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Nippon Express' China-Europe strategy getting on track

Japanese company expanding rail transport services between the two regions

A growing number of freight trains directly link China and Europe on the back of China's Belt and Road economic zone initiative.

TOKYO -- Riding on the back of Beijing's Belt and Road Initiative, major Japanese international freight forwarder Nippon Express is expanding its cross-border rail transport services between China and Europe.

Driven by the initiative, which calls for the creation of a massive economic zone linking China to Europe by land and sea, the volume of trade between the two regions is expected to grow significantly.

Toyoshige Yokoyama

Nippon Express is poised to pitch its China-Europe rail transport services to cargo owners as "intermediate transportation services" that are faster than sea and cheaper than air.

Toyoshige Yokoyama, section chief at Nippon Express' global forwarding planning department, spoke to The Nikkei about the company's China-Europe business strategy.

Q: Could you give us an outline of Nippon Express' China-Europe rail transport services?

A: The services involve arranging freight trains called "block trains," which run between China and Europe without intermediate stops, and transporting freight. We started full container load (FCL) services in 2015 and then less than container load (LCL) services in 2016. In May this year, we expanded the services significantly.

We previously had westbound LCL service routes originating only in Wuhan. But we now have westbound LCL service routes originating in 19 locations, including Chongqing and Shanghai. We previously had eastbound LCL service routes originating only in Duisburg, Germany. But we have added eastbound LCL service routes originating in Hamburg, Germany. As for FCL services, we previously had westbound routes originating in three locations and eastbound routes originating at one location. But we now have westbound FCL service routes originating in 10 locations and eastbound FCL service routes originating in nine locations.

Q: Why is Nippon Express expanding its rail transport services between China and Europe?

A: We are expanding our services along with the Belt and Road Initiative, which the Chinese government has positioned as its most important policy in the past several years. The initiative calls for the creation of an economic zone linking China to Europe by land and sea. The establishment of logistics infrastructure is progressing and the number of direct freight trains connecting the two regions is increasing. China has set a target of boosting the number of freight trains running between the two regions by tenfold by 2020, compared with 2014. The number of freight trains connecting the two regions is expected to keep increasing in the future.

The market between China and Europe is the world's largest logistics market, accounting for about 13% of the total maritime cargo volume in 2016. U.S. research company IHS predicts that the market share will remain unchanged in 2020 and that the volume of trade between China and Europe will keep expanding. Meanwhile, growth in the volume of cargo traffic to and from Japan is sluggish as a result of Japanese companies expanding overseas. Nippon Express also needs to expand its overseas operations.

Q: What are the merits of rail compared with sea and air?

A: In the case of ocean shipping, it takes about 40 days to transport cargo from China to Europe. But trains can transport cargo from China to Europe in about 15 days. The costs of rail transport are roughly a third or a quarter of air. Of course, rail transport takes more time than air and the costs for rail are higher than for sea. Therefore, we propose rail services as intermediate transport services.

Q: What types of cargo owners are using your company's rail transport services?

A: High on-time performance is another reason rail is being evaluated positively. Our rail services are often used to transport freight facing tight delivery schedules. We handle a lot of auto parts, precision equipment, liquid crystal displays and so on. Since the freight rates for rail are higher than for sea, we handle primarily high-value-added products.

Q: Are there any future challenges?

A: The volume of cargo from Europe to China is low, compared with from China to Europe. If the volume of cargo to China is insufficient due to empty containers, efficiency will be poor and freight rates will remain stuck at high levels. We want to handle exports such as luxury apparel to China in the future. We have formed a team of about 30 staff, primarily from our Chinese subsidiary and group companies, to expand our rail transport sales. We will coordinate our rail, maritime and air services.

Interviewed by Nikkei staff writer Yohei Muramatsu

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