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Despite headwinds, China-Europe rail traffic continues to grow

In modern history, there are a few examples when irreconcilable opponents supplied each other with critically essential materials such as when Japan purchased scrap metal from the U.S. during World War II to build its navy.

However, compared to previous times, economic instruments of coercion are becoming increasingly important in global political affairs, including conflicts and wars. How else to explain that the volume of rail traffic between Asia and Europe increased again last year, with almost all shipments carried out through Russian territory – the so-called Northern Corridor?

According to China State Railway Group Co., last year, approximately 16,000 freight trains transported goods on the China-Europe route. Despite the fall in the world’s economic activity in 2022 and the military operation in the heart of Europe, the growth in the number of trains was nine percent.

A record number of 1.6 million twenty-foot equivalent units (TEU) were transported along the route, up 10 percent from a year earlier. These facts confirmed that despite headwinds, rail transport has become a critical factor in maintaining the global supply chain between Asia and Europe.

An even more significant increase in the volume of direct and transit rail traffic was observed through the territory of Central Asia. The Foreign Minister of Kazakhstan, Mukhtar Tleuberdi, speaking at the International Conference on the Connectivity of the EU and Central Asia in Samarkand at the end of November last year, stated that in 2022 container traffic between China and the EU through Kazakhstan increased by 84 percent. Kazakhstan’s exports grew by 3.6 times.

It is of fundamental importance that at the end of last year, China made a breakthrough in improving the soft infrastructure of rail transportation. In November, the first freight train was sent on the China-Europe route using new technology – the so-called full-time schedule. It took a record-breaking 10 days for a train from the central transportation hub Xi’an to arrive in Duisburg, Germany.

The new full-time schedule technology means that arrival and departure times are synchronized across the entire path at each travel segment. Unlike previous practices whereby local rail authorities set their own logistical rules, train demurrage has been reduced to a minimum.

An effective coordination of the railway regulators of different countries was required to reach such a result. It has been achieved, which is a clear illustration of the correct implementation of the basic principles of the Belt and Road Initiative (BRI). It is also vital that the developers of the new technology do not intend to stop there.

As noted, even the laws of war or antagonistic relations between rival countries could not bring to a stop the pressure of economic pragmatism and practicality. Despite the almost complete boycott of the Russian economy by Western countries, the Russian Railways freight route remains critical to the functioning of the European economy.

A direct reflection of this fact was that in July last year, the EU published a special guidance explaining that goods transiting through Russia and Belarus are not subject to the broader sanctions they have imposed.

What to expect for the future of rail transport between Asia and Europe? On the one hand, given the duration of the conflict and the radically changed relations between Russia and the EU, many, primarily European carriers, are reducing orders for such transportation.

Another factor is the pessimistic outlook for global economic growth next year. On the other hand, there is significant pressure of market factors confirming such transportation’s high efficiency and practicality.

The recovery of post-pandemic economic activity in China will help the growth in rail traffic. Of particular interest is the announced new policy of the Chinese Ministry of Commerce to support the export of electric vehicles (EV) by rail. Introducing electric cars has become a priority in China’s export strategy, with Europe being the target market. For example, in the first half of 2022, Chinese exports of electric vehicles to the EU increased by 125 percent.

Bloomberg found that through the Northern Corridor, Western arms manufacturers are supplied with rare earth elements necessary for producing microchips, electronics and ammunition. It is known that most of those elements are mined in China. The country supplies more than 90 percent of European rare earth elements.

According to EU data, the volume of Chinese rare earth elements transported by trains across Russia rose to 36,074 tons in the first nine months of last year, more than double the volume transported in all of 2021. The paradox is that it is Russian Railways that is transporting the growing volume of critical metals for the “hostile” European defense industry.

Despite the emergence of alternative rail links, it is doubtful they will be able to replace the Northern Corridor soon. Indeed, the so-called Middle Corridor across the Caspian Sea has become much more active in the past year. However, the high cost of transportation and the limited capacity of the track suggests that the Middle Corridor will probably function as an additional route.

Humanity needs peaceful development without conflicts and wars, threats and sanctions. And history teaches us that even in critical geopolitical situations, the laws of economics and common sense continue to function.
Source: CGTN

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