Moreover, Skinest is currently said to be over a hundred days late with the delivery of its goods. The company has reportedly already incurred 30,000 euros in delay penalties. LTG Cargo claims that Skinest is also often late to rectify qualitative defects and shortages.

Extreme measures

As a result, LTG Cargo says it had to deal with more than 30 cases of technical problems where it had to delay or suspend scheduled deliveries while cargo was en route. It forced the company to carry out unplanned repairs in over 20 cases.

“We can no longer trust a supplier who constantly fails to properly fulfill its obligations, so we decided to take extreme measures – to terminate the contract and add Skinest Baltija to the list of unreliable suppliers”, says the head of LTG Cargo.

Skinest laments LTG Cargo way of operating

Skinest explains that the supply issues arose due to the covid pandemic and supply chain issues. “We must acknowledge that there have been certain breaches of the contract, namely delays due to the covid pandemic and disruptions in supply chains caused by the war in Ukraine, resulting in shortages of certain positions in the market”, says CEO Valdas Rasimas.

At the same time, Rasimas says that the company communicated these issues with LTG Cargo and requested a change of the supply terms. Rasimas says that “Skinest Baltija has repeatedly requested the possibility of changing the supply terms due to the situation that has arisen, but unfortunately, we received a negative response from LTG Cargo representatives.”

Moreover, Rasimas accuses LTG Cargo of mishandling technical issues. “Some defective reports were filled and submitted without the participation of Skinest Baltija representatives, although we actively requested the presence of our representatives,” the Skinest CEO says. “These reports were based solely on visual inspection without measuring specific parameters of the components, such as surface roughness or the ability of certain parts to withstand pressure. We disagree with such subjective, technically unfounded, and potentially erroneous defect assessments.”

Relationship hits rock bottom after ups and downs

According to Rasimas, there were ups and downs in the company’s relationship with LTG Cargo. “Some representatives attempted to preserve the contract, while others, due to their incompetence in assessing and evaluating components, discredited us as a supplier”, he says. However, he adds, “there were some periods of understanding, we even signed a settlement agreement last year as a proof of goodwill.”

Skinest does not agree with the situation as sketched by LTG Cargo. The relationship between the two companies has hit rock bottom. “Yes, we are preparing to take legal action”, says the CEO. “We will defend our rights according to the provisions of the law.”

Also read:

• Finnish cargo critical to making Rail Baltica relevant for logistics
• LTG Cargo launches first cross-Baltic service
• Lack of Baltic commercial operators hinders intermodality, says Samskip

Only a few ports can afford to be only a transshipment hub

Intermodal links are very important for practically all European ports, Landa says. “There are only a few ports that can afford to be only a transshipment hub, and that is mostly only because they do not have a noteworthy hinterland. You can have the best terminal in the world, but without a good hinterland network of roads and rails, you are going to have containers dwelling over your terminal and that is not what you want.”

“However, the industry is also struggling a little bit as I see it”, he continues. The vessels are getting larger and consequently terminals are getting larger. The industry is subject to change. It is not uncommon for a vessel to have five to ten thousand containers onboard. These need to be discharged and the same number of containers needs to be reloaded. Moreover, these containers need to depart.”

All parties need to be efficient

It is this challenge that drives ports and terminals to increase their level of efficiency. The ports want to discharge these containers as fast and efficiently as possible, Landa explains. Large European ports are indeed impressive in handling the large-scale operations, especially with the digitalisation of these operations that has taken place over the last years. But how well capable is the rail freight industry to adapt to these changes?

That is the crux of the matter, if you ask Landa. “We can be super efficient in the port, but if not all actors in the chain are efficient, we will be suboptimal in what we do. Therefore, we should work together to fight these inefficiencies. If we know that e train arrives at the port at a certain time, we can also make sure that the ship is ready to be unloaded and reloaded for the train to start its return journey right away. If this works out, it can be easy.”

What is in it for rail?

But all these large numbers and fast handling times, are these good news for rail? In the end, a train can take a limited number of containers and even though longer trains are making an entrance, this scale increase is not at all happening at the same pace as that in the maritime industry. Moreover, the rail industry is not known for its reliability.

Yet, the advantage of efficiency is certainly a shared one, argues Landa. “Rail operators for example have expensive rail sets and high costs involved with running a train. You want to use these assets as efficiently as possible. All parties want for a train to leave the terminal as soon as possible.”

Ports pushing infrastructure managers

Hinterland infrastructure plays a great role in this as well, the HHLA professional says. In Europe port terminals are well aware of the need to serve their hinterland. They are as efficient as they can be. But often, they are pushing hinterland infrastructure providers to make sure the railway links are there to allow the ports to grow.”

