Off to China with Rotterdam Partners; One Belt One Road

Kneppelhout & Korthals is currently participating in the trade mission to Shanghai and Chongqing in China as organized by Rotterdam Partners. During this mission, a seminar is organized by me and Ying Liu in which we give a presentation on opportunities to do business in Europe. The most important subjects are agro-food and cold chain logistics. Chinese demand for these products has seen a considerable growth. By setting up free trade zones in Shanghai, Chongqing and Chengdu, the (Western) Chinese market is mostly opened to foreign companies. All of this aligns with the One Belt One Road Strategy from the Chinese government. Not just transport by sea, but also by rail: from China to Rotterdam by train.

Agro-Food

China’s urbanization rate is expected to increase to 60% by 2020 compared to a current rate of 50%. This increased urbanization will lead to an increase in agricultural products, that could make China more dependent on import of such products. The Netherlands enjoy an excellent reputation in China when it comes to agriculture. Within the agro-food branch, Dutch companies have lots of room for growth. In 2015, the Netherlands was the 17th-largest source of agriculture goods to China (Hong Kong included). With the opening of certain branches to foreign products of the economy in mind, the Netherlands is set to become an even larger source of goods. As of 2014, Dutch pears are approved to be sold in China and work is in progress to gain access to the Chinese market for Dutch peppers, tomatoes and apples. Considering the Chinese food scandals, it is not hard to believe that Chinese consumers prefer foreign food produce. Take the melamine scandal from 2008, when infant nutrition was contaminated with melamine. Major shortages of Dutch infant nutrition occurred in the Netherlands as a result of Dutch consumers buying up all the stock of this product to ship it to China. To further indicate this market potential, 40% of the Dutch agricultural export to China consists of dairy, in which infant nutrition compromises a large part. Apart from export of agriculture goods in its pure form, Dutch companies scan also benefit from the modernization of the Chinese agriculture and horticulture branch by providing agro-technology and knowledge.

Cold Chain Logistics

Cold chain logistics is another fast-growing segment. Cold chain logistics can be seen as temperature-managed transport that is essential to deliver perishable products as fresh as possible. Within cold chain logistics in China, one distinguishes five major product categories within agriculture that compromise the majority of all cold chain logistics. These five product categories are meat, fish, frozen food, fruit and vegetables and dairy. From these five categories, fruit and vegetables are the largest category, while fish is the fastest-growing category. Together, all these five categories represent a total value of 332.24 tons in shipped products in 2015, a YOY-increase of 15.55%. The expected value of agriculture goods in cold chain logistics is expected to reach 597.8 tons by 2020. Apart from agriculture goods, the delivery of cooled pharmaceutical products like vaccines is a major growth market in cold chain logistics. This Chinese growth is great news for the Port of Rotterdam, that has the largest amount of cool and frozen storage facilities from all European ports. Within container shipping, the transport of these so-called reefers is a niche that performs above average with a growth rate of 3% compared to a growth of 0.6% for the container market as a whole. With the Dutch agriculture export opportunities in mind, the growing Chinese market for cold chain logistics is a great plus.

One Belt One Road Strategy

Everyone is familiar with the ports of Guangzhou, Ningbo and Tianjin, but Khorgas? Khorgas, in the west of China next to the border with Kazakhstan, is about to experience a major growth. In 2013, Chinese president Xi Jinping announced the billion-dollar investment in the Belt and Road Initiative, a major project that will revive the ancient Silk Road. With great skepticism in Europe, China started the construction of a rail track over land that will provide an even faster way to transport Chinese goods to Europe compared to the traditional route by sea. The route starts in Chongqing, in the center of China and will end in Duisburg, Germany, the world’s largest inland port. Khorgas will act as a hub for a large part of goods that go to Europe by rail. The revived Silk Road, that has a considerably shorter transport duration, will have a major impact on the Port of Rotterdam. Currently, 90% of all export from China will go by sea to its destination. European cities like Łódź, Poland and Duisburg, Germany already anticipate on a major increase in economic activity. Take Łódź, one of the initiators that started the first frequent rail connection between Europe and China thanks to a cooperation of Poland’s third-largest city, Chengdu, Sichuan’s capital and US technology giant Dell. Round Rock, Texas-based Dell, that owns manufacturing facilities in both Łódź and Chengdu, benefits greatly from a fast connection between these two cities. As a result of this initiative, Poland is able to export a lot more than just the mentioned Dell products. Duisburg, already the world’s largest inland port, stands to benefit greatly from this rail connection considering the already tremendous size of trade between China and Germany.

All these developments are set to have an impact on Rotterdam. Thanks to the Betuweroute, a cargo rail line that connects the Port of Rotterdam with Germany, the Port of Rotterdam will have many opportunities for cargo transport by rail. For example, containers from Rotterdam are less likely to return empty to China and vice versa. The revived Silk Road also provides many great opportunities for the earlier-mentioned export of agriculture goods, in which freshness of these products is of major importance.