around the globe.
TIR “enables goods to transit from a country of origin to a country of destination in sealed load compartments that are controlled by customs via a multilateral, mutually recognized system,” the IRU explained. “TIR streamlines procedures at borders, reducing the administrative burden for customs authorities and for transport and logistics companies. It cuts border waiting times significantly, saving time and money.”
In November, CEVA Logistics Greater China launched a TIR journey from China to Poland under a pilot program, marking the first China-Europe road transport entirely under TIR.
Customs sealed in Khorgos, China, the truck left the northwestern Chinese city on the border of Kazakhstan on Nov. 13 and arrived at its final destination in Poland on Nov. 26. The trial run was a joint initiative between CEVA, the IRU and CEVA’s partners, Alblas International Logistics and Jet-rail International Transportation.
The truck drove from China to Kazakhstan, Russia and Belarus to Poland with no disruption or customs issues, CEVA said.
Commenting on the trial, Torben Bengtsson, executive vice president of CEVA Logistics Greater China, said in November, “We foresee a great future for road transport from China to Europe. The pilot proves that it could save up to 50 percent door-to-door cost compared to air and at least 10 days delivery time compared with rail.
“The market is eager for the new product. We have a lot of customers waiting for the start of a regular service,” Bengtsson said, adding that the company would “prepare to start regular operations as early as possible in 2019.”
A CEVA spokesperson told BlueWater Reporting in January, “The regular service will be launched by the beginning of April 2019. It comprises trucking from China main cities to Europe (not only Poland, but also other countries, depending on customers’ request), mainly via Khorgos-Kazakhstan-Russia-Belarus-Poland.” Lead time to Russia is 10 days, while lead time to the European Union is 11 to 15 days, depending on the destination, the spokesperson added.
“Two more trial runs in March from and to Europe are in the making,” the CEVA spokesperson said. “In addition, a TIR service to Turkey is considered.
“For the start, only FCL service will be provided, but LCL service will most likely follow,” the CEVA spokesperson said.
The CEVA spokesperson added that the company began investigating the possibility and feasibility of road transportation from China to Europe in 2017 to find an alternative to the escalating air freight market.
“However, China joining TIR makes the trucking service more worthwhile because it saves time, and the time-cost ratio is crucial in logistics. We see really huge potential for trucking as an alternative to air,” the CEVA spokesperson said. “It is much cleaner and much cheaper than air, and the total door-to-door delivery time is almost the same if you include the forerun for space reservation. But even if you don’t, trucking is still faster than rail and much more flexible than air or rail. In addition, we see high potential also for further developments in terms of environmental sustainability, self-driving systems and so on.”
The IRU also said in January that “the Asia to Europe route has been a realistic option before China started TIR operations in May 2018. Kazakhstan and some European transport operators have already been using the corridor.”
Commenting on different modes of cargo transport from Asia to North Europe, the IRU said in January that the cost of truck transport is “higher than rail, but up to 50 percent lower than air, and the door-to-door delivery time is competitive with both air and rail. Major benefits of road transport include flexibility, a door-to-door service and time savings.
“Road transport from Asia-Europe is more suitable for consigners, consignees and freight forwarders with high-value goods (electronic products/auto parts, etc.),” the IRU added. “They are more sensitive to efficiency and punctual delivery.
“Road, rail and air are not competitive to each other and could be integrated to combine the benefits of different modes of transport in the future for China-Europe transport,” the IRU also said. “Moreover, TIR can be applied to intermodal transport as long as one part of the whole trip is conducted by road. So TIR has high potential to further facilitate China-Europe transport in the future.”
The IRU also had announced in September that the new Kazakhstan-China border crossing — “Nur Zholy” on the Kazakh side and Khorgos on the China side — had opened “to boost transport and trade along the new western China to western Europe, 8,445-kilometer expressway, part of China’s Belt and Road project.”
The IRU said that the World Bank was predicting that this corridor would more than double road freight volumes between China and Western Europe.