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It has become common knowledge that subsidies for rail freight along the New Silk Road have significantly reduced, pressuring forwarders and operators to chalk out new ways to keep the momentum in the industry going. Recently, at the World of Freight Expo (WOF) held in Bratislava, Ms. Ziwei Liu, CEO and Co-Founder of New Silk Road Network (NSRN), moderated an interesting discussion panel addressing the concerns regarding sustaining the rail freight industry post-subsidies and post-pandemic.

(Pic Courtesy: WOF Expo)

The discussion panel was joined by industry heavyweights: Tomasz Langowski, Vice President at Langowski Logistics from Poland and a founding member of NSRN; František Komora, President of the Association of logistics and freight forwarding in Slovakia; Stefan Kubatz, Managing Director of Swiss Container Lines, a daughter company of Atlantic Forwarding a German-Swiss company, who are also members of NSRN; and finally, Stefan Esztergalyos, Head of Business Development for METRANS, Czech based rail operators. The discussion covers the growing strengths of rail freight as subsidies diminish, the focus of SMEs when it comes to working in rail freight and the various other challenges that still need to be addressed to sustain rail freight along the New Silk Road.

Growing Rail Freight Despite Subsidies

Rail freight has been a flagship product of the New Silk Road, or the “Belt and Road Initiative” since its launch in 2013. In 2020, there was a growth of over 50% in the recorded volumes as compared to the previous year on the China-EU Express Train. However, the panellists had different perspectives on the growing capabilities of rail freight. The Polish and German rail freight industry has seen a lot more volume and traffic than the Slovakian market, and the difference between various markets are still huge. Mr. Komora points out that though there was some progress in creating a service for Brastislava, it was not a regular one. Various issues such as the political climate between Slovakia and Ukraine impact the service. Still, these are steps in the right direction to open Slovakia as a critical market for the New Silk Road.

The panellists agree that volumes grow even with lacking subsidies as seen in the past months. For the developed Polish market, Mr. Langowksi adds that they have witnessed a long history of rail subsidies, from the time before it even existed, to after the Belt and Road Initiative was announced, till today where the current freight prices have rendered subsidies unnecessary. So much so that all modes of freight are now equaling out with the old tagline ‘faster than sea, cheaper than air’ put to rest, but it is the demand that is exponentially increasing that will aid sustaining rail freight without subsidies. Mr. Esztergalyos points out interesting data underlining a growth of 24% of volume for Slovakia via the New Silk Road, to which Mr Komora adds that governmental support along with key operators such as METRANS has been and will continue to be crucial in creating these routes.

The Slovakian policies support transport goals by focusing on new lines and equipment for the operators, developing the last-mile while also taking the example of the Austrian rail freight industry. At the same time, the panel's general consensus is that supply that the subsidies behaved well for marketing the rail freight industry among the freight forwarders but it is not the best long term resolution. As logistics personnel from the EU, the panel also agrees that the European Union’s interest is to invest in infrastructure rather than subsidize cargo movement along the New Silk Road, however finding a uniform approach amongst various European countries is still a huge challenge. Mr Langowski and Mr Kubatz note that for SMEs, subsidies never influenced much except some effects on the pricing, and to develop rail business SMEs can provide ‘add-on’ services or focus on bigger clients.

(Pic Courtesy: WOF Expo)

Rail Freight Beyond Subsidies: New Challenges

Understandably, subsidies are not the end all be all theme when it comes to rail freight along the New Silk Road. There are various other factors and challenges that influence its growth and acceptance amongst the logistics industry. The panellists highlighted that the existing infrastructure could not handle the boom of rail freight. Mr Kubatz adds that apart from the need for reasonable prices, the promise of faster rail freight falls flat due to congestion caused mainly by underdeveloped infrastructure. There is a need for EU countries to cooperate together and build these infrastructures and open more points of entry into the European Union, which Mr Langowski eloquently puts forth as ‘a big enough cake for everyone’. On the other hand, not all cargo should go on the rail, and it needs to establish a clear positioning in the market, rather than as the last solution when sea and air do not work.

Ultimately, there is a need to develop efficient rail freight systems within. Not all cities or hubs can act as primary points of connection with the New Silk Road, and this is where the Hub and Spoke System functions as an interesting arrangement to optimize functioning. Mr Esztergalyos comments that simply quantitively adding new terminals and hubs may only impede the already existing connections. Therefore, a better strategy would be to strengthen the ones that are in place and to check on the number of incoming trains to Europe, otherwise, congestions are imminent and cause a loss of quality. Rail freight can sustain when the competition remains healthy and cooperation increases.

Click here to listen to the full discussion panel:

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