China spends big on rail in 4th quarter, sparking demand for rolling stock

CHINA has big investment plans for national railways in the fourth quarter, after a flat January-to-October spending period, a change which the China Security Journal says will spark a big demand for rolling stock, reports Xinhua.

Usually, the Ministry of Railways orders trains one or two years before a rail project is finished. Time from manufacturing to delivery is about eight to 10 months. So to cater for surging demand expected to start next year, the ministry is expected to order 300 to 400 high-speed trains.

The latest figures from the Ministry of Railway show that China's spending on railway fixed assets in October surged 141.2 per cent year on year to CNY81.01 billion (US$12.99 billion). This has been the fastest growth since March 2009. Investment on railway construction projects even rocketed 240.8 per cent to CNY67.78 billion.

From January to October, railway fixed assets investment dropped 0.9 per cent to CNY425.17 billion. Construction projects investment fell 1.5 per cent to CNY361.83 billion.

The Ministry of Railways plans to spend CNY630 billion on railway fixed assets this year. CNY516 billion will be used on construction projects. In order to meet this target, investment in the remaining two months of this year will have to reach CNY200 billion, 30 per cent more than in the same period in 2011.

Analysis shows that CSR Corporation Limited and CNR Corporation Limited, the two largest rolling stock producers in China, still have 730 high speed trains in the manufacturing stage or ready to be delivered. They will able to meet the demand until 2013, but after that they will suffer a shortage of rolling stock.

With the commencement of a number of passenger high-speed railway operations, the capacity on the old lines can be spared for cargo.

As of the end of last year, China has 643,000 public freight trains and 140,000 private trains. The public trains cater for less than 40 per cent of demand. An increasing need for retiring the old ones for new ones will increase demand for cargo trains estimated to grow at a rate of about 10 per cent, according to the latest report from CITIC Construction Securities.