As major global corporates like HP move from seaboard to western China in search of ever cheaper labour costs they are faced with increased costs and time delays trucking their produce to Chinese ports and thence to major markets in Europe. Now the Kazakhstan rail network has become a major alternative route to market for China based manufacturers. It is still 25% more expensive than the sea route to Europe, but takes, on average less than 21 days, compared to 5 weeks for the sea route. The difference is significant for high value fast moving computer goods like tablet computers where inventory costs and time to market are critical. The Kazakhstan, Russia and Belarus customs union has helped to reduce customs delays and pilferage and Kazakhstan has big plans to increase through traffic:
Hauling New Treasure Along the Silk Road
Kazakhstan forecasts that rail freight will grow to 7.5 million 40-foot containers by 2020, from just 2,500 transported from western China to Europe last year. That would be a huge increase that could sorely tax Kazakhstan’s rail network; Mr. Alpysbayev said plans were under way to build extra tracks to help handle the traffic. But even at 7.5 million containers, rail freight transiting Kazakhstan would still be only a tenth of ocean freight between Europe and Asia.
Kazakhastan also has big plans to improve their rolling stock:
Hauling New Treasure Along the Silk Road
The locomotive was built at a new factory in Astana, Kazakhstan’s capital, by a Russian-Kazakh joint venture that licensed the design from General Electric. The locomotive’s body, generator, radiator and wheels are made in Kazakhstan, but G.E. exports the diesel engine from Erie, Pa. — although G.E. and the joint venture are making plans to start building a diesel engine factory in Astana as well next year.
One problem is that Kazakhstan uses the wider Russian gauge rail tracks (1,520 mm/4 ft 11 5⁄6 in) which means cargo has to be moved from the narrower standard international gauge (1,435 mm/4 ft 8 1⁄2 in.) Chinese flat cars at the Chinese border and again back onto narrower international gauge cars and shorter trains (due to European regulations) at the Polish border. There is also much scope for futher technological and operational improvements:
Hauling New Treasure Along the Silk Road
Just as the Pony Express of the American West relied on a series of riders to carry the mail, the H.P. train relies on a new driver, assistant driver and guards to board the locomotive at stops every three or four hours. Even the locomotives are replaced with fresh ones every third or fourth stop. At each stop, railway guards dressed in black or military fatigues hustle up and down the train, checking the cars for signs of tampering. Over the course of each three-week journey, more than 100 drivers and guards board the train.
Nevertheless it looks as if long distance train transport has become a viable competitor to sea transport, even for 7,000 mile inter-continental routes. And as Krugman has noted “In the United States, freight rail bottomed out in the 1970s, and has since been carrying a rising share of ton-miles — around 40 percent these days”. Of course trains being an instrument of socialist collectivism as far as US Republicans are concerned, it’s not a subject that gets much prominence in the US MSM. No doubt their worst fears will be confirmed when they hear that
Kazakhstan, which already has 8,700 miles of rail, is rapidly building new rail routes to its borders with China in the east and Turkmenistan to the south. One goal is to connect China through Turkmenistan to Iran, assuming that the political situation in Iran improves, said Kanat K. Alpysbayev, the vice president for logistics at Kazakh National Railways. The Kazakh rail authority is also negotiating to help fix and manage the rail network in Afghanistan, where Chinese companies are building a vast copper mine.
It will be a bitter pill to swallow for Washington neo-cons if the Chinese are set to benefit from their Afghanistan “conquest” and if the Chinese also build much closer links to the Iranian economy via an enhanced Kazakhstan and Turkmenistan rail network. It will be much harder to enforce sanctions against Iran if much of their trade no longer needs to pass through international waters and Iranian dependency on “western” trade is reduced. Railways may be about to make a comeback as an infrastructure of increasing strategic and economic significance even at current oil prices.
