The perishables trade between Europe and Asia is set to be boosted exponentially as a result of the increased rail links along the New Silk Road.
In particular, the optimisation of the Yu’Xin’Ou railway, connecting Chongqing in China with Duisburg in Germany, with subsequent links into Northern Europe, will help satiate growing demand for the likes of beef, dairy and seafood products in rapidly urbanising China, a new report has found.
The 11,178-km route takes in Xi’an, Lanzhou, Urumqi, Russia, Belarus and Poland and is providing European producers with quick access to emerging markets in China. While it opened in 2011, the route has been predominantly used for transferring tech goods from China to Europe.
“Currently, it takes about 40 or more days to get perishable foods to China by ship, and getting food into China by plane is not cost effective. With the Yu’Xin’Ou railway link, it will become both more cost effective and efficient for European businesses to bring perishables into China within 13 days or less,” Wiebe Draijer, the chairman of Rabobank, which produced the report, tells GTR.
While rail transit has been traditionally much more expensive than sea routes, researchers found that the costs are coming down, with door-to-door rail delivery costing just 50% higher than sea, despite the much faster delivery time.
“The shorter lead time means costs are reduced in three ways: less working capital expenses, inventory costs and transport costs within China as cargo can be directly delivered from Europe to landlocked Chongqing, instead of first being delivered to eastern coastal ports. Overland transportation can also be seen as a safer means of transportation, as it avoids risks such as pirates and typhoons,” Draijer says.
Other key points in the report, co-authored with Wageningen University in the Netherlands, include the rapid development of China’s e-commerce sector, particularly pertaining to perishable goods.
“An annual growth of 50% in Chinese sales of perishables via online retail is further expanding the opportunities ahead. European exporters will find their options for distribution increased, especially as online retailers make use of faster and higher-quality logistics. For European exporters of perishables to China, the New Silk Road, connecting Rotterdam and Chongqing, will provide an exciting new route to market,” the authors wrote.
Chinese consumers are expected to increase their consumption of fruit and vegetables, dairy and meat by 17% in the next 10 years, with 38 million households joining the middle class. With this, comes rising taste for goods such as pork, beef, chicken and dairy. And along with the opportunities for producers, comes opportunities for financiers.
“There are definitely movements within domestic companies investing in these logistical opportunities, particularly e-commerce companies. Within China, infrastructure growth has been supported by central and local governments who have introduced subsidies and tax breaks for cold distribution centres and cold production warehouses,” Draijer says, emphasising the opportunities available for banks who will support clients investing in cold chain logistics as part of their food and agri businesses.