Central Asia's Baku port rides the China-Europe rails

HONG KONG — The latest multimodal option introduced to the One Belt, One Road trade initiative linking China and Europe comes from the Caspian Sea port of Baku in Azerbaijan that this week greeted the arrival of its first block train.

Carrying 82 twenty-foot equivalent units, the train left Shihezi city in China’s Xinjiang Uygur Autonomous Region on July 28, bound for Baku. The Azerbaijan capital, however, is on the western side of the Caspian Sea and the train had to be transported by rail ferry 250 miles from Kazakhstan’s Aktau port to Baku port, situated at Alyat 45 miles south of the city.

The government of Azerbaijan is developing a new port complex near Alyat that includes logistics zones, a secured park site, common-use oil supply-base facilities, and customs bonded areas. The new port covers a total area of 988 acres. This development is a part of a larger strategy of Azerbaijan’s President Ilham Aliyev to strengthen the country’s non-oil economy and diversify it from hydrocarbons.

Located at the strategic crossroads of Europe and Asia and nearby sizeable markets such as China, Turkey, Russia, the port of Baku has aspirations of becoming a logistics and trade hub.

While it is difficult to see how the train-ferry-train route via Baku could be economically viable compared to the more direct train-only services between China and Europe, the new route is an illustration of the complex cooperation required to make China’s trade initiative a success.

The first train from Northwest China to Azerbaijan was the result of a joint effort by a coordination committee dealing with the development of something called the Trans-Caspian International Transport Route (TITR). The committee was initiated by Kazakhstan Railways and comprises ports, railways, shipping and logistics companies of Azerbaijan, Kazakhstan, Georgia, Turkey and China.

The landlocked countries that lie in the Caucasus and Central Asia will be direct beneficiaries of the One Belt, One Road strategy and are building the infrastructure that will link their road and rail networks with the China-Europe trunk route.

The soon to be completed Baku-Tbilisi-Kars railway project will link the rail networks of Azerbaijan, Georgia and Turkey with the European Union and is being pitched as a shorter route between China and the European Union than the 35-day ocean voyage. The coordination committee members aim to shorten door-to-door delivery of China’s goods to Europe to under 14 days.

An indication of the fast maturing nature of the One Belt, One Road initiative was revealed late July with the launching of two indices covering the Belt and Road Freight Trade Index (SRFTI) by the Shanghai Shipping Exchange (SSE).

The indices track the trade volume, value and rates along the Silk Road Economic Belt and 21st Century Maritime Silk Road. The Belt and Road Freight Trade Index (SRFTI) is designed to track the volume and value of international trade between China and 66 countries linked to the strategy in Asia, North Africa, Europe, and Oceania.

The Maritime Silk Road Freight Index (MSRFI) tracks the shipping freight rates of imported and exported containerised cargo, imported dry bulk cargo, and imported crude oil.

«The most critical factors of the shipping industry shown in the Belt and Road strategy are trade volume and freight,» Zhang Ye, president of SSE, said in a statement. «So, SSE starts from the trade volume and freight to publish the shipping factors for the Belt and Road strategy.»

Both the indices are published monthly, with a basis index of 100 points and have January 2015 as the start date. In July, the SRFTI closed at 98.98 points, with the MSRFI closing at 92.46 points.

Another indication of a more mature market has been the introduction of less-than-container-load services in the past year. Block trains are good for single shippers with large volumes, such as electronics makers or auto manufacturers, but forwarders have been introducing LCL options to shippers and have reported strong interest in the services.

Charles Kaufmann, senior vice president and head of operations and value added services for DHL Global Forwarding Asia Pacific, said by introducing the LCL option, the rail service was more accessible.

«We have already been seeing increased customer demand and with China’s focus on initiatives such as building a new Eurasian Land Bridge, the China-Pakistan Economic Corridor and the Bangladesh-China-India-Myanmar Economic Corridor, which will prompt a number of complementary engineering projects, and we expect to see distinct benefits for the professional logistics industry,» he told JOC.com.

«International logistics such as container transport, bulk cargo transport and air freight forwarding services will also have new opportunities. In addition, with China’s One Belt, One Road initiative, the volume of bilateral trade and investment will continuously expand, increasing the logistics volume of the area. As a result, it will accelerate the sustainable growth of international logistics businesses.»

Kaufmann said rail played a complementary role to ocean and air freight — being cheaper than air and faster than ocean — and would continue to be an additional and viable option for customers as the volume of trade and investment grew.

«China has been the biggest trading partner, biggest export market and a major source of foreign investment for many countries along the One Belt, One Road, according to statistics from the Ministry of Commerce,» he said.