“In the end, we all work for the same customers”, Landa concludes. We are working in the service industry. Customers demand efficiency. This is the name of the game. We need to provide according to the customer’s needs. If we don’t, they will use another port, terminal or railway network.

Join the discussion

We would like to hear your opinion on this topic. You can give comments on the following question below:

Do you achieve better performance as a port when hinterland connections and terminal operations are managed within the same company?

Do you want to join the discussion in real life? Join us at the RailFreight Connects summit on 6 & 7 September in Bremen. Tickets are still available here.

Watch the webinar

Dominik Landa shared his views during a recent webinar held in the run-up to RailFreight Connects. You can watch this webinar free of charge below.

Last/first-mile operations

T.H.I said that “at the moment, this does not affect the railway. It just requires planning in advance”. According to the company, the new anti-epidemic policy mainly affects last/first mile operations, “It may not be possible to pick up empty containers from Shanghai to surrounding cities, as many cities have restrictions on vehicles coming from Shanghai. However, vehicles entering Shanghai can report in advance and use special routes.” TopRail also confirmed that some yards in neighbouring cities do not accept trucks from/via Shanghai.

The Port of Shanghai, an important international supply chain hub, is still running 24 hours a day. To ensure the smooth flow of the logistics chain, Shanghai Port Group urgently put online an electronic version of the PSI pass for container truck drivers in the early hours of 29 March to improve the efficiency of container vehicle logistics turnover.

In other words, the return and onward trains from Shanghai are not affected. Still, the collection and distribution of goods may face delays due to the restrictions on road haulage from Shanghai to the surrounding provinces and cities.

Production slowdown

According to the Chinese government’s policy, all enterprises located in the lockdown zones should stop production or work from home. Some logistics companies in the first lockdown control zone (Pudong) have suspended their warehousing and distribution operations. TopRail explained that “due to the closures, yards are shutting down, and some factories can’t load and unload products for delivery, leading to a production slowdown and a reduction in demand for freight”.

For example, Tesla’s Shanghai factory has suffered some disruption to its production pace recently, according to China Business Network. This factory is a major export centre for electric vehicles in Europe and elsewhere, and its director said it had encountered a series of problems with logistics, inter-provincial transport, procurement of prevention materials and staff arrangements and deployment.

Inland sea and rail transport

In addition, COSCO Shipping Lines issued a statement saying that all sea-rail routes within its territory are currently operating normally. “After communicating with the railway authorities and the Shanghai port sea-rail platform company, our company will make every effort to ensure that the services of the existing circular trains in Suzhou, Wuxi, Changzhou, Zhenjiang (Danyang), Nanjing, Nantong (Hai’an), Huzhou and Changxing are constantly uninterrupted. For non-circulating sea liners and railway lines, if there is a demand, they can be shipped in the form of new special trains.”

This article was originally published in our sister publication Railfreight.cn.

Also read:

• Lockdowns in China put even more strain on the supply chain at a critical time

The prices of sea freight usually reflect on the entire supply chain, thus also affecting rail freight.

War in Ukraine

The lockdowns come at a time when the rail freight corridor between Europe and China already faces challenging times. The war in Ukraine is having a large impact on the cargo volumes on the corridor, as many shippers and transport companies currently refrain from transiting through Russia, a country hard to avoid on the landbridge route.

According to Container xChange, this impact does not yet show in container prices. “So far the impact of the war on container prices is limited”, the company says. But soon, high-value cargo from the rails will be pushed to ocean freight, and this will result in a capacity crunch. Add to this the impact of the lockdowns, and you will see “a major shockwave to an already crippled supply chain”, the analysts explain.

This impact must be seen in the wider context of the last two years, it adds. “The immediate impact of this (war in Ukraine) on the overall supply chain has not started to show, not ignoring the fact that the Russian importance on global trade is not big enough for the containerised cargo to really disrupt the supply chains. We see on the other side, the container prices at record highs, containers piling up and a massive shortage as well. This is a result of many more other disruptions over the past two years since the pandemic started”, Schlingmeier pointed out.

Although rail freight lines are not directly affected, the industry is not immune to the impact that port closures have on the supply chain. Large ports on the east coast of China are especially relevant nodes on the New Silk Road, as transhipments hubs between sea and land transport. Moreover, factories in these regions are likely to close their doors, slowing down production.

Infections in Chinese province of Zhejiang

Zhejiang, the Chinese province of which Ningbo is the major port, counted several hundred corona infections this week, which is significant by Chinese standards. Authorities warned that the virus appears to be spreading relatively quickly and in response, several factories in the province have closed their doors, including a battery producer and a pharmaceutical company.

