RLL Container Report - 23 April 2014
From: John Keir, Ross Learmont Ltd Email: john.keir@telia.com Date: 23 April 2014
«The shape of things to come».
In his celebrated book “The shape of things to come”, the writer, H.G. Wells speculated on future events from 1933 until the year 2106. However, not even a writer with the insight of the eminent English novelist could have foreseen the radical changes, which are to be imposed on Chinese society over a much shorter timeframe. The Chinese government announced it is to launch a six-year plan to raise the level of the urban population from 53.7% to 60%, which equates to over 88 million citizens. This is equivalent to the combined populations of Germany and Denmark upping sticks, leaving their native villages and moving – or being moved – to an unbuilt urban settlement.
As city dwellers normally have higher incomes, this should mean that an additional 88 million urban residents would have far greater spending power. Crucially, it is this increase in domestic consumer demand that will be the driving force behind China's economic development. This great rush to the cities was announced at the same time as reports indicated that up to 21 % of agricultural land in China suffers from contamination, which could a detrimental effect on crop yields. Urbanisation on this scale will require enormous investment in public infrastructure, including housing and expanded transport systems. High-speed services will connect cities with populations over half a million, while cities with up to 200,000 inhabitants will have access to new or improved railway systems. Breath-taking stuff, indeed, and all this by 2020.
The government raised the current railway budget by Yuan 20 Billion to Yuan 720 Billion (USD 116 Billion), which will allow construction to begin this year on an additional four major rail lines. This takes the total number of rail projects under construction up to 48. At the same time, the Chinese government is planning to establish a rail-development fund worth up to Yuan 300 Billion. Chinese Railways have set an ambitious target of 7,000 km of new track to be opened this year alone. Many of the new metropolises, such as Chengdu and Chongqing are located up to 1,000 km from the coast and will form the backbone of a new and technologically-advanced economy exporting to all four corners of the globe.
The shift of population from the land to the city and from the coast to the inland will steadily open up the market to ever more Transcontinental rail services, such as the one linking Chongqing with Duisburg in Germany. On his recent state visit to Germany, the Chinese President was taken to see the arrival of the first block train of the season from central China to central Germany. It was all a rather mundane affair; after all it was just another anonymous block train arriving at a rail terminal that looks much like any other rail terminal. Except, that it wasn’t. The trains from Chongqing and Chengdu are unusual in that they do not operate during the winter months, the reason being that they carry electronic goods, which may be susceptible to the low temperatures in Central Asia and Russia. During this period, the electronic goods go by the far longer sea route. Indeed, the vast majority of electronic goods leaving Chinese and S E Asian factories travel to their final destination in Europe, America, Australasia and Africa by sea, where frost is least of their concerns.
In order to overcome customer concerns about potential frost damage, RZD Logistics has been carrying out tests with temperature-controlled containers. The cargo is loaded into insulated containers, each fitted with two built-in diesel generators. Unlike “reefer block trains” that operate between Vladivostok and Moscow, these temperature-controlled containers to Duisburg are not powered from a central diesel generator, which is manned 24/7 by Russian Railway technicians. This explains the addition of not one but two “built-in” diesel generators, which maintain a pre-selected temperature throughout the journey from Asia to Europe.
The containers from Chongqing to Duisburg are exceptional not only for a much shorter transit time but also because they have a higher chance of finding return cargo. German car manufacturers are assembling cars both in the eastern port city of Shanghai and in the far West of China. Volkswagen and their joint venture partners, SAIC Motor are producing the popular Santana model in Urumqi, the capital of the western province of Xinjiang. Urumqi lies right on the rail route between Chongqing and Duisburg and is a mere 620 km from the border crossing with Kazakhstan. Last year, Volkswagen sold 4 million Santana models in China and this figure is projected to rise steadily. This year, the German company plans to raise output at the Urumqi plant to 50,000 vehicles, thus providing the block train with a potential source of return cargo all year round.
General Motors Corp also plans to invest $12 billion in China from 2014 to 2017 with five new assembly plants, as it competes with rivals such as VW in the world's largest auto market. The new plants will be established in Chongqing, Wuhan, Jinqiao and two in Shenyang. The possibility of automotive cargo on the return leg would be most welcome, as the special “winter” containers will no doubt raise the overall operating costs of the block train service. This comes as the shipping lines are introducing their 18,000 teu vessels, which could reduce slot rates even further on the main routes to Europe. So, the competition on the routes to Europe will continue to hot up even during the cold winter months.
By coincidence, the latest of the 18,000 teu Maersk behemoths called at the Port of Vostochny in the second week of April. The 18,340 teu Maribo Maersk took on fuel before it set out on its maiden voyage to Europe. This is the fourth of the Maersk giant box carriers to call at the Russian Pacific terminal, yet not one container has ever been loaded on board. Nevertheless, bigger box carriers are the shape of things to come for the Russian Far East. Regular calls by larger vessels at Vostochny would give a tremendous fillip to box traffic originating in the Urals and Siberia. Faster and more efficient intermodal services would aid Russian manufcaturers in their constant quest for new export markets.
John Keir, Ross Learmont Ltd.
23 April 2014
Copyright ©, 2014, John Keir