In the increasingly competitive China-EU rail freight space, Estonia’s EVR Cargo has secured contracts with Sweden’s IKEA to use a new China-Estonia route to service IKEA’s customers in Scandinavia. The train, which is scheduled to arrive later this month, provides a more cost-effective manner of getting Chinese manufactured products to European markets than sea, and is three times faster.
The train arrives at Paldiski, a sea port in North-West Estonia on the Baltic Coast, and from there by ship to the Swedish port of Kapellskär. EVR Cargo CEO Raul Toomsalu stated in Estonia’s Daily Newspaper Eesti Päevaleht that: “While transporting by container from China to Europe previously cost approximately US$600 then, by now it has reached US$1,500 dollars. The cost for a container is nearly the same as transporting by rail, only that instead of 45 days, the journey lasts 10 to 12 days.”
Estonia is poised to become a China rail hub as it is one of the closest ports to China and is part of the EU, making it an ideal transshipment destination for Chinese products entering the European markets, a geographical advantage we explained back in July.
Competition, for handling and transshipping Chinese goods to the EU markets remains fierce. Finlands Kouvola rail terminal is also about to receive its first train from China, while other EU hubs, such as Poland’s Lodz and Latvia’s Riga have already been receiving freight train cargo.
“China’s current subsidizing of freight rail containers is responsible for the sudden boom in Sino-Euro rail routes; yet, it is also skewing the market”, says Chris Devonshire-Ellis of Dezan Shira & Associates.“Clearly when these subsidies end, not all of the China to Europe routes will remain economically feasible. The long term winners in the race to handle European transshipment from the China rail routes will be those ports and terminals which invest and adopt technologies, such as 5G and blockchain, and can work either with or around Brussels to bridge the data sharing gap that currently exists between the EU and non-EU countries to provide a truly seamless and efficient service.”
Chris Devonshire-Ellis is the Founding Partner and Chairman of Dezan Shira & Associates. He is based in Europe. The firm provides European businesses and governments with strategic, legal, tax and operational advisory services to SMEs and MNCs investing throughout Asia and has 28 offices across China, India and the ASEAN nations as well as St. Petersburg and Moscow. Please contact the firm at email@example.com or visit the practice at www.dezshira.com