New Silk Road in 2021: powerplay, record-high volumes but lack of quality
As another year passes by, the New Silk Road is still here stronger than ever. After surviving a global pandemic, overcoming supply chain crises and proving that rail is worthy of attention, the Silk Road proves something more: that it is a shifting entity subject to changes that can alter the status quo anytime.
2021 started with the aftermath of 2020 and the Covid-19 pandemic. However, the pandemic was not the main focal point. Indeed it monopolised policy and business developments in 2020 and shaped the floor for developments in 2021. Nevertheless, 2021 proved to be more important in terms of business than global phenomena and confirmed that the New Silk Road can always provide space for surprises.
Million TEUs milestone reached
The volumes on the New Silk Road are always a hot topic since they provide growth insights. During the European Silk Road Summit 2021, keynote speaker Onno de Jong from the Dutch firm Ecorys shared the figures of the ERAI index, based on the main routes via Kazakhstan and Kaliningrad and those of RZD, based on the routes via Russia.
The volumes on the main routes via Kazakhstan and Kaliningrad witnessed a growth of 30 per cent in the first nine months of 2021; ERAI reported traffic volumes of 459.000 TEUs. RZD reported an even higher growth rate of 40 per cent, with 782.000 TEUs transported in the first nine months of 2021. These figures overlap, de Jong points out, because the routes via Russia include some of the routes via Kazakhstan. But he also pointed out that based on these figures, it is very likely that the 1 million TEUs milestone will be reached by the end of the year.
Geopolitics more relevant than ever
One of the central discussion points for the year that passed is the role of geopolitics in developing the New Silk Road. Business is not unconnected to politics. In contrast, they are intertwined. 2021 was the year that China showed off the power it has through the BRI project. The situation with Lithuania and the attempt to stop train traffic from China through the Baltic country for a purely political dispute is indicative that the New Silk Road can be subject to political games that can also affect business. Indeed, the China-Europe express does not stop in Lithuania anymore. The only reason this development is not fatal is due to the relatively low volumes directed to Lithuania.
However, the powerplay on Eurasian tracks does not reduce only to China. In a similar instance of political instability, the Belarusian president Alexander Lukashenko threatened to ban EU products passing through Belarussian territories on their way to Russia or China. This reaction was a response to EU sanctions imposed on Belarus that affect the transport of Belarussian products through other countries.
Apart from these instances, the New Silk Road seems fragile when political tension rises between two countries. Many professionals wonder what would happen to the Eurasian supply chain if, for example, Poland closed its borders with Belarus because of the refugee crisis. Or, what would happen if Russia and Ukraine entered a bumpy and conflicting relationship? Would trains keep running? Most probably not.
Russia monopolised the interest in many ways during 2021. In fact, the country is gradually becoming one of the central players of the New Silk Road, also starting to shape how the market looks. Some of the most critical Eurasian routes pass through Russia for many years, such as the Trans-Siberian railway and the whole northern route.
However, 2021 saw more developments and investments in the country that are transforming it. For example, Apart from the Trans-Siberian corridor, Russia is also heavily investing in the Northern Sea Route, which touches upon the Arctic seaports of Russia and forms a detour away from the busy inland corridor. “This investment will amount to RUB 716 billion (8.6 billion euros)”, according to Yulia Kolosopova from RZD logistics. “But Russia is also investing in the modernisation of the Eastern Polygon in the Russian territory: an investment of 850 billion rubles is planned for the Trans-Siberian and Baikal–Amur railways.”
Another topic that returns to the discussion every year is the subsidies. This year would have been the last year that subsidies from the Chinese government were in place. But, as we found out on the first day of the European Silk Road Summit, nothing is less true. The subsidies will continue for another year.
This was decided by the Chinese government considering the ongoing pandemic, said Jacky Yan from New Silk Road Intermodal in a video message to the audience. However, 2022 is considered by industry players as the last year that subsidies at a central level are in place in China. And this is OK, as the corridor can do without, agreed CEOs as Alexey Grom (UTLC ERA) and Uwe Leuschner (FELB).
New equipment-better performance
With volumes rising rapidly the New Silk Road is in need of efficient solutions both in terms of speed and capacity. New solutions like wagons and containers appeared this year with the aim to optimise Eurasian transport. For instance, a high-speed flatcar developed by Sinara Transport Machines (STM) promises to transport containers at a speed of 140 kilometres per hour. Combined with high-speed rolling stock equipment this new flatcar could allow Russian Railways to reduce transit time through Russia to seven days.
Yulia Kosolopova from RZD Logistics shared something even more interesting during the European Silk Road Summit 2021. “By 2024, 200 billion rubles (2.4 billion euros) will be invested in the container transit development subproject Transsib in 7 days”, she said. This project aims to reduce the delivery time of containers from the eastern to western border of Russia to a week from today’s 11-14 days. Moreover, this should encourage an increase in traffic volumes.
Apart from high-speed flatcars, a new container developed by Laude Smart Intermodal S.A claims to be the gamechanger of Eurasian rail freight transport. The 40’ SBOT container was developed by the Polish logistics company explicitly for transportation between China and Europe. Its primary characteristic concerns the increase of capacity by 25-30 per cent compared to standard 40’ high-cube containers.
The new Laude containers have a different form. They have a narrower-than-usual top and a wide bottom. However, according to Cetnerowski, these characteristics do not interfere with their stacking and storage in freight yards. “Our main point was to increase the capacity of the container at the same time, allowing the container to be handled like any other 40′ unit. In this sense, there is no need for special cranes as the container can be handled with standard reach-stackers or cranes,” explained Maciej Cetnerowski, Laude’s director of intermodal development.
Congestion the main characteristic
High traffic volumes combined with stricter border procedures or even closures resulted in congestion on every route, without exceptions. Not just the main border crossing, but also alternative gateways as Kaliningrad and Vladivostok experienced significant congestion.
As a result, transit times saw a significant increase in 2021. On the broad gauge section, which entails the route through Belarus, Russia and Kazakhstan, the transit time went from a record low in the first half-year in 2020 (4,96) to a record high in the same period this year (6,84). This is far from the target that has been set for 2024: 3,5 days.
Improving quality the key resolution
A general consensus for the future of the New Silk Road focuses on one thing: there is a need to put quality over quantity. Considering the long transit times and congestion on the corridor, it is time to focus on reestablishing the quality of the corridor, several industry players agree. “This means less focus on new routes, and more on improving our current services”, according to Wolfgang Rupf from RTSB. “Focusing more on big European hubs instead of continuously launching new routes could also help in improving the quality of services”, explained David Aloia from Hupac, while he underlined that Europe should control better the schedule of Eurasian trains and not allow China to act uncontrollably.
On the other hand, impressive gesture was made by the Chinese platform company from Xi’an. Starting from next year, KPI assessments will be conducted towards European clients, in order to assure good transit times, revealed Xiao Zhang from Xi’an International Inland Port Multimodal Transportation. “We will need to do more to provide high-quality services.”
However, Europe and European businesses should also play their role and become more dynamic in their exchange with China. Aloia has explained that Europe has the knowledge, the skills, the background and the information to succeed. “We have a good network with many competitors and infrastructure, which could have better performance, but we are on a good track. We have to be smart in a more dynamic way and acquire a more dynamic role against China. This is the only way for the New Silk Road to remain viable”, he said.