Intermodal Special - BNSF a key player in China’s emerging intermodal infrastructure

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$242 billion government investment will make transportation more efficient
By Peter A. Buxbaum, AJOT
In an effort to improve is overall logistics infrastructure, the government of China will be sinking hundreds of billions of dollars into intermodal rail transportation facilities and systems over the next 15 years. The Burlington Northern-Santa Fe Railway, based in Fort Worth, Texas, with a long history of participating in the US-China trade, is advising Beijing’s Ministry of Railways on its intermodal policies and has cemented ties with the ministry in an effort to strengthen its own global network.
China’s economy and its role in global trade have exploded in recent years. US-China trade grew from $5 billion in 1980 to $147 billion in 2002, according to the Congressional Research Service. But a poor logistics infrastructure is one area that puts a drag on that expansion.
“Shippers oftentimes find it difficult to use rail transportation in China due to its lack of reliability,” says Fred Malesa, assistant vice president for international marketing at BNSF. “Although it’s cheaper compared to other modes, within the interior rail accounts for only 30%of total transport volume because the lower price often doesn’t outweigh the other costs.” Trucking has historically been embraced as the mode of choice for getting export products from China‚s interior factories to river and ocean ports.
China’s land mass is only slightly larger than that of the United States, yet its rail network is only one-third the size in terms of track mileage. China’s weak rail and intermodal infrastructure means that logistics consumes a much higher proportion of operating costs in the People’s Republic than it does in the United States. To remedy the situation, the government’s Railways Ministry has announced that it will invest $242 billion in rail between now and 2020.
“Logistics is being targeted by the government as a key growth area and rail infrastructure improvements are an important part of that program,” Malesa says. “That’s where we come in with our alliance with the Ministry of Railways: to help focus the development of new logistics centers in China.”
As a long-standing participant in the China trade, BNSF stands to benefit from China’s new emphasis on rail and intermodal. Since the 1980s, BNSF and its predecessor railroads have carried grain for export to China. BNSF’s Asia-related business has doubled in the last six years, accounting for more than $1.3 billion in revenue for 2003; about two-thirds‚ of that growth is attributed to China. BNSF’s intermodal business grew by half a million containers and trailers to 4.1 million in 2003. The company expects its 2004 figures to once again show double-digit growth.
“We are the largest intermodal rail carrier in the world,” Malesa claims. “When the government of China decided to focus on intermodal and assign intermodal development a high priority, they intelligently looked to the West and to North American railroads to supply some of the leadership.”
Rail intermodal is emerging as one of the most significant transportation options in China, according to Malesa. “Although the intermodal infrastructure has been limited historically and container tracking has been difficult by modern standards,” he says, “there are a number of joint intermodal projects underway showing a promising future.”
One is in the Yangtze River area, which is emerging as the largest West-to-East trade corridor in China. Another is the three-year-old Sino-Netherlands joint project, which covers six provinces and which is building an integrated intermodal system to be inaugurated in 2010.
The Chinese government’s investment in intermodal infrastructure reflects a rapidly growing transportation and logistics industry in that country, according to Malesa. “The transportation and logistics market in China is still fairly small but it is growing very rapidly,” he says. “Market inefficiencies have been driven historically by a less-than-adequate infrastructure and by regulatory co

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Peter Buxbaum has been writing about international trade and transportation, as well as security, defense, technology, and foreign policy, for over 20 years. Besides contributing to the AJOT, Buxbaum's work has appeared in such leading publications as [em]Fortune, Forbes, Chief Executive, Computerworld, and Jane's Defence Weekly[/em]. He was educated at Columbia University.