German city of Duisburg reaps rewards as hub for China-Europe freight services
When the Suez Canal was blocked by the 400-meter-long container vessel Ever Given in March, the headlines around the world gave scant attention to dog leashes and other canine accessories.
But, for pet supplies retailer Fressnapf Group, getting these products－as well as cat trees and the like－to pet lovers in Europe was all that mattered. With the vital waterway in Egypt paralyzed, the managers at Fressnapf had decisions to make－and quickly.
The freight transport routes via sea and air were already congested, largely because of the disruptions caused by the COVID-19 pandemic. And Fressnapf’s franchise partners, stores and customers were having to wait much longer for pet care products, all made in China.
The company, one of the biggest pet supplies retailers in Europe, changed tack. It hastily arranged－in a first for the company－for a 42-container-long train to haul its products from Linyi in East China’s Shandong province to its import warehouse in the port of Duisburg. All the better that the port was just 20 kilometers from the company’s headquarters in Krefeld. Both cities are in the western state of North Rhine-Westphalia. As well as being Germany’s most populous state, it is an economic engine and a major region for exporters.
On the train’s 11,000-km journey, it passed through Russia, Belarus and Poland before reaching Duisburg, the world’s largest inland port.
To Fressnapf founder and owner Torsten Toeller, the switch to rail makes sense not only as a way to better serve the customers but also for environmental considerations. Seventy-five percent less carbon dioxide is emitted when goods are consigned to rail instead of being shipped on the high seas.
Fressnapf is one of a growing number of companies that have jumped on the bandwagon to embrace the transcontinental freight trains, now collectively known as the China Railway Express, or CRE.
According to the China State Railway Group, 12,605 CRE train services plied the route in the first 10 months of this year, carrying 1.22 million TEUs (20-foot equivalent units), a rise of 26 percent and 33 percent, respectively, over the same period of last year and both exceeding the yearly numbers of 2020.
Zhang Wen, managing director of Duisburg-based CRCT Europe Logistics, a subsidiary of China Railway Container Transport Corp, part of the China State Railway Group, still remembers the departure of the first China-Europe freight train that set out from Chongqing to Duisburg on March 19, 2011. The train service was a key part of the western inland Chinese city’s efforts to entice more producers of laptop computers to move their manufacturing lines there with the bait of improved transport links.
Chongqing’s stature in the global supply chain for laptops has since grown immensely. It has been the world’s largest hub for the production of laptops for the past seven years, churning out more than 70 million units in 2020.
When the Chongqing-Duisburg route was launched in 2011, it was known as Yuxinou, meaning Chongqing-Xinjiang-Europe, for the three main places that it connects.
There were only 17 train services that year, a number that later expanded exponentially, exceeding 3,000 in 2017, 6,300 in 2018 and 12,400 in 2020 as more routes were launched linking Chinese and European cities.
By the start of July this year, there were 73 routes linking Chinese cities with some 170 cities in 23 European countries. And that number has kept rising. In October, the German port city of Hamburg greeted the first freight train from Shanghai. On Nov 18, China’s southwestern province of Guizhou sent its first CRE train to Moscow, a route that could be extended to other European cities.
Zhang took up his post at CRCT Europe Logistics in August, but has been closely involved in the planning of CRE trains from the beginning. He expects the total number of services to reach 15,000 this year even on conservative estimates.
These trains now pass through five Chinese customs checkpoints: Alashankou and Horgos in the Xinjiang Uygur autonomous region, Suifenhe in Heilongjiang province, both bordering Russia; Manzhouli in the Inner Mongolia autonomous region; and Erenhot in Inner Mongolia, on the frontier with Mongolia.
Unlike the trains that go through Russia and Belarus, which can haul up to 70 wagons, the services heading to Western Europe, such as Germany, are limited to no more than 41 40-foot containers, or 82 TEUs, due to the shorter platforms at terminals there.
There is good news on that front. A document released on Nov 24 by the three German political parties that agreed to form a coalition government includes a plan to increase rail freight transport by 25 percent by 2030, signaling huge investment in modernizing the country’s railway network.
“The goal of our company is to provide a better service for the China Railway Express,” Zhang said from his office overlooking the Duisburg port along the Rhine and Ruhr rivers that intersect in the city.
Pointing to a large map of China Railway Express routes on the wall, Zhang expressed the view that the CRE is a good alternative to sea and air transport. With delivery times of 10 to 15 days, rail fits between ocean shipping, which takes about 30-45 days, and air transport, at four to five days. But it’s attractive on price: rail freight comes to just a fifth of the cost of air transport but more than twice that of ocean shipping.
Zhang said rail is especially attractive for the transport of seasonal products and products with a relatively short shelf life.
“After 10 years of practice, the CRE rail transport has gained increasing recognition,” Zhang said.
While the ratio of return trips of CRE trains have reached an overall 81 percent, the ratio is still relatively low in West, Central and East Europe compared to Russia, where the rail freight service with China has existed for a much longer time.
“We have to step up our business promotion,” Zhang said.
He dismissed the notion that the CRE is in direct competition with air and ocean shipping because rail transport capacity is still a fraction of that of ocean shipping.
Zhang points out that his company cooperates with air and ocean shipping companies such as COSCO Shipping in developing intermodal transport services.
