Preview: World infrastructure community hails Chinese revival of German port city of Duisburg. Nobody accuses China of plotting to buy the now thriving port city. Why are so-called experts raising questions about Kenya’s SGR and its freight link with Port of Mombassa under Chinese support?
Main-Back from the dead, the former Ruhr steel hub is fast becoming the main European stop for Chinese goods arriving on the new Silk Road, challenging Hamburg’s dominance as Germany’s premier port.
To many Germans, Duisburg is no more than a grim reminder of the decline of the Ruhr’s heavy industries. At half a million, the population has shrunk 100,000 from its peak in 1975, when coal was still king and the city’s blast furnaces cast some of the world’s best steel. Local unemployment, at 11.5 percent, is twice the national average. Some working-class districts, particularly crime-ridden Marxloh, have a reputation as no-go areas; Rheinhausen, where Krupp closed a steel plant in 1986, is practically a ghost town.
But Duisburg is undergoing a revival of sorts, thanks in no small measure to its bustling harbor, the largest inland port in Europe. Employment at Duisport, the port’s management group, has soared to 50,000 from 19,000 over the past 20 years, a tribute to a clever mix of shipping, rail freight and energetic networking. Soot-stained Duisburg, in fact, may soon nudge ahead of Hamburg as Germany’s biggest port in terms of handled freight. But nothing has raised greater hopes in this troubled Rhineland city than its growing links to the economic powerhouse of China.
Erich Staake, the boss of Duisport, has been running freight trains between Duisburg and the Chinese mega-cities of Chengdu, Chongqing and Ürümqi since 2011 – transforming this rustbelt community into Europe’s top stop for the railway trade with China. “E-commerce and our business with China will be the most important sales drivers in future,” crows Mr. Staake.
15 New Silk Road-01
Some 30 trains a week travel between China and Germany on the New Silk Road, part of the ambitious Belt and Road infrastructure project that’s backed up by billions in Chinese government subsidies. Four out of five trains from China now make Duisburg their first European stop, with most taking the northern route through Kazakhstan and Moscow (see graphic above).
Duisburg’s growing importance to China raised eyebrows in 2014, when Chinese President Xi Jinping made the city one of the few stops on his state visit to Germany. Timed to coincide with an incoming Chinese freight train festooned with red ribbons, Mr. Xi’s arrival was greeted by an orchestra playing traditional mining songs and children holding banners in Chinese.
To the delight of Sören Link, Duisburg’s extroverted mayor, Chinese interest in Duisburg is translating into major local investment. “As the Nr. 1 logistics center we will make intensive use of the opportunities the new Silk Road to China provides,” gushed Mr. Link last year.
In July, real estate investment firm Starhai got the go-ahead to build a €260 million ($296 million) Chinese business center in the Niederrhein area of Duisburg. This will create a foothold for Chinese firms eager to deepen their ties to European markets – including technologies in which Germany excels, such as the automotive industry. But not everyone welcomes the plans with open arms. “Chinese industrial policy aims to create value in China,” says Sebastian Heilmann, a China specialist at the University of Trier. “Basically, foreign providers of technology are to be replaced by Chinese firms.”
Stacked in Duisburg’s favor.
Last year, Mr. Staake signed an agreement with China Merchants Group (CMG), the state-run owner of 31 ports in 18 countries and operator of over 1,100 logistics centers in China’s metropolitan regions. CMG is investing heavily in such operations along the Silk Road, and Duisport is among hundreds of business partners seeking to cash in. One such project is Great Stone, a sprawling Chinese-Belarusian industrial and logistics park being built outside Minsk, the Belarus capital, close to the northern rail route and the transnational highway from Moscow to Berlin. At 91 sq km, it’s an economic zone in its own right.
Duisport is keen to beef up the Silk Road’s southern route, too. Near Istanbul, the Germans are jointly developing a logistics center with Turkey’s Arkas Holding to serve as a regional hub for truck and rail transport. And in Italy, a cooperation agreed last year with the port of Triest will open a maritime link on the southern route via markets in Greece and Turkey.
Rail freight beats shipping containers for speed and flights for cost. A container ship takes around 40 days to make the journey to Duisburg, while trains can cover the 10,000 kilometers from Chongqing in 12 days, down from 19 a few years ago. Mr. Staake says his goal is to cut that time further to make the rail routes more competitive.
Less is more often
The catch is, for every two full containers arriving from China, only one returns the other way, and the German port only earns one-fifth of the fee from empty containers sent back to China. Then there’s volume: While a train can only load 60 containers, a container ship can handle 10,000, meaning a locomotive would have to make almost 170 trips to move the same amount of goods. It’s unlikely that the Chinese are making much profit on the train routes, content for the moment to garner market share in the delivered goods.
Port operators are touting containers and rail freight as future engines of growth. The reality is more complex, as customers increasingly seek a combination of air, sea, rail and road transport to get their products there faster and/or cheaper. Hamburg’s port, hampered by too-shallow channels at the mouth of the Elbe and sanctions on Russia, its biggest trading partner, hasn’t exploited its opportunities to the full, losing container business to the likes of Rotterdam, the world’s biggest port, and Antwerpen in Belgium. Though much smaller, Duisport’s own container business is sailing along at record levels and growing fast. Hamburg’s loss may turn out to be Duisburg’s gain.
This article was first published in Handelsblatt.