The development of new trade routes will help meet predicted freight transport demand growth in the decades ahead, according to a major new report.
ITF Transport Outlook 2019 – produced for the OECD by the International Transport Forum (ITF), an intergovernmental think tank, predicts global freight demand will triple between 2015 and 2050, based on current demand growth rates.
ITF argues that new shipping, barge and rail routes will help meet such demand growth, transforming trade flows and logistics strategies in the process. “These shifts could result from new and improved freight networks in Eurasia and Africa and from new maritime routes opening up in Arctic waters,” it said.
“Using the Northern Sea Route for maritime freight between Northern Europe and Japan could reduce voyage distances by 37% relative to routing through the Suez Canal,” it added. “The distance from Northern European ports to Korea would be reduced by 31%, to China by 23% and to Chinese Taipei (Taiwan) by 17%.
“Regular use of the North-West Passage could reduce voyage distance between North America and large ports located in Northeast Asia by up to 20%. New canals could also provide alternative maritime routes that would shorten existing trade routes.”
The report said plans to construct the Kra Canal across the Malayan peninsula would cut the distance for oil and other shipments from the Middle East to China and Japan by 1,200 km, the equivalent of two to three days vessel transit time via the Strait of Malacca. Equally, the proposed Nicaragua Canal across the Central American isthmus could theoretically provide an alternative to the Panama Canal that would be better able to accommodate the biggest ships.
Modernising infrastructure and improving the efficiency of customs processes at border crossings on Euro-Asian overland routes has the potential to shorten transit times by four to seven days, helping ease rail flows on the three main corridors between China, Central Asia, Europe, South East Asia and South Asia.
“Among these corridors, the northern route – using the Trans-Siberian railways or Kazakhstan’s rail system – is currently the only route with stable and reliable transport services and infrastructure,” said the report. “[But] Azerbaijan, Kazakhstan, Georgia and Turkey have agreed to construct the Trans-Caspian International Transport Route as part an intermodal East-West transport infrastructure initiative.”
The report said the economic case for rail transport from Asia to Europe was clear and in China there was now considerable political will to increase network capacity.
“Although transport by rail is five times more expensive than transport by sea, it is about 1.7 times faster,” said ITF. “This makes rail an attractive mode for transporting highly time-sensitive goods, such as fashion goods, electronics, car parts and perishables including food.”
In Africa, the report found that investments in infrastructure projects were accelerating quickly and a number of plans and initiatives could further the continent’s integration and boost trade. The construction of the Mombasa-Kampala corridor between Kenya and Uganda, for example, had reduced transit times from fifteen to five days, while in Namibia and Zambia, the Walvis Bay Corridor Group had reduced customs clearance time from forty-eight to two hours.
“Greater connectivity between South Africa and eastern Africa is expected to be developed by 2030, and between eastern and western Africa by 2040,” added the report. “In Africa, trans-continental freight transport options could lead to increased intra-African trade and could also shorten international trade routes by 2050, if current and planned transit infrastructure projects in Africa continue to reap similar benefits in terms of cost and time savings.”
However, the report also warned that while the environmental decimation of the Arctic could mean the Northern Sea Route will be ice-free on a seasonal basis sometime between 2040 and 2050, operators would face high costs.
“Apart from meteorological conditions and heightened safety concerns in Arctic waters, operators face logistical barriers due to scarce infrastructure, strict certification requirements, and tight environmental regulations,” the report noted.
“The Polar Code sets strict standards including on ship design, crew training, fuel tank characteristics, or sewage discharge. Even more stringent environmental regulations could apply to Arctic shipping in the future, for instance regarding the use of heavy fuel oil, already prohibited in the Antarctic.
“Conforming to these regulations reduces the net economic gains of shorter transit times.”