High-speed rail projects create broader economic benefits not measured in traditional cost-benefit analysis, according to a study by the World Bank. “High-speed rail will push China’s economy forward significantly,” said Anthony Wong, former President of the Hong Kong Logistics Association. The comments followed a report by the World Bank, which stated: “The wider economic benefits of high-speed rail in China seem more significant than in developed countries. [The projects] have the potential to deliver significant benefits.” The report said the high-speed railway between Guangzhou, in Guangdong province, and Nanning, in Guangxi, would generate benefits of CNY99 billion over the next 30 years, including CNY49 billion in indirect economic benefits not captured in conventional cost-benefit analysis. After the Beijing-Guangzhou high-speed line opened, the traditional rail link between these two cities was used to transport an additional 20 million tons of freight annually, because passengers switched to high-speed trains, said Zheng Tianxiang, Transport Professor at Sun Yat-sen University in Guangzhou. “This is very important, because trains can bring coal from the south to the north this winter while many trucks can’t transport coal due to the snow,” Zheng said. He said China was overly reliant on trucks to transport freight and needed to expand rail freight transport.

The crushing debt burden of the Ministry of Railways (MOR) has compelled Beijing to impose the biggest rise in rail freight tariffs in a decade. Although that may be bad news for freighters, it came as welcome news on the stock market, where the Hong Kong share price of Guangshen Railway, a freight and passenger rail company operating in Guangdong province, and of Daqin Railway, a coal rail operator; and shares in China Railway Tielong Container Logistics, a rail container operator, all rose on the news. The rate rise will increase Daqin’s revenue by about CNY1.6 billion this year, the Shanghai-listed firm announced. Its turnover was CNY43.5 billion in 2011. The Railways Ministry and the National Development and Reform Commission (NDRC) raised the rail freight tariff by 13%, the largest increase since 2003. Macquarie Analyst He Saiyi said the Railways Ministry’s debt burden was rising and its gearing ratio was beyond control, requiring it to generate more income. “The fact that they raised the tariffs higher than expected shows how desperate they are for cash,” she said. As of September 30 last year, the Railways Ministry’s debt was CNY2.6 trillion and its gearing ratio stood at 61.8%. Freight charges accounted for 50% to 70% of the Ministry’s revenue, and last year it collected CNY320 billion in freight revenues, only slightly above its repayment of principal and interest of CNY300 billion. He Saiyi said freight rates would continue to increase in the next few years. Last year’s 9.5% jump was already high, Bocom International Analyst Geoffrey Cheng said. In 2011, coal accounted for 64.2% of the country’s rail freight, the South China Morning Post reports.

It is estimated that 20 million metric tons of cargo transport capacity will be released on the Beijing-Wuhan section of the old Beijing-Guangzhou rail route after the high-speed rail service between Beijing and Guangzhou started on December 26. Transportation capacity for commodities such as coal, steel, rice, oil and ores will be increased as there will be less passenger trains on the old, slower, route. But Zhao Jian, Professor at Beijing Jiaotong University, remained skeptical. “In reality, a very limited number of passenger trains will stop operating after the high-speed railway opens,” as many travelers could not afford the expensive ticket prices on the high-speed service. Still, rail is a good way to transport cargo.  The transportation cost for delivering 1 ton of goods 1 km by rail is CNY0.12 on average, while by road the cost is about CNY0.5, and by air CNY6. Chu Xuejian, Professor specializing in logistics with Shanghai University, said the main problem with rail transport is how to link stations to other modes of transport. Without such links, rail transport cannot be truly efficient and low-cost because cargo needs to be unloaded and reloaded, which is not only time-consuming but also expensive. The rapid development of the high-speed rail system may bode well for express deliveries, Chu added. Railways are an important long-distance transportation solution for the industry thanks to their better punctuality than road transport, and lower expenses than airlines. Business volume for express delivery services surged 51% year-on-year in the first half of 2012. Less than 5% of express delivery services currently use rail services, with 80% using road transport. The rapid expansion of China’s high-speed railway network will lower express delivery costs by at least 50%, the China Daily reports.