In the fight against the impending danger, the ITF has drawn up its own list of recognised quarantine facilities (hotels) together with the International Chamber of Shipping (ICS). This is to ensure, according to the ITF, that seafarers can board ships safely despite unpredictable changes in government border policies.

“Yes, rail can save supply chains!”

The numbers from 2021 show that “the volumes are there and that it has been a good year”, explained de Jong. Specifically, sources like ERAI and RZD show that there has been substantial growth on the New Silk Road routes passing through Kazakhstan and Russia. ERAI provided numbers showing a 30 per cent increase in volumes through Kazakhstan between January and September 2021. The total volumes via this route are equivalent to 459,000 TEUs.

On the other hand, RZD’s numbers concerning the Russian route are equally encouraging. RZD found that volumes through Russia increased by 40 per cent for the same period, which means that they are equal to 782,000 TEU. Taking these numbers into account, “it is fairly likely that we will reach the milestone of over 1 million TEU between China and Europe this year”, highlighted de Jong.

At the same time, the fact that big market players like Maersk and MSC want to maintain their ‘emergency’ overland services like the AE19 (Maersk) and Taiga (MSC) rail connections is indicative of the power that rail and the New Silk Road acquire. These services were launched to respond to the Covid-19 crisis but will stay here for the future. “Ocean carriers investing in rail is the most important indication that rail is viable”, said de Jong.

“…but be aware that there are still unsolved problems.”

Nevertheless, rail still has many kilometres to cover before dominating the global supply chain, if it ever does. For instance, Eurasian rail transport faces persistent problems that remain unsolved despite its phenomenal success. In 2021, congestion and bottlenecks were “the name of the game”, as de Jong said. Indeed, congested border crossing either due to higher than expected traffic or strict Covid measures monopolised the interest of the New Silk Road.

Simultaneously, equipment scarcity was worsened by China Railways’ ban on exporting China Railways equipment abroad. What is more, the seemingly competitive prices that rail offered this year do not show the whole picture since they do not include the extra costs caused by equipment scarcity.

What will the future bring?

Regarding the coming year, de Jong explained that it will be characterised by four trends and two questions to be answered. First of all, the situation will remain the same concerning the ocean tariffs, which are not expected to reduce in the short run. The second pillar that will influence the market is the switching roles and integration of companies that now try to acquire their own assets and set up their own business units in all different transport modes. This will lead to increased competition.

Moreover, inflation and higher electricity prices will have a crucial role in shaping the global supply chain. However, there is some positive news from the geopolitical field since there are indications that relations between the west and the east are cooling off and opening the way for better synergies.

Finally, the two questions that need to be answered concern rail: the first one is what role will rail have in the EU’s Global Gateway Initiative? Will it become a tool to launch a project equal to China’s BRI? The second one concerns the usefulness of new routes and border crossings to bypass heavy congestion on the New Silk Road. Do new alternatives help, or should traditional routes be optimised? Time will show and maybe the European Silk Road Summit of 2022 will be the place to assess all the developments.

Digital platform

DP World is certainly not the first to launch a digital platform with the promise of simplifying the logistics chain and offering a ‘one stop shop’. However, it is one of the most powerful parties that has done this to date. DP World operates more than eighty port terminals worldwide.

European shippers who want to put the system to the test still have to be patient. It will be available first for shipments from India to destinations in the Middle East, Southeast Asia and North Africa, among others, and from the United Arab Emirates to India. Worldwide introduction will follow later.

Shipping empties

By using foldable containers, transporting empties becomes less costly, Broekhuis explains. Sea shipping lines have already understood this, as the company has been delivering its solutions for a few years now. “This is defintely suitable for rail as well, but the rail industry is more traditional. It takes time to embrace change”, he acknowledged.

According to long-time rail expert Luuk von Meijenveldt, who also joined the RailFreight Live show, it is definetely an interesting proposition, as long as you have a good user case. “If the folding of containers frees up space, you have empty spots. You do need to fill up those empty spots if you want to create value. But if you do, you can save hundreds of euros with this concept.”

4Fold Container

Holland Container Innovations (HCI) is the developer of the 4FOLD foldable container. It started in 2008 as a spinoff from the Delft University of Technology in The Netherlands.
After 5 years of development, the company managed to build an ISO and CSC certified foldable container. “This helps shippers and shipping lines implement real supply chain innovation”, the company says.

You can see the interview with Hans Broekhuis in last week’s edition of Railfreight Live.

