The new Silk Road

Associations, Conferences, Seminars, Forums, Marine Insurance, Markets, Trade and Commerce — By on December 17, 2014 at 11:42 PM
David Brice

David Brice

The new Silk Road: China-Europe landbridge is a challenge to sea trade, says rail expert David Brice By James Brewer

China wants to triple its rail freight traffic with Europe over the next 20 years, eating into a trade that is dominated by shipping. At present only 2% of imports and exports between the destinations is moved by land.

International railway consultant David Brice spelled out the implications of China’s ambitions for a new Silk Road, when he spoke at the International Union of Marine Insurance 2014 conference in Hong Kong.

Rail links have operated between China and Europe since 1916, but it is in the last two decades that there has been massive trade growth between China and Europe. China’s aims for strengthened continental ties were exemplified by its investment of some $50bn in energy and infrastructure projects towards the end of 2013 in mainly central Asian countries.

There was further confirmation of progress in mid-December 2014 when the official news agency Xinhua quoted Chinese officials as saying that the general blueprint for the Silk Road Economic Belt has basically taken shape.

Train about to leave Xiangtang. Originator: DB Schenker.Copyright Deutsche Bahn AG

Train about to leave Xiangtang. Originator: DB Schenker.
Copyright Deutsche Bahn AG*

The ancient Silk Road came into being through the popularity of silk and much other Chinese merchandise in Europe. It was a 10, 000 km trading network through Central Asia, and what is now Iran and Turkey. One of its main routes was known as the Persian Royal Road.

The new Silk Road makes use of the Trans-Siberian Railway linking Moscow to Vladivostok near the border with China, and what is known as the Second Eurasian Land Bridge, running from the port of Lianyungang on the East China Sea to the Kazakhstan junction of Druzhba and on to central Asia, western Asia and Europe towards Rotterdam and other major centres. Within China the line runs parallel to one of the ancient routes of the Silk Road. The Second Eurasian Land Bridge opened the Zhetigen (Kazakhstan) route to the logistics hub Korgas Pass in Xinjiang Uygur autonomous region in 2013. Korgas Pass is 200 km from Astana, capital of Kazakhstan. China is continuing to push for increased links with Kazakhstan supported by highways, railways, ports, air routes, and oil and gas pipelines.

Mr Brice said: “The build-up of rail routes in China has been absolutely staggering.”

Copyright Deutsche Bahn AG.**

Copyright Deutsche Bahn AG.**

Creating the world’s longest rail corridor at 13, 000 km,  the first freight train from China directly to Spain arrived in Madrid on December 10 2014. Carrying 40 containers, it passed through Kazakhstan, Russia, Belarus, Poland, Germany, and France during a 21-day journey, a period 10 days shorter than an equivalent sea voyage.

China already has regular direct freight train services to Germany: from Chongqing to Duisburg, and from Beijing to Hamburg.

Mr Brice spoke of other complementary developments: planning was in hand for an Uzbek-Caspian route, a Kashgar-Dushanbe-Afghan-Turkey route was in perspective, and the Marmaray Tunnel under the Bosporus Strait, connecting Europe and Asia, opened in 2014.

He listed what he saw as the rail advantages and opportunities compared with the sea route. Rail halved transit time, greatly improved container turnaround, was attractive for high-value traffic, offered a choice of routes across Asia, included a comprehensive European network with direct delivery to European destinations, was aided by good cargo tracking systems and was less impacted by weather.

Challenges for the rail option included the risk of delay when wagons were unavailable or track capacity was lacking. There could be border delays caused by congestion or excessive paperwork, posing the risk of theft.

Mr Brice enumerated several insurance aspects, including risk of delay, damage and loss. Sea transport reparation was usually limited to weight rather than value of goods. Insurance cover needed to include delay compensation as well as loss.

Rail transport was usually secure, providing the journey was not interrupted. There were packaging implications such as increased kinetic energy sparked by acceleration and shunting. There was uncertainty over the liability regime: whose risk was it at each stage of the journey?

Copyright: Deutsche Bahn AG ***

Copyright: Deutsche Bahn AG ***

Mr Brice said that the Trans Siberian Route, which transited Mongolia, Russia, Belarus, Poland and Germany, was in September 2014 “currently full but the Russians were now spending $43bn to increase capacity.”

He outlined a series of risks for long-distance freight, ranging from stowaways, to theft by organised crime, to security issues while trains were stationary and while they were on the move, damage from dangerous goods, ambient temperature changes, terrorism, high financial exposure with hi-tech goods, transhipment damage and potential complications of duty payable in multiple territories.

So far, he said, the impact on seaborne shipping volumes was negligible, but “cargo underwriters need to understand the new Silk Road.” He highlighted the need for the regulatory regime to keep pace with developments.

Mr Brice spent his main career with British Rail, where his duties included implementation of start-up Channel Tunnel freight services. Since opening his consultancy, he has undertaken studies and audit of projects in many countries, covering mass transit schemes, heavy rail operations and freight and passenger terminal projects.

___

Full caption of photo no.2: DB Schenker rail freight transport from China across the Eurasian Landbridge
to Germany. Train about to leave Xiangtang. Originator: DB Schenker. Copyright Deutsche Bahn AG

Full caption of photo no.3: After a 15-day journey, a freight train loaded with containers from Beijing reaches the shunting yard in port of Hamburg in 2008. Originator Ralph Kranert.  Copyright Deutsche Bahn AG.

Full caption of photo no.4: Container train in Hamburg container terminal Burchardkai sets off for Hamburg-Waltershof station. Originator: Uwe Miethe Copyright: Deutsche Bahn AG.

 

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