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Global Glycerol Trade Has Almost Doubled Over the Past Three Years and Totaled $1.6B

glycerol

Global Glycerol Trade Has Almost Doubled Over the Past Three Years and Totaled $1.6B

IndexBox has just published a new report: ‘World – Glycerol – Market Analysis, Forecast, Size, Trends And Insights’. Here is a summary of the report’s key findings.

Global Glycerol Trade 2013-2018

In 2018, global exports of glycerol (including synthetic, excluding crude, waters and lyes) amounted to $1.6B (IndexBox estimates). Over the period under review, the total exports indicated resilient growth from 2013 to 2018: its value increased at an average annual rate of +5.4% over the last five years. The trend pattern, however, indicated some noticeable fluctuations being recorded throughout the analyzed period. Based on 2018 figures, glycerol exports increased by +91.7% against 2016 indices.

Exports by Country

The exports of the four major exporters of glycerol, namely Indonesia, Malaysia, Germany and the Netherlands, represented more than two-thirds of total export. It was distantly followed by Argentina (86K tonnes), mixing up a 4.9% share of total exports. Belgium (47K tonnes), Thailand (39K tonnes), the U.S. (34K tonnes), Poland (32K tonnes) and France (29K tonnes) took a relatively small share of total exports.

From 2013 to 2018, the most notable rate of growth in terms of exports, amongst the main exporting countries, was attained by Thailand, while exports for the other global leaders experienced more modest paces of growth.

In value terms, Malaysia ($351M), Indonesia ($309M) and Germany ($302M) constituted the countries with the highest levels of exports in 2018, with a combined 61% share of global exports. The Netherlands, Argentina, Belgium, the U.S., Thailand, France and Poland lagged somewhat behind, together comprising a further 28%.

Export Prices by Country

The average glycerol export price stood at $910 per tonne in 2018, surging by 26% against the previous year. In general, the export price indicated mild growth from 2013 to 2018: its price increased at an average annual rate of +1.5% over the last five-year period.

Prices varied noticeably by the country of origin; the country with the highest price was the U.S. ($1,274 per tonne), while Argentina ($741 per tonne) was amongst the lowest.

From 2013 to 2018, the most notable rate of growth in terms of prices was attained by France, while the other global leaders experienced more modest paces of growth.

Imports by Country

In 2018, China (183K tonnes), the U.S. (144K tonnes) and the Netherlands (125K tonnes) represented the largest importer of glycerol in the world, generating 26% of total imports. The following importers – Japan (73K tonnes), India (72K tonnes), the UK (71K tonnes), Mexico (67K tonnes), France (64K tonnes), Thailand (63K tonnes), Russia (52K tonnes), Spain (45K tonnes) and the Czech Republic (43K tonnes) – together made up 32% of total imports.

From 2013 to 2018, the most notable rate of growth in terms of imports, amongst the main importing countries, was attained by the Czech Republic, while imports for the other global leaders experienced more modest paces of growth.

In value terms, the U.S. ($150M), China ($134M) and the Netherlands ($95M) were the countries with the highest levels of imports in 2018, together comprising 24% of global imports. These countries were followed by Japan, France, Mexico, India, the UK, Thailand, Spain, the Czech Republic and Russia, which together accounted for a further 32%.

Among the main importing countries, the Czech Republic experienced the highest growth rate of the value of imports, over the period under review, while imports for the other global leaders experienced more modest paces of growth.

Source: IndexBox AI Platform

online

Doing Business Under COVID-19: Going Online to Weather the Storm

Doing Business Under COVID-19: Going Online to Weather the Storm

At the time of this writing, there are now unprecedented restrictions being put in place to prevent the spread of the 2019 novel coronavirus or COVID-19, its official designation by the World Health Organization. These actions have been proposed as necessary steps in order to prevent the spread and transmission of the disease. However, its impact on the socio-political and economic fronts cannot be overlooked.

Such is the nature of this virus and the ensuing government actions that this will likely forever change how we do business not only in our individual nations but across the globe as a whole.

