On July 1, DHL Global Forwarding signed a Memorandum of Understanding (MOU) with Kazakhstan Temir Zholy Express (KTZE), which aims to provide greater rail connectivity and trade between China, Kazakhstan, the Commonwealth of Independent States (CIS) countries and Europe.

Two weeks later, UPS announced that it has added a less-than-container load (LCL) option for China to Europe rail shipments from Zhengzhou to Hamburg to its existing full-container-load (FCL) service, providing more evidence of the growing popularity of rail shipments between Asia and Europe.

A UPS statement says that the company’s expansion of its rail product portfolio in China reflects the company’s commitment to infrastructure developments along the Silk Road Economic Belt. “This expansion coincides with the transformation of China’s manufacturing industry from a low-cost and high-volume model to a more innovative, quality-focused and customer-centric approach,” the statement says.

While DHL Global Forwarding is still in the planning stages of the project, company officials say that eventual additional commercial block train services will enable DHL to enhance the scheduled rail services for its customers, and increase the overland rail routes as a complimentary alternative to traditional sea and air freight.

 “We are working on a new and better service for our customers, putting together the expertise of our partners to provide an improved offering to the market,” reports Bruno Selmoni, head, Road Freight & Multimodal, DHL Global Forwarding Asia Pacific. “Essentially, the rail service is at a sweet spot between air and ocean freight, being cheaper than air freight and faster than ocean freight.”

The UPS statement says that customers who have taken advantage of UPS’s China-to-Europe FCL rail service, which it launched in 2014, have experienced cost savings of up to 65% versus air freight and time savings of nearly 40% compared to traditional FCL ocean service on the same routes. “In addition to providing faster and more economical options to customers, these rail options also are a much more environmentally friendly alternative to air and ocean freight, consuming less energy and producing lower carbon emissions,” the statement said.

Under the DHL MOU, KTZE will be responsible for operating rail activities from point to point as well as across the China/Kazakhstan borders. DHL Global Forwarding will focus on developing its forwarding capabilities along crucial trading routes linking China, Kazakhstan and CIS countries while KTZE will add several logistics service locations to its existing network as well as increasing their overall capabilities. The partnership will see the development of additional rail offerings along the South Silk Road trade route to Europe via Kazakhstan.

“Customers require speedy movements for these routes and with the rail service, we are helping them to reduce transit time from ocean freight and cost from air freight,” Selmoni tells Asia Cargo News.

Over the past few years, DHL Global Forwarding has seen tremendous growth in rail freight between Asia and Europe. DHL Global Forwarding executives contend there is a lot of growth potential in many intermediate trade hubs such as Kazakhstan.

“Based on the Intercontinental Combined Traffic (ICOMOD) report, the rail potential of around 1 million TEUs is forecast for 2030 – out of which there is already significant hypothetical market potential today,” Selmoni says. “With China’s ‘One Belt, One Road’ initiative where one of the key focus is on Asia-Europe connections, we are expecting remarkable growth for intermediate trade hubs such as Kazakhstan.”

Kazakhstan’s own economic development stands to benefit significantly from strong infrastructural links to China and the EU, its two largest trading partners. KTZ has been focusing its efforts on a burgeoning “land port” at Khorgos on the China-Kazakhstan border, northeast of Almaty. A number of agreements between Kazakhstan’s and China’s governments permitted the area around Khorgos to become a 5,700-hectare Special Economic Zone (SEZ). The SEZ will center on trade, tourism, culture and sports, as well as an airport and terminus of a railway to Almaty, which is to connect with the Chinese-funded high-speed railways to run from Almaty to Astana.

“The Khorgos Special Economic Zone is important as a free trade zone and effective transport, logistics and industrial centre with manufacturing capabilities. Its strategic location is an important piece of the jigsaw for the business between Asia and Europe,” Selmoni says.

The World Bank sees Khorgos as a key node on the Western Europe-Western China International Transit Corridor. An immense new freight terminal has already been built there.

A report last September indicated that a dry port and logistics area was to be completed at the Khorgos-East Gate SEZ at the end of 2014. The complex near the Kazakh-Chinese border includes multimodal facilities, transport infrastructure and warehouses for the storage, sorting and secondary packaging of goods in transit.

DHL Global Forwarding, as well as Hewlett Packard and Toyota, plan to open distribution centers at the complex and have an interest in the dry port.

While reports have indicated concerns over Customs delays on the Kazakhstan side, Selmoni indicates that DHL Global Forwarding has had no issues. “Our shipments are in transit in Kazakhstan,” he says. “We are already connecting Asia and Europe with our existing rail solutions between Zhengzhou and Hamburg; Suzhou and Warsaw; and Chengdu and Lodz, in addition to sea links from Japan to China and onwards to Europe – and vice versa.”

While KTZ Express was not available to comment to Asia Cargo News its role in the project, Sanzhar Yelyubayev, KTZ Express president, indicated in a press release that KTZ Express is looking to establish the most advanced central Asia logistics hub in Kazakhstan by enhancing various facilities across the country and improving our freight forwarding capabilities.”

“The partnership with DHL will not only accelerate our pace towards achieving this goal, but will also help us serve multinational corporations with regional needs in these high-potential markets,” Yelyubayev said. “KTZ Express will work hand in hand with DHL to further develop end-to-end logistics solutions via rail and multimodal solutions in this part of the world. We will continue to work on reviving the Silk Road and increasing our capacity to move goods within the region as its economic growth and development gain critical momentum.”

By Karen E. Thuermer

Correspondent | Washington