Opportunities rising from and for Middle Corridor

2023-02-27 15:54:31

Since the Baku-Tbilisi-Kars railway-the core project of Turkey's "Middle Corridor Initiative"-was officially put into operation on Oct 30, 2017, its actual utilization rate has been tepid and unsatisfactory.

Statistics show that from the beginning of its opening to June 30, the total volume of container transportation on this route was 33,267 twenty-foot equivalent units. Among them, after promotion and operations improvement, 11,748 TEUs have been transported in 2020, while 11,084 TEUs were delivered in the first half. In contrast, the China-Europe Railway Express transported 1.135 million TEUs and 701,000 TEUs during the same period, respectively, which means that most of the China-Europe Railway Express took the main channel of the Northern Corridor.

Why is the "Middle Corridor "route so tepid with such an advantageous geographical location? What is the problem?

Shortcomings

From the perspective of shippers, we may choose to start with a brief comparative analysis of the main channel of the Northern Corridor and the Middle Corridor in terms of transportation distance, transportation costs and transportation time.

Regarding the transportation distance, the first thing to be clear of is that the comparison of distance must refer to the actual starting point and ending point of the cross-border transportation, that is, with reference to the main origin of China's export products, that is, the route and distance between the source of goods and the main consumption place of the products in Europe.

In view of the basic fact that the main destination of China-Europe Railway Express is Germany and its surrounding areas, if you start from the central and western cities of China, it has obvious advantages to take the new Eurasia land bridge from Alashankou and Horgos, while it is more convenient to cross the Trans-Siberian Corridor from Manzhouli if departing from northeastern cities in China.

To give a simple example, from Xi'an, Shaanxi province, in China to Prague, capital of the Czech Republic, there are two options. One takes the Middle Corridor for a total distance of 12,251 kilometers, and the other takes the new Eurasia land bridge for a total distance of 9,623 km. The difference between the two is 2,628 km.

In terms of transportation costs, the countries along the new Eurasia land bridge and the Trans-Siberian Corridor have signed intergovernmental agreements with mature operations for years, thus their transportation costs are relatively clear. Although they will fluctuate with market changes, they remain generally stable, and won't fluctuate as much as the maritime shipping market.

However, the Middle Corridor has a relatively short operating time, and all aspects are still in the process of running in. Its freight is not so transparent, especially the cost of its extended section in Europe. The freight for the very section requires negotiation with various parties, making almost every train a test train. Not only the timeliness is affected, but also preferential transportation rates cannot be obtained in the negotiation because of the failure to achieve economies of scale, which directly impacts the competitiveness of the Middle Corridor.

The transportation time is a larger variable. It reflects more the quality of various services and the condition of infrastructure in the entire transportation process, which includes all aspects of railway operation and inspection, quarantine, customs clearance, etc.

It has to be said that compared to the Middle Corridor, the Northern Corridor is more advantageous in actual operation, as it has more mature business activities, better technical conditions and fewer countries involved. Taking the same example of the China-Europe Railway Express running from Xi'an to Prague, normally it takes 12 days for the new Eurasia land bridge, while 18 days for the Middle Corridor.

In 2021, when the international supply chain was not smooth, the main route of the China-Europe Railway Express was severely congested, as a result, the alternative route was promising. Although the transportation volume of the Middle Corridor increased significantly, only 11,084 TEUs have been transported in the first half. Among them, there were only 2,915 TEUs from China, and an important reason for this was the serious delay of transportation from China to Turkey.

According to reports, the transportation time of some goods was even as long as 70 days, far exceeding the normal time required for sea transportation, and the return time has reached an astonishing 90 days. This situation has forced many cargo owners to choose other routes or even switch to traditional sea transportation.

Transportation prospects

Although there are many shortcomings of the Middle Corridor transportation, judging from the development trend of Sino-European trade and transportation, Middle Corridor transportation is currently facing the best period of opportunity in history and is on the eve of rapid growth. This is mainly manifested in four aspects.

First, the freight volume of the China-Europe Railway Express has been growing rapidly, especially after 2016, overwhelming the existing railway infrastructure of the main overseas lines, and the lines of the Northern Corridor have experienced long-term congestion and a significant drop in transportation efficiency.

Although many European countries, including Germany, Poland, Russia, Belarus, Ukraine, Finland, Hungary and others, have developed alternative routes, the rapidly growing demand of China-Europe Railway Express cannot be met. The large-scale upgrade and expansion of existing infrastructure not only failed to solve current problems, but also aggravated the congestion of the lines. The situation has weakened the competitiveness of the Northern Corridor and created huge opportunities for the Middle Corridor.

Second, in recent years, countries along the Middle Corridor, especially Turkey, have continued to vigorously promote the construction of transportation infrastructure and actively coordinate with countries along the route to simplify transit procedures. With the increase and improvement of transportation capacity and efficiency, the market competitiveness and attractiveness of the Middle Corridor are gradually increasing.

Third, the Turkish government and companies have a strong desire to actively promote transit transportation along the Middle Corridor, and Turkey is looking forward to establishing stable and lasting ties with the fast-growing Chinese economy through Trans-Caucasus and Central Asia, and integrating the Middle Corridor into the Belt and Road Initiative, to create better conditions for the Turkish economy to boom. This provides continuous impetus for the cooperation between the Middle Corridor Initiative and the BRI.

Finally, the Chinese government has been offering strong support. In recent years, China-Turkey relations have developed well, and the high-levels of the two countries have maintained good communication and coordination for a long time. Such stable political relations are the fundamental guarantee for the deepening of the cooperation between the two initiatives.

Therefore, with the rapid growth of the China-Europe Railway Express and the continued tensions in global supply chains, Turkey's Middle Corridor is facing a rare development period. As long as all parties along the route work together to make up for the shortcomings, improve quality and efficiency, the "Steel Silk Road" is bound to usher in a prosperous tomorrow.