Zhang hopes that the CRE can further expand its routes in Europe, cut costs and establish more hubs like Duisburg, which has long been a key transport hub in Europe.
So far, over a third of the CRE trains go through Duisburg. China has been the largest trade partner of Germany since 2015 and became the largest trade partner of goods for the 27-member European Union for the first time in 2020.
Zhang has made many trips to Duisburg over the years and he describes the port city as becoming “busier”, so much so that finding space to store CRE containers has often become a tough job.
Soren Link, the mayor of Duisburg, is known for calling his city “Germany’s China city”.
He describes Duisburg’s location at the confluence of the Rhine and Ruhr rivers, in the heart of Europe, as making it “an ideal destination for transport and logistics”.
“Therefore with the start of the Belt and Road Initiative, Duisburg became a crucial factor for the development of the China-Europe freight train connections,” said Link, who has been mayor since 2012.
He said that the number of CRE trains arriving in Duisburg increased rapidly after President Xi Jinping’s visit to the city in 2014.
Xi visited on March 29, 2014, during his trip to Germany. While greeting the arrival of a freight train from Chongqing, Xi expressed hope that Duisburg will play a greater role in promoting cooperation between China and Germany, and China and Europe.
Link, who greeted Xi during the visit, said that with the CRE train connections, Duisburg benefits directly from the Chinese projects and involvement in the region.
“The train connections also serve as an opportunity for the local companies to expand their markets in Central and East Asia,” said the 45-year-old mayor, who belongs to the Social Democratic Party, which beat Chancellor Angela Merkel’s Christian Democratic Union in national elections in September.
When COVID-19 hit Europe in 2020, the CRE trains carried much-needed personal protective equipment to Germany and other European nations via Duisburg.
Link notes that Duisburg has a long history of cooperation with China. The first sister-city relationship between Chinese and German cities was established in 1982 between Duisburg and Wuhan, the capital of Central China’s Hubei province.
The University of Duisburg-Essen has been cooperating with many Chinese universities and has enrolled some 2,000 Chinese students, the largest intake among German universities.
“Therefore, the development of the Belt and Road Initiative is one of the cooperation projects in line with a long relationship between Duisburg and China,” Link said.
To deal with the growing relationship with China, the city government in May appointed Markus Teuber, former senior executive of the Duisburger Hafen AG(Duisport) who has been closely involved in CRE trains, as the official China representative of the city of Duisburg, replacing Johannes Pflug, who took up the job in 2014 right after Xi’s visit.
Johannes Grunhage, who has studied and worked in China and speaks fluent Chinese, is now head of the new Office of Chinese Affairs, which serves as the first point of contact for any China-related matters within the city.
Grunhage told German media recently that the growing role of Duisburg as a hub for China-Europe rail transport has brought prosperity to the city. It is home to some 100 to 120 Chinese companies and a fast-growing Chinese community of 1,300 people.
Dong Wanxu, who once worked for the German railway company Deutsche Bahn, is now managing director of TE Bahnoperator, based in Duisburg. The company he founded three years ago focuses on serving CRE trains.
“Rail transport has its advantage and I am quite optimistic about the future,” Dong said. But he added that in the short term, the COVID-19 pandemic has posed challenges by causing serious delays and congestions along some routes.
Markus Bangen, CEO of Duisport, operator of the port of Duisburg, said that the company’s business related to CRE trains has grown nearly 40 percent during the pandemic. He said that visibility of the train service has improved due to the fact that air cargo services and ocean shipping was either unavailable or restricted for a period of time.
To manage the growing business, Duisport has established Duisburg Gateway Terminal, a joint venture with COSCO Shipping Logistics and Hupac of Switzerland and HTS Indermodal of the Netherlands to build the largest container terminal in the European hinterland with a capacity of 850,000 TEUs.
Built on an old so-called coal island, the new terminal, covering 240,000 square meters, is expected to handle up to 100 container trains a week from China. Total investment will amount to 100 million euros ($112 million).
“We have now eight container terminals in Duisburg, nearly all of them are involved in China trade business. But we have to increase capacity if we have increasing volume,” Bangen said.
He expects business to grow more rapidly if China allows the transport of dangerous goods on CRE trains, referring to the chemicals that are traded between China and Germany and other European countries.
While acknowledging the complexity of the issue, Bangen hopes that there will be more transparency of data about the CRE trains after cargoes switched trains due to different gauge of railway tracks in countries along the long journey.
Duisport accounted for 26,760 jobs in the 2020 fiscal year, about 15 percent of all jobs in the city of Duisburg.
The company set up an Asia desk a few weeks ago to deal with the growing China business. It is also planning to open its first representative office in China next year.
Bangen said it will be up to the new board to decide whether the first office will be in Wuhan, Duisburg’s sister city, or Chongqing, a key player in CRE business. He said that the company will open offices in both cities. “The question is which will be the first,” he said with a smile.
Duisport, through its joint venture with PSA of Singapore, is already participating in the investment of a multimodal logistics facility in Chongqing.
“The booming China-Europe freight train business between Duisburg and China has brought many tangible benefits to all sides,” said Feng Haiyang, Chinese consul general in Dusseldorf, the capital of North Rhine-Westphalia state.
He describes the train service as following the Belt and Road Initiative’s principle of joint contribution, extensive consultation and shared benefits.