28-02-2018

New Silk Road calls for Rotterdam to take on a directing role

What does it mean for a deep sea port like Rotterdam – or Shanghai for that matter – to end up at the end of the chain? Right now, Rotterdam serves as the gateway to Europe: the point from where incoming cargo is distributed across the European hinterland. But with the arrival of the ‘Silk Road Railway’, the port will undergo a radical transformation: from gateway to, for a considerable part, final destination.

Many of the products manufactured in China are presently transported to Rotterdam via Shanghai ‘the long way round’: by sea. In the near future, a lot of this cargo will take a ‘shortcut’ over land. This effect will be strengthened by the shift of industrial production towards more western locations in China. The New Silk Road will increase the share of cargo transported via the swifter and more reliable option of rail.

I’ve heard some people say “Well, only 2 percent of the ocean freight from China will be shifting to rail.” However, the economist dr. Bart Kuipers of Erasmus University Rotterdam recently calculated that from a value perspective, this 2 percent actually represents 24 percent of all ocean freight arriving in Rotterdam from China – close to a quarter, in other words. So, while it may not be much in terms of volume, we’re talking expensive stuff here. Semi-manufactures for the automotive sector, for example, and hi-tech components. You need high added value products of this kind to earn money – by insuring them, assembling them, inspecting them, etc.

The Chinese government is investing some USD 100 billion per year in the construction of the New Silk Road. Right now, contractors are working on the track itself, but actually the Chinese government has been influencing existing transport routes for the last decade or so via a careful, methodical, step-by-step programme. They have done this by investing heavily in areas between China and Europe. They’re acquiring shares and sites, constructing new infrastructure: motorways, terminals, railways, everything. For example, China has bought Piraeus, a port in Greece – and gained a new gateway to Europe in the process. This development is at the expense of the ports of Rotterdam, Antwerp and Hamburg.

With the advance of the New Silk Road, Europe is also supplied via the Czech Republic, Poland and Greece; not just via Rotterdam, Hamburg and Antwerp. An added bonus for these Central European locations is that the track gauge in China and Russia is different to the one used in Europe. Because what does this break of gauge between Russia and Europe mean for countries like Poland and the Czech Republic? It forces the train to wait while cargo is transloaded to a different train or the rolling stock is fitted with different bogies. A fantastic opportunity, in other words, for local parties to turn semi-manufactures into finished products or engage in other value-adding activities. Meaning that along the way, everyone gets a chance to earn money. And we’re expected to buy the finished products – i.e. pay up.

The big question is: Which activities could we take on ourselves once the New Silk Road is up and running? I’d like to refer to an example: at the Aalsmeer Flower Auction, they trade flower shipments that never physically enter the Netherlands. We earn money off flowers traded between Kenya and Russia, for instance. We serve as the marketplace; the middleman. Perhaps we can play a similar role within the supply chain between China and the Netherlands? For example, we could arrange for trains to be filled to capacity at all times. Or help shippers select the best modes of transport for their cargo.

In short: how can we assume a directing role? How can we effectively organise cargo flows and earn money in the process – without these goods necessarily having to pass through our country? I believe assuming a directing role is actually the better deal, because it creates a lot of new added value and requires you to develop new innovations within the supply chain. If it were up to me, we would be handling the more difficult aspects of logistics: inspection, customs, planning, forecasts, blockchain transactions (the transfer of information and property). They present a range of issues, which often require dedicated study. We could handle everything that has to do with logistics, apart from the actual transport. From the Netherlands as a transport provider to the Netherlands as a director. And from Rotterdam as a transport hub to Rotterdam as a control centre. What do you think? I’m interested in hearing your perspective.

Source: Michiel Jak, General Manager of SmartPort

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