According to the customs services of both EU and China, the trade turnover between these countries is half a trillion dollars or more than 25 million containers. The transportation is cheap indeed. Container vessels, being able to carry 18 thousand containers on board, are much cheaper compared to any railway transportation. How many containers can a train carry? One hundred or even two? That’s nothing compared to 18 thousand.
Current Silk Route Compared to Future Route by Sea
On the map below, you can compare the current sea route and the one they are developing right now. The future possible route has several disadvantages:
- Ports on its way are not developed enough to accept those big container vessels that can carry thousands of containers.
- Lots of terrain. Lots of unknown and unclear destinations like Nairobi or Athens.
- Large land distance from Venice to Rotterdam.
The low price of sea transportation is caused by the great capacity of container ships. The cost per one container (thanks to them) dropped from 800 USD to 400-500 USD. Small ports are unable to serve those ships and it is too hard to develop them so that the prospects of the new route is not that obvious as they are trying to present it.
Conclusion 1. Current route will remain the cheapest one.
What about Terrestrial Routes from China to Europe?
Current balance of sea to terrestrial carriages is 100 to 1. Overland route currently goes through Russia and Kazakhstan. However, in London this autumn, Chinese leader declared to establish a new overland route that would not include Russia. Let’s look at it closer.
Any transport route has to be profitable. Current terrestrial route transportation is far more expensive compared to the sea option. But the new one (declared not so long ago) does not even exist. Thus, requires extensive investments for a long period of time. Geographically, it goes through the Pamir Mountains (did you try to build a good road through the mountains?), the Karakum desert and Kurdistan. It is absolutely obvious that such a route is economically inexpedient.
As it was already mentioned, the cost of one container transportation by sea is at most 500USD or 65USD per ton (2,2 thousand lbs). Overland routes are more expensive and used for goods that need special conditions or don’t depend on transportation cost (very small and expensive). This year the commodity turnover between Europe and China by land was approximately 130 thousand containers.
Conlusion 2. They are not going to build the new overland route. Perhaps some pinpoint investments will take place but not as globally as they have been declared.
What do you think?