The Eurasian transport market is changing; that is a fact. Supply chain disruptions can be inevitable, and the market needs to adjust to them and find new pathways towards development. As the New Silk Road is currently in a transitional stage, could it be the right time to reconsider it? “Maybe this is a period to tidy up the market”, says Xavier Wanderpepen, former Director New Silk Road at FORWARDIS and currently independent transport consultant.

In an interview with RailFreight.com, the experienced Silk Road veteran unfolded his views on Eurasian rail freight transport. According to him, some of the Eurasian rail’s fundamental problems are structural. He believes that rail will continue being a good case between China-Europe given that high quality is maintained. But for this to happen, some views should change.

Managing the peak

Eurasian rail freight transport was a huge endeavour when it started ten years ago, and setting it up was not easy. The parties involved in the New Silk Road kick-off and its development did something very difficult, underlines Wanderpepen. The Covid-19 pandemic and the war in Ukraine have caused significant problems; however, some issues were there even before.

“The model of China-Europe trains should have been addressed since 2018”, he claims, adding that the market lacked sufficient coordination. A point of improvement concerns the quality of services. When New Silk Road traffic started peaking, the transit times and overall performance of the corridor started dropping, with customers appearing dissatisfied. The peak of activity was boosted when for a couple of years, sea shipping was more expensive than rail; however, the more Eurasian trains ran, the more chaotic the transit times became.

“The market needs a logistic solution with a predictable maximum transit time of 20 days, door to door. If the transit time gets longer, it’s problematic because sea transportation is quite competitive and with significantly lower prices,” says Wanderpepen. Currently, there are some steps taken. “We see operators reaching transit times between 11-14 days because of the fixed timetable test that China is running. This is very good,” he adds.

Changing the focus

Eurasian operators compete with each other; the same applies to platform companies in China. Coordination of all players involved instead of competition is critical for developing the New Silk Road, stresses Wanderpepen. In this sense, Europe and China should come together, understand each other, and implement an efficient business model.

Subsidies are no longer a solution, according to him, because they primarily benefit the industry in China and do not foster better synergies. “Maybe it is time for China to think of a train slot timetable that will provide specific departure and transit times. If transit time targets are met by 90 per cent, let’s say, then there is no need for subsidies because customers will be happy with the service stability and predictability and use rail even if it is more expensive than sea transport,” explains Wanderpepen.

Market tidying up

As for the current economic and operational situation on the Eurasian rail corridor, Wanderpepen believes it is an opportunity for better future conditions. “The China-Europe train is a good model to develop,” he insists. However, its development must adapt to all the market changes. “We don’t know what will happen with Russia. It might take years, even after peace in Ukraine is reached, for Russia to return as an official member of the New Silk Road,” he says.

Companies without a strong business case to deal with the current situation might eventually exit the corridor. “In my opinion, successful operators will be the ones who can place their solution in a niche market,” explains Wanderpepen. “We know that the Chinese economy is developing towards the production of high-value products currently and that the production of cheaper products relocates to other Asian countries like Laos or Vietnam.” In his view, the Chinese high-value products should be the focus of European operators.

This will result in more expensive to develop services. Nevertheless, it will also result in services focusing on quality cargo. Given the needed developments in the business model, this quality cargo will also be able to travel with faster transit times. Even if the ideal transit times are not 100 per cent achieved, the regularity of the trains can also play a critical role in attracting customers. “Customers will be willing then to pay more if trains are fast, on time, or depart regularly,” mentions Wanderpepen, who also stresses that cheap goods might stop onboarding trains gradually.

Consequently, operators should choose their market focus and product placement very carefully. They should also attempt to avoid economic risks as much as possible. Fixed costs for the rolling stock, for instance, should be avoided. The current situation could also be seen as a market tidying-up process. “The strong and smart will make it and hopefully provide better future market conditions,” concludes Wanderpepen.

European Silk Road Summit 2023

Do you want to learn more about how the New Silk Road develops and get in touch with over 300 Eurasian rail freight professionals? The the European Silk Road Summit 2023 is the right place to be! This year, the event takes place in Budapest on 29-30 November, with its central theme being ‘Bridging Boundaries, Expanding Network’.

While the main route is still open, the last couple of years have created increased possibilities for the Middle Corridor and the CEE and Balkan regions, and this year’s event will dive into them. Registrations are already open with a special early bird offer you don’t want to miss. At the same time, a call for papers is running until 31 August, so make sure also to apply and pitch points and ideas to discuss during the two-day conference.

More information about the full conference programme, award nomination, and site visit will be announced soon, so keep an eye on the event’s official website and don’t forget to block your agendas and register already.

Also read:

• More fixed timetable trains: a new trend spurring the Silk Road?

• Volumes increase by 30%: a closer look at China Railway’s latest figures

• Dedicated service connects Southeast Asia and Europe in 15 days via China

• Kazakhstan reconfigures its logistical position, and for a good reason