Cargo transport set to benefit from link

The launch of the world's longest high-speed rail route from Beijing to Guangzhou, in South China, promises to reshape the country's logistics landscape with the release of huge cargo transport capacity.

More passengers traveling between the two cities are expected to opt for the new service, freeing traditional trains for cargo transport.

China put the 2,298-km Beijing-Guangzhou high-speed line into test operation on Saturday.

According to an earlier announcement by the Ministry of Railways, the service will open on Wednesday and is expected to cut traveling time between the two cities to eight hours from about 20.

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 service starts, people.com.cn reported.

The Beijing-Guangzhou route is mainly used for passengers, but once the high speed service operates, the old route will be able to run more cargo trains, increasing transportation capacity for commodities such as coal, steel, rice, oil and ores, wrote Chu Hai, an analyst with Ping'an Securities.

"Closing a passenger train can add transport capacity of 1.5 to 2 cargo trains. In addition, cargo transportation is more profitable," Chu wrote.

A report by People's Daily in August 2010 showed 85 percent of the nation's timber, 85 percent of its crude oil, 60 percent of coal and 80 percent of iron and steel are transported by rail, but due to inadequate transport capacity, less than 35 percent of these resources can be allocated to trains at a time.

"After the opening of the Wuhan-Guangzhou high-speed railway, we shipped 28 percent more coal out of Pingdingshan in the first five months of 2010 from a year earlier," Chen Qiao, deputy general manager of the logistics division of the Wuhan Iron and Steel Corp, was quoted by People's Daily as saying.

Chen said more than 10 coal-fired power plants lie along the Wuhan-Guangzhou section, or the southern section of the Beijing-Guangzhou route, consuming about 30 million tons of coal a year, but only half of the coal can be transported by rail.

After the Wuhan-Guangzhou high-speed rail service began, about 33 pairs of cargo trains, or 3,960 carriages, were added to the railway, increasing transport capacity by 87.6 million tons annually.

With complete operation of the Beijing-Guangzhou high-speed railway, the strain on cargo transport is expected to ease, according to some analysts.

But Zhao Jian, professor at Beijing Jiaotong University, is less optimistic about a substantial improvement in cargo transport capacity.

"In reality, a very limited number of passenger trains will stop operating after the high-speed railway opens."

Zhao said many passengers on the Beijing-Guangzhou route will still take the old trains as they will not be able to afford ticket prices for the high-speed service.

A ticket for travel between Beijing and Guangzhou is 253 yuan ($40), but a ticket for the same route on the high-speed service costs 865 yuan.

Jin Jiaxin, an analyst with Xiangcai Securities, said: "It will take quite a long time to ultimately replace the existing passenger trains with cargo capacity."

Railways are an ideal logistical solution because of high efficiency and low cost, Jin said. The transportation cost for delivering 1 ton of goods 1 km by rail is 0.12 yuan on average, and by road the cost is about 0.5 yuan. "By air, it will be as high as 6 yuan," she added.

Chu Xuejian, a professor specializing in logistics with Shanghai University, said:" The development of a railway network and railway operating system should be an opportunity for the development of cargo transportation."

Chu 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, Chu said.

Express delivery

The rapid development of the high-speed rail system may bode well for express deliveries, Chu added.

The e-commerce boom has brought great demand for such services, and 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 percent year-on-year in the first half of 2012, and revenue of more than 100 billion yuan is expected, according to a report from the State Post Bureau in September.

Less than 5 percent of express delivery services currently use rail services, with 80 percent using road transport. The rapid expansion of China's high-speed railway network will change the market, as it will lower express delivery costs by at least 50 percent, according to a report by the China Business Times on Dec 17, citing unnamed sources.