Although the Beijing to Guangzhou high-speed rail line is largely being seen as a passenger line, Wu Ruliang, Director of the Logistics Association of Hubei Province, said his industry will benefit greatly from the new high-speed link, and expects the cost of express delivery to drop by at least 50% as a result of its opening. Officials from the Ministry of Railways (MOR) have said the new route will release cargo transport capacity on the old line between Beijing and Wuhan by 20 million tons a year. Wu added that with 95% of highways and 65% of class-A roads now installed with toll gates, the logistics industry will view rail transport as an altogether more appealing prospect than road from now on, given that toll costs currently account for a third of all logistics costs. “The opening of the service means the logistics industry will enter a new era of high speed rail transport,” Wu said. Wuhan and Zhengzhou will be build into national transport hubs for passengers and cargo.

Shenzhen ports in Shekou and Chiwan are planning to strengthen their rail freight links with China’s western cities by setting up containerized cargo services to Chengdu, Chongqing and Kunming, Erik Yim, Managing Director of Shekou Container Terminal (SCT), said. The new railway freight services could start next year and would augment services between the two western Shenzhen ports and Changsha. He and other transport experts said further development of China’s high speed rail network would be important to the growth of containerized cargo services because freight trains could use the tracks previously used for passenger services. “If railway conditions can be improved, we hope that we can have a daily service from Changsha within two years,” he said. Rail freight experts are forecasting significant growth in containerized import and export cargo moved by rail, while operators DB Schenker Rail and DHL Global Forwarding are exploiting international containerized rail. Frederic Campagnac, General Manager of rail transport consultant Clevy China, said: “Chinese container rail has a lot of room for development.” Campagnac said around four million TEU per year is moved by rail, a figure that has remained stable for about five years. He added that just 1% of containers moved from Chinese ports are transported by rail compared with 85% by road. Sunny Ho, Executive Director of the Hong Kong Shippers’ Council, said that “so far the Chinese government has not given containerized rail a priority”. But he added that development of high-speed rail will leave the old capacity free to cater to cargo services.

Campagnac said China United International Rail Containers, whose shareholders include New World Services with a 30% interest, had opened eight container rail terminals. These facilities, including terminals in Kunming, Chongqing, Dalian, Qingdao and Wuhan, handled 20% more containers in the year to June 30. Yim said container volumes have risen by about 10% a year since rail container services to Shekou and Chiwan started in 2008. About 20 shipping lines, including Cosco Container Lines, Maersk, CMA CGM, APL and Taiwan’s Yang Ming Marine use the service. DHL Global Forwarding will start dedicated weekly container rail services next month from Shanghai to Poland in conjunction with China Shipping Container Lines which is providing the containers. The service would be 90% cheaper compared with shipping cargo by air and less than 10% more expensive that ocean freight. Transit time would be 19 days from Shanghai to Warsaw compared with 30 to 32 days by sea. A second service would start next year. The imbalance in trade between China and Europe meant freight trains returning to China would be less than 30% full. Ho said the development of containerized rail gives exporters more options to transport their products to Europe rather than relying solely on ocean freight where transit times had lengthened as lines cut ship speeds to save fuel and money, the South China Morning Post reports.

In a further sign that the Ministry of Railways (MOR) is losing its monopolistic grip, Shanxi Energy & Transport Investment announced it would invest in rail projects where the Ministry will take a smaller share than usual. Shanxi Energy, wholly owned by the Shanxi provincial government, will invest in five rail projects with a total investment of CNY218.72 billion. One of the five projects is the CNY103.8 billion central and southern Shanxi coal railway, with an annual freight capacity of 200 million tons. Spanning 1,260 kilometers from Watang city, Shanxi province, to Rizhao port in Shandong, it is the world’s longest heavy freight railway and China’s first dedicated heavy freight line. Construction will begin in 2014. The Ministry will take only a 34.29% share of this project, while Bank of China (BOC) will invest CNY7.5 billion for a 14.45% stake and Shanxi Energy will invest CNY10.38 billion for a 20% stake. The remaining budget for this project is being borne by local governments and coal companies. Another of the five projects is the CNY8.6 billion Taixing coal railway, where the Railways Ministry will take a 70% stake and the Shanxi government 30%. Jefferies Analyst Julian Bu said coal rail services were more profitable than high-speed passenger rail. He said coal accounted for 60% of the freight on China’s railways. Separately, financing was secured last month for the CNY158 billion Mengxi-Huazhong coal railway. This is the first time MOR has taken a minority stake of 20% in a major rail project. On July 30, the Chinese government called for private investment in major infrastructure projects, including railways.