The technological revolution has already progressed sufficiently to allow for automation in a great many industries, but how can small and medium-sized businesses prepare before the next global pandemic?

Even in times of crisis, businesses still need to maintain communications with global partners, clients, and stakeholders. Get in touch with Tomedes’ crisis communication center

The Social Impact of COVID-19

Somewhere, some kid woke up in their dream utopian world, where they were forced to stay at home, playing video games in the basement, not having any physical contact with the outside world, or at least no more than necessary to order a pizza. Elsewhere, entire societies have been adversely impacted as restaurants, entertainment venues and other gatherings have been declared off-limits to the people.

Gatherings as seemingly innocuous as church meetings have been canceled, leaving many people suffering from the onset of cabin fever as they find themselves more and more isolated and incapable of participating in virtually any social engagement. This particularly impacts societies that value physical displays of affection between family members, friends, and acquaintances, along with the need to sustain relationships and friendships in a traditional hands-on manner.

The Economic Impact of COVID-19

Source: The Economist

Perhaps the most damaging disruption is that the COVID-19 is bringing the world economy to its knees, bankrupting many businesses for all sizes, and laying off employees by the droves, depriving them the ability to provide for themselves and for their families. With families still experiencing the shocks and crunches of the 2008 Financial Crisis and the Great Recession, along with the economic setbacks from the US-China trade war, the coronavirus pandemic couldn’t come at a worst time–not that it should have come at all. The pandemic is now having a rippling effect that expands throughout the global economic system as evidenced from the current global economic crisis.

Manufacturing of non-essential goods is now scaling back to even being suspended. Logistics and material supply chains are lagging behind which is then causing a domino effect, ultimately resulting in utter economic turmoil leaving entire sections of the economy beaten, battered and bruised with little hope for any immediate resolution.

Perhaps this outbreak will forever change the way that people work, shop and even how they live their lives. There are some industries that are currently thriving even during these economically depressed times. There are other businesses that are dying but some, with a little bit of effort and foresight, could be in a much better position during the next global outbreak.

Which Industries are Thriving During the Global COVID-19 Pandemic? And Why?

Source: World Health Organization

Despite the constant economic turmoil that is ongoing as a result of the current global pandemic, there are numerous industries that are thriving or at the very least, continuing operations. Many businesses that have already established themselves online in one form or another, are at the very least, not suffering as badly at present. Although, situations in some industries are mixed as some are forced to scale down their operations. Some are obligated to keep going considering the vital nature of their operations with profit being the least of their concerns as of the moment.

Tech Industry

As people continue their quarantine and lockdown lifestyle, they’ll naturally go online and browse all content they’ll come across to pass the time. Social media platforms are now experiencing a surge in content with people now having more time on their hands than usual. Streaming companies such as Netflix are also having a field day as ‘Netflix and chill’ routines are now the norm for more people for the next few weeks at least.

As for consumer electronic manufacturers, it’s fair to say that people’s consumer habits have changed from conspicuous spending to practical spending. There’s significantly less demand now for luxury products and consumer electronic products with the exception of consumer medical devices. It’s much more practical now to purchase a thermometer and digital blood pressure monitor than the latest iPhone or pre-ordering the upcoming PS5.

Ecommerce

The global ecommerce industry is facing mixed experiences as we speak. One can assume that as people stay indoors, ecommerce businesses are bound to have a field day. In reality, it entirely depends on your product inventory whether you sell essential goods, medical devices, or consumer electronics and so on. The impact on ecommerce businesses also depend on how much they rely on the global supply chain.

Since the pandemic has initially brought China’s manufacturers to a halt, everyone from ecommerce businesses to global retailers are taking a big hit. Some ecommerce businesses are forced to suspend their operations and even close up shop as they can’t restock their inventory. However, other ecommerce businesses are unable to cope with so much demand as people continue to stock up on essential goods.

