For the first time, China allows the market to set prices for railway transport on a railway line, a decision which could mark the beginning of a liberalisation process which will increase competitiveness, vary offers and stimulate private investors.
China’s National Development and Reform Commission (NDRC) announced that charges for transport on Zhunchi railway could be decided by operators, customers and investors, the institution stated. With this decision, Zhunchi will be the first railway in China for which market players will be able to impose prices and, at the same time, it represents the first step in the liberalisation of railway freight transport.
The railway connecting Inner Mongolia and Shanxi Province in the north of China was built by the national mining and energy company, Shenhua Group.
The lines pertaining to this company are mainly used for the transport of coal the group produces, but also to provide transport services to its sites. At present, the company owns 9 main railway companies which operate a network with a total length of 1,765 km and a rolling stock fleet of 35,843 trains. Also, it has a line under construction (New Batu Railway-134 km), while Zhunchi railway (179 km) will be put in operation this summer. A freight volume of 340 million tonnes was carried in 2012 with 20.5 million tonnes more than during the previous year.
Zhunchi railway will provide railway connection between the most important coal region (Inner Mongolia) and Shanxi Province in the north where the company’s railway infrastructure has direct connection to Huanghua Port (east coast) and to Wanjia terminal in Tianjin. According to local media, the company has invested CNY 13.4 Billion (USD 2.17 Billion) in the project and expects to carry 200 million tonnes of coal annually on this railway.
The Development and Reform Commission said that his project is the first attempt of opening the railway freight market in China following the similar process in the aviation industry, where air transport operators were permitted to charge tickets for internal routes.
NDRC Member Shi Lixin declared that the process was extremely important for the railway sector, and for investors. “The process will stimulate the investors’ confidence in the railway system and will help stabilize the sector. It will also have a positive impact on investments and the financial reforms of the railway sector”, he said. Until recently, the railway transport charges in China have been established by the government. As of 2013, the reform process in this sector has been launched by eliminating the Ministry of Railways and setting up China Railway Corporation, thus separating the political class from the business sector.
To meet competition demands and the changes brought by reform to the railway system, at the beginning of the year, NDRC decided to amend the price setting mechanism in the railway freight transport (decided by the Government), allowing companies to decide the level of prices in conformity with market demands and the limit established by the government.
Coal transport stimulates railway infrastructure development
According to the International Energy Outlook 2013, report elaborated by the U.S. Energy Information Administration (EIA), China has a worldwide share of 47% regarding coal consumption and an increase to 57% is expected for 2025. Also, China accounts for 44% of global coal production (in 2010). The share is expected to increase to 52% by 2030. Moreover, China’s coal imports will double from 200 million tonnes in 2011 to 400 million tonnes in 2040. Despite the significant increase of imports, the majority of consumed volumes is supplied by domestic manufacturers. According to EIA, “various factors limit China’s imports. One factor is the slow increase of consumption which should allow the domestic coal supply chain to increase compared with increasing consumption. For 2010-2040, China’s coal consumption will increase on average by 90 million tonnes which is much less than the increase of 200 million tonnes per year recorded from 2000 to 2010. Apart from the slow growth of consumption, there is a series of infrastructure projects and political initiatives which determine the increase of domestic production and transport. Regarding the transport sector, China is implementing projects for the construction of new railways to facilitate the transport of coal from production sites (north and west regions) to demand centres in east and south”, shows the report of the institution.
Last year, the local media announced that the Chinese province of Shanxi has plans to build 2,500 km of railways by 2015, when the total length of the network in the province would be of 6 thousand km. The freight volume carried by railways in the province amounted to 477 million tonnes in 2012, of which the transport of coal attracted 374 million tonnes. Also, local authorities want to improve the connections of the province with the rest of the country to improve coal transport and to create three transport hubs: Taiyuan, Datong and Houma.
Another example of railway infrastructure construction is the line connecting Xinjiang Uygur to Kazakhstan. The 308-km long Karamay – Tacheng railway will require funds of CNY 5 Billion (USD 840 Million) and will be completed in 2016. The railway will be put in service in 2017 and will have a capacity of 10 million tonnes per year. On the long-term, the capacity will increase to 15 million tonnes. From Baikouquan to Karamay to the port of Bakti (border between China and Kazakhstan), the railway will be part of the route linking the borders with interior regions. In fact, the railway will cross oil and coal exploitation regions in Xinjiang.
As part of a plan for improving the transport of resources, by 2020 China plans to increase the annual capacity of coal railway transport by one third. The National Development and Reform Commission announced that 2.26 billion tonnes of coal were carried in 2012 in the Chinese network, by 55% more than in 2005. By 2020, coal volumes shipped by rail are expected to increase significantly.
Share on:
