Change of track on the Silk Road

The “Iron Silk Road” has developed as an alternative to the sea route between China and Europe since Chinese President Xi Jinping launched the “Belt and Road Initiative” (BRI) ten years ago. The northern corridor through Russia proved to be the fastest option at acceptable costs. At peak times, up to 1.5 million standard containers (TEU) per year were transported along the Trans-Siberian Railway or further south via Moscow and Kazakhstan. HHLA subsidiary Metrans positioned itself on the northern corridor at the start of January 2022 by acquiring CL Europort, with a logistics centre in the Polish city of Malaszewicze. At the same time, a strategic partnership was entered into with the rail transport company Eurotrans, which serves the northern route.

Since the Russian war of aggression in Ukraine, it is less hectic at the Malaszewicze hub. “In the first quarter of 2023, around 80 percent of trains on the northern route from China were bound for destinations in Russia; only 20 percent continued on towards Europe,” explains Martin Koubek, Director Silk Road & CIS Countries at Metrans. Although rail transit transport is not affected by the EU’s 11th package of sanctions against Russia from June 2023. But the central corridor, called the Central Trans-Caspian Network (CTCN), is moving further into focus.

From Europe, a section of the CTCN runs overland through Turkey via Kars. At the end of October 2017, a railway line via Armenia and Georgia to the Azerbaijani port of Baku commenced operations here. Alternatively, there is a connection from the Romanian port of Constanța across the Black Sea to the Georgian port of Poti, and then on to Baku by rail. Koubek considers these alternatives from the customer’s perspective: “If rail freight transport between Europe and China via Russia has a transit time of around 14 days, we need to find a similar solution.”

Marketing of the CTCN also lags behind the Chinese BRI marketing strategy. Now Brussels wants to catch up using its “Global Gateway”. It is intended as “Europe’s initiative to connect the world through investments and partnerships”. As part of this, the European Bank for Reconstruction and Development (EBRD) examined existing and potential transport corridors in Central Asia up until June on behalf of the European Commission. The study proposes measures and infrastructure investments to achieve a maximum volume of 865,000 TEU on the CTCN with a transit time of 13 days between the EU and Asian hubs.

To enable this, the 290-kilometre stretch of railway between Almaty and Khorgos in Kazakhstan would need to be expanded to two tracks and electrified, for example. In addition, port capacity in Aktau and Kuryk is to be improved. The EBRD study assumes that container transport on the Caspian Sea between Aktau and Baku will increase from 18,000 TEU in 2022 to 130,000 TEU in 2040. In addition to HHLA, other German companies want to play a part, including Rhenus Logistics. The Group has signed a corresponding declaration of intent with the Kazakhstani state railway operator KTZ. In concrete terms, a container hub is planned in the Port of Aktau and more transit cargo is to be switched to the Trans-Caspian route.

Korneli Korchilava, Managing Director of HHLA Project Logistics, based in Poti, is already noticing this: “The volume on routes between the Georgian Black Sea ports and Central Asian countries is growing.” Since the start of 2023, he has recorded an increase of more than 50 percent compared with the previous year. In addition to Tbilisi and Baku, the HHLA subsidiary has also had an office in Almaty since the end of February.

For large orders between Baku and destinations in Kazakhstan, HHLA Project Logistics can switch project cargo from road transport to the potentially more environmentally friendly rail transport. On one occasion, around 5,000 tonnes of pipes were transferred in Baku before crossing the Caspian Sea from Alyat to Aktau. On another, a container unit train was organised from the Port of Aktau via Khorgos to China. In the Port of Poti, containers are transferred from ships to container unit trains and transported to Baku by the Azerbaijani rail operator ADY. Although this is a good start, trucks are often simply more competitive at present.

“The usually privately owned road transporters are more flexible and mobile,” says Korchilava. That is why, he says, united efforts are now necessary to overcome bottlenecks on the railways. He regards the establishment of a joint logistics company, which the prime ministers of Kazakhstan and Azerbaijan agreed on in June, as a step in the right direction. The agreement should standardise rates and freight handling on the CTCN and shorten transit times to between 10 and 15 days in the future.