Logistics

The global logistics industry is now the lifeblood holding the global economy together that’s currently hanging on by a thread. From supermarkets, relief operations, healthcare centers, to families, it’s imperative that logistics companies around the world keep running round the clock to deliver not only essential goods but also vital medical supplies of all kinds from testing kits, face masks (surgical, N95, etc.), to face shields, safety goggles, protective suits, and disinfectants.

However, there are some logistics companies that are on the losing end as many have been forced to scale down to even suspend their operations temporarily as the logistics workforce are highly susceptible to viral transmission.

Energy and Utilities

With families now staying, working, and continuing their schooling at home, energy and utility companies will naturally see a tremendous spike in operations. But whether this is profitable for their industry isn’t as black-and-white as one might think. Many energy and utility companies around the world are now extending bill payments to a month to cushion the financial toll families and businesses are currently experiencing. For energy and utility companies, perhaps profit isn’t their main concern now as they’re now working hard to keep their services uninterrupted and not putting lives at risk.

Medical Industry

The global medical industry is now in overdrive with some even classifying their operations as being elevated to ‘wartime’ level. However, we wouldn’t classify it as thriving per se in terms of opportunities and increased revenue. All health professionals and relevant frontliners are now overstretched around the world and facing dwindling medical supplies as cases rise.

It’s fair to say that the pandemic is putting even the most advanced healthcare systems under enormous pressure. The medical industry from healthcare providers, pharmaceutical companies, medical device manufacturers, and disinfectant manufacturers are now working round the clock to keep up with the pace of infections to keep it from spiraling out of the control.

Another part of the medical industry that’s seeing a spike in demand are unconventional medical services such as telemedicine and online mental health services. Doctors are highly vulnerable to viral transmission and must be protected at all costs. For patients with non-serious symptoms, telemedicine is the safest way to get a check-up from your doctor.

As for online mental health services, the abrupt social isolation along with some families even being mandated to isolate themselves from their own loved ones to prevent transmission within the household is having a damaging toll on people’s mental health.

The Language Industry

Business is booming for many aspects of the language industry, especially online translations. This is in large part due to the requirements of scientists, academics and medical professionals working around the world to stem the tide of the global COVID-19 pandemic. All of the research, the latest breakthroughs, and the research and analysis of these medical professionals must be quickly and accurately translated and then distributed to similar communities around the globe. Medical translation is also needed in the medical device industry as medical devices such as testing kits need to be accurately translated for it to be used properly by all countries affected by the pandemic.

Live interpreters are less in demand, though there are still exceptions, most notably in the medical, political, and public relations arena where communications must continue. Even here however, more and more of the work is being conducted via video conferencing and using other online means to prevent the need for gathering together unnecessarily. Translation agencies and even freelance translators and interpreters working online are experiencing an increased demand for their services when other industries falter.

The Freelance Industry

There were many claims made from both sides of the debate during the passage of AB5 in California, more commonly known as the “Gig Economy Bill”. Despite all of these claims however, freelancers online have experienced a record surge in terms of both the number of people looking for freelance work and the amount of work being moved to the “online economy”.

But not all freelancers can claim all is well unfortunately as the effects of the pandemic does naturally vary between industries. While many freelancers working online are enjoying a great boom in business, other freelancers providing on-site services such as consultants and even freelancers working for film and TV history, are having a rough time as we speak.

Setting Up Your Business Continuity Plan Amidst the Coronavirus Pandemic

Moving a business online is not only beneficial, but given the current economic and social crises, it may soon become inevitable, especially as the technological revolution automates industry and replaces more traditional jobs. There are additional benefits to the company as well.

The individuals working from home do not require expensive computers, desks or other equipment that the business owner would otherwise be forced to acquire. The business owner will not have to pay for all of the electrical consumption or other utilities that would otherwise be an added expense.

Even businesses that cannot be fully established online will benefit from an online presence. Localized service providers who only provide a limited service in an equally restrictive geographic location are one such example. Still, there are many aspects of the business that can be conducted online without any or at the very least, minimal disruption to the services being provided.

