Thursday, December 11, 2014

HEWLETT PACKARD, CHINA-DUISBURG RAIL, SUPPLY CHAIN

Very interesting idea.  And it seems to reduce critical time. 

Electronics shippers turn to China-Duisburg rail route

Hewlett Packard produces half of its laptops in the giant central Chinese city of Chongqing. One of the first movers in the Go West initiative, the computer and electronics company churns out 60,000 motherboards a day.
Getting the computers to the global markets from a city more than 2,000 miles inland is a challenge. The Yangtze River is dry half the year and heavily congested the rest of it. Many forwarders opt to truck their containers around the Three Gorges Dam rather than fight for space at the dam locks.
Where once HP’s products would automatically fly in freighters, they have become cheaper to produce and sell and no longer require transport by air. However, the laptops, motherboards and other computer components from HP, Foxconn and Acer are part of a global supply chain that requires on-time replenishment, ruling out sea transport from China to Europe.
A third transport option is starting to gain ground among electronics shippers in China and the forwarders that handle that cargo –– rail.
HP now stacks up to 50 containers on a block train that travels from Chongqing to the German city of Duisburg, a journey of 6,800 miles. It was one of up to three trains a week that leave for Germany on a route known as the New Silk Way that was developed by Kazakhstan Railways (KTZ).
Relations between Kazakhstan and China are at presidential level and Chinese President Xi Jinping was on hand to welcome the HP train into Duisburg late last month and promote the mainland’s industrial inland hubs.
The state-owned KTZ is a vast entity that also operates seaports and 11 international airports in the world’s largest landlocked country. In the last three years, the company laid more than 1,200 miles of rail tracks; it plans to invest $45 billion in rail transport, air terminals and a free trade zone in the next seven years.
Kanat Alpysbayev, vice president of logistics for KTZ, Tuesday opened the wholly owned KTZ Express office in Hong Kong, set up to increase the company’s import and export trade between China and Europe, via Kazakhstan and Central Asia.
One of the goals of the company will be to improve connection times between China and markets in Central Asia and Europe.
“The rail route to Duisburg is three times faster than sea and 40 percent cheaper,” he told reporters. “At the moment, there is one block train per week, but our target is to increase that to 170 trains per year.”
Compared to ocean shipping, the container throughput is small, with the trains carrying about 10,000 TEUs. However, with slow-steaming employed by the ocean carriers increasing the sea voyage to 45 days, the speedy 15-day transit is attractive to shippers with products that fall into the mid-value category.
KTZ is working on making the transit even faster by increasing the train speeds from the current 560 miles per day on average to 750 miles a day. That would enable, for instance, the HP block train to travel from Chongqing to Duisburg in just 12 days.
“We don’t see any threats, any slowdown or any downsizing of the trade,” Alpysbayev said.
KTZ Express has expanded its reach into the China market with a $100 million investment in an intermodal freight and logistics center at the Port of Lianyungang. The 21-hectare facility will have an annual throughput of 500,000 TEUs and is intended to provide direct access to Central Asia for shippers from Japan, Korea and Southeast Asia via Kazakhstan.
“Shippers from Asia currently have to use ocean freight to Europe and then truck or rail to Central Asia. Now they can access these markets directly by rail from China, saving time and cost,” said Sanzhar Yelubayev, president of KTZ Express.
Kazakhstan is part of a customs union agreement with Russia and the European Union, and once the block trains are cleared at the Kazakhstan border, which takes four hours, there are no further inspections, or delays, required until destination.
Contact Greg Knowler at gknowler@joc.com