ASTANA in Kazakhstan is one of the world’s most remote
capitals, surrounded by thousands of kilometres of empty steppe. This
summer Astana attempted to launch itself onto the global stage by
hosting the World Expo, which closed on September 10th and underwhelmed
many attendees. But there are other ways to have an impact. On the
city’s north side, away from the Expo’s exhibits, a series of diesel
trains, each pulling dozens of containers, roll through the old railway
station. Most are heading from China to Europe. Last year over 500,000
tonnes of freight went by train between the two, up from next to nothing
before 2013. Airlines and shipping firms are watching things closely.
The
trains rumbling through Astana result from a Chinese initiative, in
tandem with countries like Kazakhstan, to build a “New Silk Road”
through Central Asia. The earlier overland routes were once the conduits
for most trade between Europe and China and India; they faded into
irrelevance when European ships started circumnavigating the Cape of
Good Hope.
China has long wanted to develop its inland regions and push industry to
“go west”, in order to spread economic growth more evenly.
Manufacturers have been loth to shift, in part because of the higher
cost of moving goods to ports for export. Developing a rail-freight
network to Europe—an important part of China’s “One Belt One Road”
policy—opens up a new route to market for its poorest areas. The land
route through Central Asia is relatively short. A container ship too
large for the Suez canal must make a 24,000km journey to reach Europe.
Trains travel no more than 11,000km to reach the same destination.
Kazakhstan has spent over 1.1trn tenge ($3.2bn) on upgrading its railway
lines and rolling stock since 2011. That includes $250m on the Khorgos
Gateway, a dry port at the border with China that lifts containers from
Chinese trains onto Kazakh ones to overcome a change in track width (a
problem that has stymied previous efforts to build railway routes
between Europe and China).
Volumes of freight travelling between China and Europe by
rail are rising quickly. Between 2013 and 2016 cargo traffic quintupled
in weight. In the first half of this year the value of goods travelling
by train rose by 144% compared with the same period in 2016. Western
firms have been keen to embrace rail freight because it helps them to
lower costs, says Ronald Kleijwegt, an expert on the industry. In the
case of high-tech electronics, for example, which consumers like to
receive quickly, making them on China’s coast and air-freighting them to
Europe is extremely pricey.
How worried should shipping
firms and airlines be? Kazakhstan’s national rail company, KTZ, says it
will have capacity for 1.7m containers to pass through the country
between Europe and China each year by 2020; that is a tenth of the
volume currently carried by sea and air between the two. In the longer
term, a full modernisation of the existing main three rail routes from
China to Europe could produce 3m containers a year in capacity.
But
there are also reasons to doubt that will happen. For one thing, China plans
to stop handing out government subsidies for additional rail-freight
capacity from 2020, which will slow the network’s expansion. Sea freight
has little to fear in the near term, says Soren Skou, chief executive
of Maersk, the world’s biggest container-shipping line. Trains may take
away some future growth from ships, he concedes, but not their existing
business.
Air cargo is more vulnerable. Last year,
180,000 tonnes of cargo travelled on trains to western Europe from China
(the remainder was destined for Russia and eastern Europe). That is a
small fraction of the 52m tonnes that came by sea, but a big chunk of
the 700,000 tonnes that came by air. Much of that air cargo could switch
to rail in future, says Mr Kleijwegt, with one important proviso—that
Russia would need to lift the retaliatory sanctions it placed in 2014 on
imports of Western food, which stop most foodstuffs from traveling by
land between Europe and China. That is unlikely for the time being. But
it was only a decade ago that people thought the idea of freight trains
between Europe and China was a joke, says Mr Kleijwegt—and no one laughs
at that any more.
Read more: New rail routes between China and Europe will change trade patterns