Moving Operations and Transactions Online

Accounts Payable and Receivable, IT services if there are any, and a host of other jobs can easily be completed through the use of professional agencies online, or by hiring employees who will be telecommuting, or working from their own homes. Some of the work may be outsourced to professional agencies and freelance workers online. But virtually all of it can be done without the need to congregate together in a closed, more restrictive environment.

Shift to Telecommuting

Companies that retain all or even a portion of their staff as telecommuters will be in a better position to weather the financial storm created by the current crises. This may perhaps be best demonstrated oddly enough, by looking at the internet and how it works. IT professionals are among the most common people in the industry working as telecommuters online. As long as there is internet, then there is work for people.

Likewise, programmers are able to work from home, as are customer service representatives and other key positions working in IT. Any company that can establish as much of its workforce as possible as telecommuters will enjoy numerous benefits that will be explained in the latter portion of this article.

Maintain a Skeletal Workforce for Operations if Possible.

As of writing, many businesses have had to make changes overnight from moving their operations online to even laying off a part of their workforce just to keep their business afloat. With the employees you have left, it’s important to also keep your business running by maintaining a skeletal workforce to focus on vital operations for the time being.

Using Voice Over Internet Protocol (VoIP) Services

Using VoIP services such as Skype and Facetime is a perfect way to continue face-to-face interactions not only with your employees but also clients. These are mostly free but do come with premium subscriptions if you want more access to its features as video group calls.

Expanding Your Ecommerce Capabilities

Some local businesses may already have an online presence, but may also need to consider expanding their services that are offered online. Any company that has a physical product that is going to be shipped out, or that offers online products, may want to consider the addition of an ecommerce or merchant page on their website.

This gives the business owner access to a much larger audience while at the same time, more fully automating much of the checkout process and reducing the number of employees required to perform the job functions.

Upgrade Your Content Marketing Strategies

Unlike printed ads or brochures, a website can also contain videos, which are a primary tool in every internet marketing campaign. This is especially true if the videos are used to introduce products to the customers, which is a very effective technique for increasing sales online.

Videos also have been shown to do better when they include closed captioning or video translations. Many people who are searching for products and services online will prefer the videos and watch them rather than read through large volumes of text.

The inclusion of video closed captioning through video translation services will allow for the customers to enjoy the full video experience without having to worry about missing anything, even when they have the sound turned off. Given the extent of the potential audience though, video translation and video marketing are excellent and necessary tools for an online marketing campaign as more people stay at home.

Relying on Customer Relationship Management (CRM) Platforms

You might have already been using CRM platforms but in these times, they couldn’t be more necessary now as your business continues operations online. CRM platforms make the process of monitoring clients and keeping track of relevant client data much easier. CRM platforms now run under cloud systems which means your employees can continue their services from the safety of their home.

Shift to Employee Management Strategies using Employee Tracking Tools

It’s fair to say that going online is a whole new realm, figuratively and literally. Business owners and managers need to be inundated with the latest online management strategies to keep track of their employees performance. One of the most vital essential tools in online employee management are employee tracking tools.

Employees can clock in and clock out per shift as they did before in which the tool will keep track of the total number of hours they’ve worked. Another useful feature in employee tracking tools is it takes screenshots of your employees’ screens. This helps managers know whether or not their employees are actually working on the tasks at hand rather than streaming Netflix.

Use Localization to Try to Get Ahead of the Curve

Let’s talk more about localization here and how you can get provided an elevated online customer experience for your foreign audiences and markets, especially during these trying times. Among the most popular online trends for business in 2020 is globalization through localization. Localization is all about speaking to the target demographic in their own language not just in a linguistic sense but also culturally and socially.

You’ll be using their preferences and norms as points of reference to help you refine your product and marketing strategies. This involves establishing a full business presence online in numerous different markets, using language and references that the people will understand from a more localized and personal perspective.

Localization indeed is more than just language, but translation itself under localization takes on a new form. Localizing translations involves taking note of regional linguistic nuances. Language differs greatly, even when everyone involved in the conversation speaks the same language. Think about the local vernacular, local phrases and local accents. Add in local frames of mind and points of reference, and even in different areas that speak the same language, different localization techniques will be required.

