Factories scramble to move goods as China limits diesel trucks
Thousands of small factories in China, making everything from steel to chemicals, are scrambling for access to the country’s clogged railroads as Beijing curbs the use of diesel trucks.
The Ministry of Environmental Protection last month gave tens of thousands of companies in 28 cities until Nov. 1 to halve their use of diesel trucks over the winter months, when air pollution is worst.
In a policy document, the ministry also instructed more than 20 power and steel companies to send at least half of their shipments by rail.
Trucking is a cheaper mode of transport for heavy industry in China, especially for inland companies moving goods over short distances.
Some provinces have taken even tougher stances on trucks.
In Hebei and central Henan, some steel producers must deliver as much as 90 percent of their products via rail, up from around 50 to 60 percent currently.
The moves are the latest in Beijing’s battle to tackle the air pollution that blankets the north as houses turn up the heat between November and March, drawing on the nation’s power plants, which are mainly fueled with coal.
China also will force steel mills and other factories to shut up to 50 percent of their capacity across the north during the winter to ease air pollution.
The truck restrictions follow bans earlier this year on coal transports by diesel trucks in major ports.
The shift to China’s 120,000 km railroad network is a cornerstone of Beijing’s Belt and Road initiative, which aims to revive old trade routes linking Chinese companies with overseas markets.
The scale of the shift is immense. Highways accounted for 77 percent of freight transported in China last year, compared with 8 percent for rail.
“It’s another indication of how seriously they’re taking the environmental impact, although it’s a blunt way of doing it and some trips won’t make sense by rail,” said Jonathan Beard, head of transportation and logistics in Asia for Arcadis, a design and consultancy company.
The Ministry of Rail declined to comment.
Railway armageddon
Companies were already preparing for a grim winter, having been ordered to slash output as part of measures to clean up the air in Chinese cities.
Now, many are struggling to get space on the rail network by the November 1 deadline.
Major state-owned companies like Sinopec and Aluminum Corp. of China have long-term access to railroads, leaving little room for smaller companies. Many factories are hundreds of miles away from any railhead.
There are also concerns that bottlenecks could create chaos, cutting off supplies of critical raw materials and hurting the ability of companies to get products to market, executives told Reuters.
Rail also is more expensive and takes longer for some routes. An executive from Xingtai Iron & Steel estimated that using rail would add as much as 40 yuan per ton, raising his costs 10 percent.
“We might resort to reducing production in the winter if we cannot get enough supplies and have difficulties sending our products due to the railway Armageddon,” said a manager with Yanzhou Coal Mining Co.’s coke plant in Shandong province, which produces two million tons per year.
In Shandong, the nation’s eastern industrial and agricultural heartland, the rail bureau proposed raising freight rates by 1 cent per ton per kilometer at an internal meeting with key clients two weeks ago, according to the Yanzhou Coal manager.
That is equivalent to an almost 10 percent increase to move products to Jiangsu, about 100 miles to the south. It is not clear whether the plan has been submitted to the state planner for approval. The state planner sets freight prices.
“Some of our clients are only 40 miles away from us,” said a sales manager with Xingtai Iron & Steel’s steel wire subsidiary.
“Trucking is more flexible than rail and cheaper,” the manager said. “For our clients in Zhejiang and Jiangsu, about 500 miles away, rail takes almost a week but trucking takes one or two days.”
Under orders
Rail traffic has increased this year due to increased shipments of coal. Rail is the most popular mode of transport for coal, which accounted for a third of traffic last year.
China’s rail network is mainly run by China Railway Corp. State-owned companies such as China National Coal Group and coal miner China Shenhua Energy also own some specific routes, giving them lower transportation costs.
Many are bewildered by the enormity of the undertaking. A manager with Longyu Chemical Co. in central Henan province said he had no access to rail.
”I honestly have no idea how we are going to deal with it this winter,“ he said. The trucking freight rate is also rising because of the crackdown on diesel trucks.”
In a policy document, the ministry also instructed more than 20 power and steel companies to send at least half of their shipments by rail.
Trucking is a cheaper mode of transport for heavy industry in China, especially for inland companies moving goods over short distances.
Some provinces have taken even tougher stances on trucks.
In Hebei and central Henan, some steel producers must deliver as much as 90 percent of their products via rail, up from around 50 to 60 percent currently.
The moves are the latest in Beijing’s battle to tackle the air pollution that blankets the north as houses turn up the heat between November and March, drawing on the nation’s power plants, which are mainly fueled with coal.
China also will force steel mills and other factories to shut up to 50 percent of their capacity across the north during the winter to ease air pollution.
The truck restrictions follow bans earlier this year on coal transports by diesel trucks in major ports.
The shift to China’s 120,000 km railroad network is a cornerstone of Beijing’s Belt and Road initiative, which aims to revive old trade routes linking Chinese companies with overseas markets.
The scale of the shift is immense. Highways accounted for 77 percent of freight transported in China last year, compared with 8 percent for rail.
“It’s another indication of how seriously they’re taking the environmental impact, although it’s a blunt way of doing it and some trips won’t make sense by rail,” said Jonathan Beard, head of transportation and logistics in Asia for Arcadis, a design and consultancy company.
The Ministry of Rail declined to comment.
Railway armageddon
Companies were already preparing for a grim winter, having been ordered to slash output as part of measures to clean up the air in Chinese cities.
Now, many are struggling to get space on the rail network by the November 1 deadline.
Major state-owned companies like Sinopec and Aluminum Corp. of China have long-term access to railroads, leaving little room for smaller companies. Many factories are hundreds of miles away from any railhead.
There are also concerns that bottlenecks could create chaos, cutting off supplies of critical raw materials and hurting the ability of companies to get products to market, executives told Reuters.
Rail also is more expensive and takes longer for some routes. An executive from Xingtai Iron & Steel estimated that using rail would add as much as 40 yuan per ton, raising his costs 10 percent.
“We might resort to reducing production in the winter if we cannot get enough supplies and have difficulties sending our products due to the railway Armageddon,” said a manager with Yanzhou Coal Mining Co.’s coke plant in Shandong province, which produces two million tons per year.
In Shandong, the nation’s eastern industrial and agricultural heartland, the rail bureau proposed raising freight rates by 1 cent per ton per kilometer at an internal meeting with key clients two weeks ago, according to the Yanzhou Coal manager.
That is equivalent to an almost 10 percent increase to move products to Jiangsu, about 100 miles to the south. It is not clear whether the plan has been submitted to the state planner for approval. The state planner sets freight prices.
“Some of our clients are only 40 miles away from us,” said a sales manager with Xingtai Iron & Steel’s steel wire subsidiary.
“Trucking is more flexible than rail and cheaper,” the manager said. “For our clients in Zhejiang and Jiangsu, about 500 miles away, rail takes almost a week but trucking takes one or two days.”
Under orders
Rail traffic has increased this year due to increased shipments of coal. Rail is the most popular mode of transport for coal, which accounted for a third of traffic last year.
China’s rail network is mainly run by China Railway Corp. State-owned companies such as China National Coal Group and coal miner China Shenhua Energy also own some specific routes, giving them lower transportation costs.
Many are bewildered by the enormity of the undertaking. A manager with Longyu Chemical Co. in central Henan province said he had no access to rail.
”I honestly have no idea how we are going to deal with it this winter,“ he said. The trucking freight rate is also rising because of the crackdown on diesel trucks.”
