All Aboard!

Sunday, May 6, 2007 22:12
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Logistically speaking, it is difficult for one person to keep up with everything that is going on in China. One minute there is a foreign company investing in a Chinese company… the next a Chinese company is looking to invest in a foreign company.. one minute there is bullet train service… the next a single shipping company orders 66 new ships…

There is just a lot to digest in China’s world of logistics!

In the last month though, there has been a lot of activity in the rail sector that we wanted to focus on, but with all the work we have been doing on the Yangtze… we were a little preoccupied.

In China, the rail is the cheapest option to move goods… and it is for good reason. It is SLOW, inefficient, and has high damage/ loss rates.. and you never know when your goods will get on or off (unless you have your own car).

The primary reasons for this situation is a mix of failing to fully plan needed invest in infrastructure + a booming economy on the east cost = havoc on the rails.

As highlighted in a recent WSJ article (China Railways Hurt Coal – subscribers only) David Winning writes that the infrastructure is so poor that China may actually have to import more costly coal as it cannot get cheaper coal from China’s interior to the coast as the rail network is maxed out:

One problem is that many of the new coal reserves being found are in regions lacking suitable rail infrastructure for transporting heavy loads. Such regions include Inner Mongolia, where the official Xinhua news agency reported this year that a major geological survey since 2004 has led to the discovery of coal fields that could increase coal reserves by 319 billion tons.


The lack of suitable alternatives to transporting coal by railroad also is a headache for China’s economic planners. The NDRC’s think tank predicted that 338 million tons of coal will be moved on China’s highways in 2010, but conceded that such transport doesn’t make economic sense.

With this situation only set to get worse, and become a barrier to growth, the Minister of Railways Liu Zhijun recently announced that they would open the door wider for those looking to invest in the development of railway… and he “suggested” that the three railway firms that had already gone public (Datong Qinhuangdao Railway and Guangzhou Shenzhen Railway) go out and get more money from the markets to support the growth plans that are in play.

According to the ministry’s 11th Five-Year Plan (2006-10), 17,000 km of new tracks will be laid across the country at a cost of 1.5 trillion yuan (US$193 billion), double the amount spent during the previous five-year plan.

There are still many gaps in the systems, and due to poor infrastructure many lines are unable to hold double container cars, a mainstay of modern rail freight systems that increase efficiency and capacity on the system while reducing costs and transit times.

And if moving freight around the country weren’t enough, China also needs to move its people as well. A complete polar opposite to the United States, China has more train passengers than anywhere else.

For the past Chinese new year holiday “The Ministry of Railways estimates that China’s railways will transport an unprecedented 156 million passengers during the 40-day Spring Festival travel peak from February 3 to March 14, up 4.3 percent year-on-year.” (See More Trains Arranged to Cope With Spring Festival Rail Passenger Peak)

And for the recent May day holiday…. Ticket shortages will be alleviated during the May Day holiday as an additional 340,000 seats will be provided every day to make traveling more convenient (See China considers cutting ticket prices for bullet train services)

Fortunately, the April 18 debut of the new speed trains went well, and by the end of the year more than 100 should be in service…. and passenger capacity for those lanes will increase dramatically as trip frequencies will increase dramatically for the short haul distances (Shanghai to Suzhou will go from 1hr or 27 minutes!)

However, currently only 6,000 kilometers (3,720 miles) of track can accommodate the high-speed trains, with most restricted to top speeds of between 120 and 160 kilometers an hour on 36,000 kilometers of sub-standard track.

Nevertheless by 2020, China hopes 13,000 kilometers of track, or about one-fifth of the nation’s current 77,000 kilometers, will be able to handle bullet trains.

In the end, the government believes it will need to build an additional 25,000km of track before 2020 (from 75,000km currently to 100,000km), 12,000km would be just for passenger, and it will need a lot of help from many sources (see ADB Grant Helps Expand China’s Passenger Rail System).

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