In many areas of the world, it will be necessary to use two or more local languages. The province of Quebec generally requires both French and English if it is to be effective. Locations around the Southern border of the USA may require both English and Spanish. Many locations throughout Europe commonly use numerous languages. Switzerland recognizes German, French and Italian as official languages, but also has a strong presence of Romansh. In such a case, four or more languages may be required to be translated for the website. In Switzerland, staying there for a moment in time, the areas for each language are generally geographically specific.

Each one of these geographic areas will have unique features and individual points of pride for the local populations. The ability to integrate these into a larger online campaign using localization strategies means that each one of these languages can be used to more specifically target the desired audience.

The best means to accomplish such a task is to ensure that when moving online, a translation agency that specializes in localization strategies is used in order to ensure both the accuracy and the individual aspects of a more complete, professional and personalized translation service. In some cases, these techniques will be crucial even for a more localized and restricted online business presence.

In other cases, they may be part of a broader globalization campaign, though using the same techniques of localization. However, there are places in the world that lack regular internet access. Some research may need to be done on who will be your ideal target audience.

Going Online Amidst Medical or even Economic Crises: Final Word

For those businesses that can go completely online, there will be no more need to worry about where people can or cannot gather, or what people can or cannot do in person. Many of these companies have the added benefit of creating  online products and services that can be delivered over the internet. Furthermore, the expansion of the online economy will keep the world economy going rather than flatlining.

The impact on ISPs and the relevant infrastructure have already pointed out the need for some expansion of the underlying infrastructure of the internet. It will create the need for more and better infrastructure to be built, resulting in even more work being made available online.

Overall, building a business online may seem like a rather small affair at first glance. However, just as is the case with the current social and economic crises the world is facing, the gains of an online business can create the very same rippling and domino effects in the opposite direction. The creation of more industry results in the creation of more jobs even in times of economic turmoil, and does more than just its “fair share” to aid in the global economic recovery.

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This article originally appeared on Tomedes.com. Republished with permission.

companies

Free Trade in Free Fall: How Companies Can Navigate the Pandemic

Even before the global pandemic arrived in every corner of the globe, free trade and the globalized trading system were in critical condition. The bruising U.S.-China trade war, along with regional conflicts such as the Japan-Korea trade war, Brexit, import tariffs, the decline of the WTO, left companies struggling to adjust supply chains and many wondering whether the globalized trading system will survive.

Yet these challenges pale in comparison to the trade and supply chain issues the COVID-19 pandemic generates on a nearly-hourly basis. Demand has plummeted around the world for goods and services as vast portions of humanity are isolated in their homes and left without incomes. Export restrictions on medical supplies, food and other critical products, while still limited, are on the rise, creating fears of reverse protectionism. Airfreight capacity has dropped as tens of thousands of flights are grounded. Logistics companies are struggling to deliver goods as nearly every country in the world has implemented ever-tightening border restrictions in a matter of weeks.

As a result, companies and individuals are struggling to keep our grocery stores, pharmacies, and retailers stocked with the cheap and plentiful products consumers have grown accustomed to, not to mention supply the medicine and equipment that our frontline healthcare workers desperately need. While these are dark days in trade, there are ways to immediately protect your company and your supply chain.

First, companies must protect their workers from the disease. Crisis management procedures to keep people healthy, whether that means remote working procedures or social distancing policies to keep production facilities running, should be implemented and revisited as the crisis moves on. While most companies have implemented these policies as a result of government orders, companies should continuously evaluate how to both keep their employees safe and their companies running. Fighting this disease and its economic ramifications is a marathon, not a sprint, so companies should find ways to maintain continuity as long as possible.

Next, now is the time to be hands-on with your supply chain. Companies need to examine every aspect of their supply chain and logistics: every container, every ship, every truck, every port, and every border crossing. In this way, you can understand how your goods must pass to understand how the pandemic will affect each shipment. Seafreight remains stable, though that could change, so companies with any slack in their supply chain should consider moving goods in advance through slower means.