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A fashion brand’s experience with rail

Hugo Boss’ experience with rail freight transportation, to and from Asia, started back in 2015. The beginning saw a considerable number of containers being transported, while in five years, until 2020, the company observed a solid growth of the transported volumes.

Primarily, the brand focused only on the transportation of a specific product group because they needed to test the reliability of the service. Specifically, since fashion customers are susceptible to the quality of the delivered products, certain factors had to be taken into consideration. For instance, transporting products through Russia and Kazakhstan, during winter, could be a challenge due to the extremely low temperatures. As a result, they even experimented with reefer containers to transport their goods.

Time and several tests proved that rail was way more reliable than expected. Additionally, other potential issues, such as train wobbling and rocking, were resolved by improving the product packaging. The specific initiative demonstrates that to have supply chains running smoothly; each side needs to take its responsibilities. Rail could be capable of reaching the standards of the fashion industry, but without the cooperation and adaptability of the shipper, this might not be feasible.

Limitations

Apart from the positive aspects of using rail and the New Silk Road, Vecci also referred to some limitations that shippers frequently face. The impossibility to book single twenty-foot containers on a train, for example, is indeed problematic since it restricts shippers from using rail more. At the moment, shippers have to book double twenty-foot containers even though they do not need them. Consequently, the expenses get considerably increased.

Another critical issue that could also impact the cost of rail freight, according to Vecci, is that of the reduction or cut of Chinese government subsidies. Relying on subsidies cannot be avoided, and, understandably, their shortage could pose a threat to the Eurasian rail transportation overall. Nevertheless, this issue constitutes a good chance for the countries that participate in the New Silk Road to review some of their policies and adopt standard measures in such topics.

Did you miss it?

Did you miss the European Silk Road Summit 2020? It is possible to watch the replay of the conference. You can buy a replay ticket here.

Container numbers

To make the overview of freight transport in the Netherlands more complete, the Department of Public Works (Rijkswaterstaat) commissioned a pilot to collect additional data. Every container has a unique number. These numbers can be traced throughout the transport chain. Customs also registers them, including data such as country of origin, volume, weight and type of goods. By linking data from the various transport companies and customs, it is possible to map the entire transport chain of the goods in those containers on the basis of this data.

“The necessary data is available at transport companies”, says Willem Otto Hazelhorst, senior advisor traffic and transport at Rijkswaterstaat. “But so far it has been challenging to collect this data. However, thanks to improvements in documentation and automation, companies can now quite easily supply data digitally. Companies also see the benefits of more knowledge about the logistics system. All companies we approached to participate in the pilot agreed.”

Privacy

About ten large companies, as well as carriers and terminals in the logistics sector are participating in the pilot and have already supplied crucial data. The pilot will run until 1 September 2020. “In the pilot, we are investigating what is needed to obtain sufficient coverage of the logistics system throughout the Netherlands. We also look at what is possible while respecting privacy. The Dutch Central Bureau of Statistics is a very important data source for Rijkswaterstaat and the business community, partly because of the strict observance of anonymity. Companies therefore see this company as a reliable party to supply data.”

After 1 September, the results of the pilot will be analysed and evaluated. Hazelhorst: “From the participating companies we have almost all daily container movements in 2018, for some also internationally. We expect to be able to indicate for individual containers how they traveled from China to their final destination, for example, via which route and with what content. We also expect to provide insight into the distribution of container transport across the various modes of transport, thereby identifying the opportunities for the modal shift from road to water and also rail. Then we also know better where possible reinforcement of the infrastructure and terminals is needed. ”

If the pilot proves successful, this information source will be used for the Modal Shift programme, which the Ministry of Infrastructure and Water Management and the Top Sector Logistics are now developing. The results and evaluation report of the pilot ‘More Insight in Container Transport in the Chain’ are expected to be published this autumn.

Double count

Detailed information about container transport is necessary, according to Rijkswaterstaat and the Dutch Central Bureau of Statistics, because the statistics are now classified by means of transport: sea shipping, inland shipping, rail and road. For some types of goods, such as bulk – including coal and iron ore – this provides a reasonably suitable picture. Bulk is mainly moved with a single means of transport. According to the Dutch Central Bureau of Statistics, this classification is less suitable for other goods, such as containers.

“Containers are often transferred from one mode of transport to another”, says Mathijs Jacobs, traffic and transport researcher at the Dutch Central Bureau of Statistics. “If you then look at their transport per mode of transport, the information about transhipment movements is limited and you count goods twice in the total picture. The sources for freight transport statistics are registers and surveys based on samples, but these are incomplete. We fill the gaps with estimation models. These are based on assumptions and do not show the entire freight transport chain. Especially the view of the load of individual containers and the routes they take is missing. ”