The ancient Silk Road that existed 2000 years ago was known to be the major trade route of the world connecting the East and the West. However, its significance and uses went obsolete with technological changes and declining transportation cost as the industry have shifted more towards air and sea freight.
In 2013, China launched an ambitious project to once again connect itself from Europe across land and sea- under the slogan- One Belt, One Road (OBOR). This great Silk Road will link China with Iran and Russia while crossing through Central Asia. The track emerges from China’s Xian province and ends up in Rotterdam in the Netherlands. This new Silk Road is not a new discovery. Although goods were moved between China and Europe through the Trans-Siberian route since 1973 the cold war did not allowed for the smooth movement. Currently, there are two routes from northern china that heads towards Europe terminal stations like Hamburg or Duisburg via Mongolia, Russia, and Kazakhstan. And the route also connects China’s west side residing 30 million populations to the northern routes. Nevertheless, the new Silk Road referred to as the BRI- Belt and Road Initiative by China’s President Xi Jinping aims at boosting an interconnected route between china and Europe. According to a recent report, it is anticipated that the total investment can reach up to 1.3 trillion US dollars by the year 2027 where more than 150 countries and international organizations have made commitments to contribute by investing some amount of capital. From a political perspective, china’s economy is expected to boost enormously on the global stage. And From a logistical perspective, the infrastructure and interconnected network will emerge on a completely new scale in upcoming years. The New Silk Road will be a paradigm shift in world trade. But the question arises, how worth is this new Silk Road over the sea and air freight. The data says, a total of 2,400 trains carried 145,000 TEU between China and Europe in 2017 which is equivalent to the containers carried by seven large vessels. The figure is anticipated to spike to 670,000 TEU in the coming decade. From China’s Perspective: Some postulate that China wants to upraise its economic power and others compares the project to the Marshall Plan. But perhaps the motive could be simple that China just wants to get rid of its bottlenecks or overwhelming capacity issue. No doubt, this longest linking rail route will significantly boost China’s economy and will also reduce social tension between the coast and provinces. The new Silk Road is meant to reach far beyond improved logistics. IrakliGaribashvili, the Georgian Prime Minister called the new silk road ‘a corridor of global prosperity and cooperation’. President Xi Jinping said the project aims to have of five principle pillars-
Advantages to Europe: According to the World Bank, the pace at which china’s economy is growing in the past few decades, in total, it is still roughly half the size of the European Union’s economy. Therefore, One Belt, One Road project is imperative for the economic growth of European continent. No doubt, China and Europe have been the two main economic poles for centuries. Europe being the china’s largest trading partner and China being the second-largest trade partner of Europe holds the maximum control over the world trade route connecting these two poles. Thus, trade between them dominates the other region. The New Silk Road aims to serve all parties- small or large and will open wide doors for freight forwarders to expand their businesses. In the long run, everyone is going to be benefited from the project. One of the main motives of the project is to link the East Asian economic circle with China with Europe. Under the framework, Europe is hugely going to build new international economic corridors- like the ‘new Eurasian Land Bridge’ aimed to decrease trade cost and promote flexible and smooth trade practices. What do experts say? Some experts believe that the volume of cargo transportation through the network will not witness much growth and will remain small as compared to ocean freight. They describe that various reasons are responsible for this. Cost: The transportation cost of standard shipping containers from Hamburg to Shanghai is high when transported by rail and very low when transported by ship. The gap is so big for rail transport to be competitive against the sea freight. Although, the transit time by rail is much less than that through ship but the high cost through railway is unaffordable for many shippers. Support: China greatly subsidizes the international rail connection that enables the rail freight to offer competitive prices. Once the subsidies are declined or terminated, the competitiveness of rail transportation will not remain the same effective. The recent report says the Chinese subsidies for rail freight traffic to Europe has now been put in place ceilings and will end by 2021. There has been no formal announcement but the anticipation says that Eurasian rail traffic should now stand on its own feet. Speed: Rail is indeed the fastest mode of transportation than the sea but when compared to air freight it doesn’t give competitive speed advantage. Many times, shippers who require urgent transition would opt for air freight even if the cost goes beyond. Thus, freight rail stands at the midway of air and sea freight. What benefits the Silk Road holds within? Reduced Transit Time: Sea transportation has been one of the most preferred modes of shipment for carrying heavy and bulky cargoes between China and Europe. But the initiative of the new Silk Road project seems to alter this notion. While a vessel takes approx 35 transit days, through rail it takes just 18 transit days to reach the port of UK from china. Almost half the total time took by Maritime. Thus, rail stands to be the best suitable mode of transportation by freight forwarders if time-sensitive cargo needs to be shipped. Lower Transportation Cost: The unpleasant and incessant financial crisis has put the air freight option at an unaffordable stage. Although shippers have sea freight as another best option it lacks in speed. All of these fragmented a luxurious market niche for rail freight. Freight forwarders are now seen registering an increasing number of inquiries into the new Silk Road route as an alternative to the slower maritime and costly air services. Customers are therefore strongly asking shipping companies to include the China-Europe rail in their catalog. Environment-Friendly: After the implementation of IMO 2020 regulation, various shippers in order to escape from the high cost of less sulfur content fuel or installation of bunker scrubber impose high freight rates on customers. As compared to air and sea, rail stands at the bottom in polluting the environment. Some container service companies like LOTUS Containers have already adopted the China-Europe rail route as a part of supporting greener modes of transportation. Also, the route aims at saving 75% of the carbon footprint of the ocean route and reduces several congestions existing in and around the seaports.
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