Companies also need a proactive examination of their legal risks.  This assessment must include a review of which contracts may be broken through force majeure and other similar break clauses, whether initiated by you or the other party. At first, only producers were using force majeure as they realized they did not have the raw materials, labor shortages, and logistical support to deliver products. Now, importers and end-users are breaking their contracts as demand drops and shops close. Similarly, insurance markets are struggling to find ways to insure goods, services, and even projects as supply chain issues threaten to slow projects around the world. A holistic examination of your legal risks will save your company money and time when legal challenges arise.

Companies also need to find help from their governments. Governments are looking to help companies stay afloat, keep people employed, and keep goods and services flowing, but they are frequently looking for answers from companies. If you are not part of a trade association, join one. And if you do not have representation in Washington, now is the time to make sure that government authorities know how best to help your company and industry navigate this crisis and to remind them of the value that trade brings to communities around the world, and where you need help.

The COVID-19 crisis will leave the global trading system permanently altered, but it is also a reminder that, just as our physical health is intertwined with our neighbors, our economic health is also dependent. Long-standing trade relationships are under strain, contracts will be voided, and shipments unfulfilled. Yet a healthy dose of compassion and understanding that your business partners are facing the same challenges as your company may help you maintain your trading relationships through these hard times and allow them to rebound faster when the crisis is over.

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Benjamin Kostrzewa is a Registered Foreign Lawyer at Hogan Lovells, working in Hong Kong and Washington serving the needs of clients on both sides of the Pacific. Before joining Hogan Lovells he served as Assistant General Counsel at the Office of the U.S. Trade Representative.

Qatar

The Logic of Qatar’s Logistics Ambitions

Put simply, logistics is a global mega-business. Its processes are time-sensitive, quality-centered, customer-driven and efficiency-bound. An array of functional, operational and legal instruments shape the flow of a genuinely 24-hour industry. In response, the powerhouses of the corporate logistics sector – some of whom have been around for centuries – have near-constantly adjusted and innovated business strategies to stay at the top of their industry, typically for the good of all stakeholders.

However, logistics is not only about companies and their business activities. Superior logistics capabilities have become an important strategic asset for states aspiring to play a more prominent role in an increasingly interconnected world. In this respect, China has become something of a role model. Beijing identified early in the country’s economic development the need for facilities capable of inserting its output into the global marketplace. Since then, China’s logistics know-how has evolved to the extent that newer infrastructure projects such as Ningbo Port are on a par with more established hubs like Singapore.

Most Gulf States have factored the buildup of logistics facilities into their respective National Visions. These programs focus on reducing reliance on energy exports as the primary source of national income and diversifying economies beyond the exploitation of natural resources. As things stand, however, some states more than others are in a better position to become major global logistics centers with facilities to match. These include Qatar, for at least three key reasons.

First, since the start of the 2017 blockade by several Gulf Cooperation Council (GCC) states and others, Qatar has held the moral high ground by not responding in kind. Rather than cutting off supplies to blockading states, Doha has continued to fulfill its contractual obligations. The country has also called on allies and international organizations to help resolve the dispute with its neighbors. In doing so, Qatar has sent a strong signal to multinational companies seeking effective logistical hubs that their businesses will not suffer in the face of ongoing regional tensions.

Second, the blockade has demonstrated Qatar’s remarkable ability to adjust supply chains rapidly to meet the needs of the state and its 3million+ citizens and residents. Prior to the crisis, several now-blockading countries accounted for over 90% of Qatar’s milk and dairy supplies. Imports of these products collapsed almost overnight. However, in the space of just 4-6 weeks, Doha had made up for this shortfall by sourcing almost 90% of its milk and dairy products from 20 countries. Qatar’s ability to diversify its global supplier base at breakneck pace would not have been possible without effective resilience planning and adaptive logistics capabilities.

