China Railway Corp (CRC) is expected to raise freight rates early this year to relieve its massive debt burden and speed up market-oriented reform in the industry, which it monopolizes. However, such a move may further reduce the competitiveness of rail against road freight, which has rapidly overtaken it in market share. The rail freight rate in China may rise from CNY0.12 per ton per kilometer to an average of CNY0.15, which the railway operator said would be “more reasonable”. “Freight services are a major source of income for the railway operator. However, the freight rate has long been under the market value,” said Li Hongchang, Railway Expert and Economics Professor at Beijing Jiaotong University. CRC was spun off from the former Ministry of Railways (MOR) in March last year, taking over its entire assets and debts. A reform in the railway freight sector has since been at the top of its agenda. Statistics from the National Audit Office show that the new national railway operator was bogged down in debt of CNY2.9 trillion in June last year, while its total assets were valued at CNY4.66 trillion. “The primary goal for the company is to increase revenues and cut costs. To raise the freight rate is a natural solution,” Li said. A rise in freight rates would also be an important measure to make the highly monopolized industry more lucrative for potential private investors, analysts say. As the rail network expanded, the country’s annual rail freight volume increased from 2.04 billion tons to 3.9 billion tons between 2002 and 2012. The average freight rate rose from CNY0.08 to CNY0.12 per ton per km during the decade. The research shows CRC would be able to pay off its debts within seven to 10 years assuming the freight rate rose to CNY0.13 per ton/km and annual growth in railway freight and passenger volume remained at 5% to 8%. Over the past three decades, railway freight has lost market share to road transport. The railway network’s share of the country’s freight volume shrank dramatically from about 48% to 17% between 1980 and 2012, CRC General Manager Sheng Guangzu said earlier. By contrast, the market share of road freight jumped from 6.4% to 35%. One reason is the overtaking of “dark goods” by “white goods”. Dark goods, a term used in the railway industry to describe coal and other raw materials, are the principal type of railway cargo. While the volume of dark goods has remained steady in recent years, that of “white goods”, which are those other than raw materials, has been growing rapidly, and they are mostly transported by road.

A cargo train route linking Xian, capital of Shaanxi province, and the city of Almaty in Kazakhstan started operation. The Chang’an Train will pass through Xinjiang and take six days to travel the 3,866-kilometer route, cutting the journey time between the two cities by more than 20 days, according to Qiang Xiao’an, Director of the Xian International Trade and Logistics Park. The train will operate twice a month between November 2013 and June 2014 and will run three times a month from July 2014. On its first run, the train, which departed the logistics park on November 28, was hauling 90 cars of goods, including mechanical components, barite powder, industrial salt and glass tubes. Authorities have also planned to open a 9,850-km Xian-Rotterdam route and a 7,251-km Xian-Moscow route in the future after gaining experience from the operation of the Xian-Almaty route, said Qiang. The cargo service is expected to further boost bilateral trade between China’s western regions along the Silk Road belt and central Asian countries.

DB Schenker plans to offer regular block train services between China and Russia, as well as China and Central Asia, over the next two years. Having set up regular block trains from a number of major Chinese cities to Europe starting in 2011, DB Schenker now is working with partners such as Russian Railways and China Railway Corp. The block train service could cut rail cargo travel time between China and Moscow by half, the German company said. A subsidiary of the Deutsche Bahn rail network, DB Schenker ran 250 container trains between China and Europe in 2012. It started its westbound block train service from Chongqing to Duisburg and eastbound from Leipzig to Shenyang in 2011. Bernhard Wiezorek, Director of Rail Logistics and Forwarding of Schenker (China), said that increased financial and environmental awareness, as well as improved product categories, make rail transportation a preferred option. China’s railways used to mainly carrying bulk goods such as coal, steel, ore and agricultural products. DB Schenker has established a field office network of more than 62 offices, 90 warehouses and 5,000 employees in China. “Rail service today is able to offer economic solutions to large international brands with high standards for speed, reliability and safety,” Wiezorek said. The China-Europe rail system’s key clients belong to the electronics, automotive, high-end manufacturing and consumer goods industries. The German carrier was the first company to implement a regular train service on the so-called New Silk Route that runs through Kazakhstan, Russia and Belarus to Europe. “Nowadays, there are regular block trains from Chongqing, Chengdu and Zhengzhou to Europe,” Wiezorek said. “They enable door-to-door transport from almost anywhere in China to most European cities in 19 to 22 days.” To connect inland cities, rail often is twice as fast as ships and a fraction of the cost of air, the China Daily reports.

Daily cargo transported on China’s railways rose 4.4% year-on-year in August due to the economy warming up, official data showed. The volume is the highest since April and the year-on-year growth rate is the highest since 2012, a report from the state-owned China Railway Corporation said. On a daily basis, 133,018 carriages were loaded in August, up 2,826 from July. China’s economic growth slowed to 7.6% in the first six months, the weakest first-half performance in three years, but above the country’s annual target of 7.5%. The National Bureau of Statistics (NBS) in early September revised the country’s growth rate for 2012 down to 7.7% from 7.8%.

China Railway Corp, a spin-off of the former Ministry of Railways (MOR), has announced its decision to develop the high-speed rail express business in a bid to make gains in the country’s logistics market. Currently in China, about 80% of express deliveries are carried out on the road, 15% via air and 5% via railway and other modes of transport, according to Hong Houxing, Analyst with Anbang Logistics. Sun Zhang, Professor at the Urban Mass Transit Railway Research Institute at Shanghai’s Tongji University, said the proportion of rail express’ share in the country’s logistic market only counted for about 1%. “Express delivery by rail will grow for sure in the long run as it’s faster compared to road transportation and costs less than cargo flights,” said Hong, adding that air freight is also believed to be more vulnerable to weather conditions. “Take the trail of high-speed rail delivery between Guangzhou in Guangdong province to Changsha in Hunan province launched last year as example – the cost is CNY1.5 per kilo, 25% less than delivering by air,” he said. Hong said that airfreight is most suited for long-distance express deliveries that need to travel more than 1,000 km; rail is most suited for deliveries in a radius from 500 to 1,000 km; and delivery vans are most suited for deliveries in a 500 km radius. Though distances between Shanghai, Nanjing and Hangzhou are under 500 km, Hong still believed the new Nanjing-Hangzhou and Hangzhou-Ningbo lines would reshape the country’s logistics landscape as they are part of the essential rail routes to link cities in the Yangtze River Delta to Fujian and Hainan provinces in the south. Prof Sun said railways could be used for cargo transport at night. Moreover, new high-speed services free traditional trains for cargo transport and increase transportation capacity for commodities such as coal, steel, rice, oil and ore.