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Uncertainty over China rail subsidies deters European Silk Road investors
UNCERTAINTY over the future of Chinese rail subsidies threatens the growth of a sector that has seen a number of new refrigerated cargo services launched on Europe-Asia rail routes and rising eastbound volumes.
The railways are heavily subsidised by China, but there is no guarantee that that will continue, despite Beijing's commitment to its One Belt, One Road policy. According to a report by The Coolstar, one China-based source claimed the subsidies could end as early as 2019.
"It's a big problem as it could double the price. The uncertainty may cause some shippers to think twice about rail and go by ocean or by air. One option to keep the price down will be to implement double-blocktrains, like the US system," the unnamed source was quoted as saying.
However, chairman Henrik Christensen of Silk Route Rail, a private transcontinental rail operator, dismissed fears of a sudden termination of subsidies as unlikely.
"There have been rumours about subsidies for years and I do not believe anyone knows when they will be removed.
"But in my view, they should be removed as soon as possible, as rail is sustainable without subsidies. It's not meant for cheap plastic toys but as a replacement for air freight."
Mr Christensen said the current uncertainty over subsidies was putting off investors. "It is the very reason that we have not been able to raise funding to acquire reefer containers for the route, as no investor is willing to invest until they know what will happen to the subsidies."
He argues that a cheaper solution is needed to support reefer services. "The key missing factor is the solution for the reefer cargo, food and pharmaceuticals, and a year-round service for all goods.
"At the moment there is only the grossly overpriced diesel-electric container. There are far smarter and better solutions, such as the automatic wheel gauge wagons, electric cabled railway wagons with gensets, kinetic energy power on wagons, even lithium ion batteries to power the normal electric reefer containers," said Mr Christensen.
"However, decisions by railways, and there are a lot of them between China and Europe, takes many years. Then you have the politics in each country which makes the geopolitical problem a huge obstacle as well."
The railways are heavily subsidised by China, but there is no guarantee that that will continue, despite Beijing's commitment to its One Belt, One Road policy. According to a report by The Coolstar, one China-based source claimed the subsidies could end as early as 2019.
"It's a big problem as it could double the price. The uncertainty may cause some shippers to think twice about rail and go by ocean or by air. One option to keep the price down will be to implement double-blocktrains, like the US system," the unnamed source was quoted as saying.
However, chairman Henrik Christensen of Silk Route Rail, a private transcontinental rail operator, dismissed fears of a sudden termination of subsidies as unlikely.
"There have been rumours about subsidies for years and I do not believe anyone knows when they will be removed.
"But in my view, they should be removed as soon as possible, as rail is sustainable without subsidies. It's not meant for cheap plastic toys but as a replacement for air freight."
Mr Christensen said the current uncertainty over subsidies was putting off investors. "It is the very reason that we have not been able to raise funding to acquire reefer containers for the route, as no investor is willing to invest until they know what will happen to the subsidies."
He argues that a cheaper solution is needed to support reefer services. "The key missing factor is the solution for the reefer cargo, food and pharmaceuticals, and a year-round service for all goods.
"At the moment there is only the grossly overpriced diesel-electric container. There are far smarter and better solutions, such as the automatic wheel gauge wagons, electric cabled railway wagons with gensets, kinetic energy power on wagons, even lithium ion batteries to power the normal electric reefer containers," said Mr Christensen.
"However, decisions by railways, and there are a lot of them between China and Europe, takes many years. Then you have the politics in each country which makes the geopolitical problem a huge obstacle as well."
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