Third, Qatar is not only determined to become a global trading hub but also to attract the type of foreign direct investment that will take its logistical capabilities to the next level. Such ambitions require a more intensive network of international partners collectively doing business in and out of Qatar with relative ease. To assist, a radical overhaul of customs processes and systems to support future growth in these areas is now underway. Streamlined legal frameworks are also widely expected to attract greater foreign interest in the country’s logistical capabilities.

Qatar’s recently-established free zones perfectly highlight the country’s logistical strategies in action. Located close to Hamad International Airport and Hamad Port, both are designed to attract companies seeking a stronger regional presence and infrastructure that serves trading routes between Asia and Europe. In keeping with free zones around the world, they also offer a range of benefits, including zero corporate tax, seamless administration, and unrestricted capital repatriation. However, financial (and related) incentives are by no means the only tactics employed to attract and retain business.

A defining feature of the most successful free zones is their ability to encourage innovation from the companies that make their facilities home. For example, DHL Express’s relocation to the airport free zone at Ras Bufontas will be accompanied by the development of a new product that brings express bulk logistics process capabilities to Qatar and upper Gulf region. In an effort to enhance maritime logistical capabilities, the second free zone at Hamad Port’s Um Alhoul will develop a chemical cluster to encourage innovative logistics approaches relevant to this important process industry.

Taken together, Qatar’s stealthy response to the blockade and determination to become a global logistics hub chimes with its historical reputation for accepting and taking calculated risks. When Doha decided to construct Ras Laffan Industrial City in order to exploit Qatar’s vast natural energy resources, it did so knowing that its development would irreversibly change the economic structure of the country. This required a level of courage that many larger countries remain unwilling to demonstrate on the global stage. The same rule of thumb also applies to Qatar’s determination to increase its global connectedness via high-quality logistics capabilities.

This ambition has not only had a profound impact upon Qatar’s economy but also its higher education sector. Academic programs in Logistics and Supply Chain Management (LSCM) are under development at several academic institutions across the country. Their emergence in turn reflects Qatar’s growing demand for expertise in the fields of logistical planning, strategic supply chain management and operational management. To this end, course offerings by Hamad Bin Khalifa University’s (HBKU) Division of Engineering Management and Decision Sciences (EMDS) are among the most advanced, with alumni already developing promising careers in the country’s burgeoning logistics sector.

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Frank Himpel is a faculty member of the Engineering Management and Decision Sciences division at College of Science and Engineering at Hamad Bin Khalifa University in Qatar. Prior to moving to Qatar with his family in 2018, Frank served as a professor of business administration and logistics in Germany, where he also received his academic degrees. His research into aviation and air transportation management has taken him to several countries around the world.

 This article is submitted by the HBKU Communications Directorate on behalf of the author. The views expressed are the author’s own and do not necessarily reflect the University’s official stance.

Hamad Bin Khalifa University (HBKU), a member of Qatar Foundation for Education, Science, and Community Development (QF), was founded in 2010 as a research-intensive university that acts as a catalyst for transformative change in Qatar and the region while having global impact. Located in Education City, HBKU is committed to building and cultivating human capacity through an enriching academic experience, innovative ecosystem, and unique partnerships. HBKU delivers multidisciplinary undergraduate and graduate degrees through its colleges, and provides opportunities for research and scholarship through its institutes and centers. For more information about HBKU, visit www.hbku.edu.qa.

silk road

Can the New Silk Road Compete with the Maritime Silk Road?

China’s president Xi Jinping refers the Belt and Road Initiative, aka the New Silk Road, as the “Project of the Century” and according to a recent Bloomberg article, Morgan Stanley anticipates Chinese investments will total 1.3 trillion US dollars by 2027. In addition, more than 150 countries and international organizations have committed to invest in the project as well with infrastructure enhancements, such as roadways and power plants. But will this New Silk Road ever really compete with the firmly established Maritime Silk Road?

Following is a comprehensive analysis by Bernhard Simon, CEO of Dachser, an international logistics solutions provider, Mr. Simon outlines the benefits and challenges associated with the New Silk Road as well as its position as a potential competitor to the Maritime Silk Road.

Over the last few years, the more I hear and read about the New Silk Road, the more grand the expectations.  Politically speaking, the trade corridors between China and Europe, as well as Africa, seem to be China’s key to becoming a leading global power in the 21st century. Logistically speaking, it would seem that infrastructures and networks are emerging on an entirely new scale, taking a gigantic economic area—often described as representing 60 percent of the world’s population and 35 percent of the global economy—to the next level. The New Silk Road could be a kind of high-speed internet for the transport of physical goods.

As with most narratives, it is worth taking a critical look at the facts. I would like to do this now for certain logistical aspects of the Belt and Road Initiative (BRI), as the New Silk Road is officially known.

First, let’s consider the overland connection between China and Europe: the possibility of bringing Chinese consumer goods to us on the east-west route via rail. This transcontinental route was not the brainchild of China’s President Xi Jinping, who made the BRI a national doctrine in 2013.

In fact, goods have been rolling along the Trans-Siberian route from China to Europe since 1973 (with some interruptions due to the Cold War). Today, there are two routes out of northern China, which head via Mongolia, Kazakhstan and Russia to terminal stations such as Duisburg’s Inner Harbor or Hamburg. China’s western region, home to the megacity of Chongqing and its 30 million people, is also connected to the northern routes. This route allows cargo from the west to no longer need to be transported the many miles to China’s coasts.

 High Costs of Rail Freight vs. Ocean Freight

How significant are these rail links for logistics between Asia and Europe? In 2017, 2,400 trains moved about 145,000 standard containers between China and Central Europe. This corresponds roughly to the cargo of seven large container ships. The International Union of Railways (UIC) expects this to grow to 670,000 standard containers—equivalent to 33 container ships—in ten years’ time. Despite this forecast growth, the existing rail links between China and Europe are likely to remain logistical mini-niches. Steve Saxon, a logistics expert from McKinsey in Shanghai, summarizes it nicely: “Compared to sea freight, the volume of goods transported to Europe overland will always remain small.”

This is primarily a matter of cost. Transporting a standard container between Shanghai and Duisburg by rail costs between $4,500 USD and $6,700 USD; compare that to the cost of sending a similar container from Shanghai to Hamburg by ship: currently around $1,700 USD. This difference is simply too great for railway transport to be truly competitive against ocean transport, even though they move the cargo at about twice the speed. Efficiency improvements will not have a big enough impact to shift from ocean transport to rail.

Another factor is that at the moment, China heavily subsidizes these international rail connections. Once that support ends in 2021, competitiveness will erode further. It is not clear whether rail transport will be self-sustaining without subsidies.

Also, in most cases, anyone needing a shipment quickly and flexibly typically sends it via air freight, even if this option costs around 80 percent more than via railway. Thus, freight transport by rail is (and will remain) caught between economic (by ocean) and fast (by air).

Would adding more train routes change the situation?

China is planning an additional railway line in its southern region, which will move cargo to Europe via Central Asian countries, as well as Iran, and Turkey, bypassing Russia entirely. Indeed, a railway line has connected China with Iran since 2018. This route is, geographically speaking, very similar to the “old” Silk Road, a trade route for camel caravans that crossed Central Asia on its way to the eastern Mediterranean. If this railway line is completed one day, it will raise a number of questions from a European perspective: How can safety, punctuality, and reliability be guaranteed? How can delays caused by customs clearance be minimized? What effect will international sanctions have, for example, on transit through Iran? How can the misuse of containers for smuggling immigrants be avoided? In other words, many issues need to be addressed before a railway corridor south of Russia can be established.

There are two more routes in China’s BRI strategy. One is in Southeast Asia: a 2,400-mile railway line from Kunming to Singapore plus a branch to Calcutta. The other is a rail line that starts in China’s far west, then runs through Pakistan to the port of Gwadar on the Arabian Sea. Crossing over various passes in Central Asia, this technically challenging project is expected to cost $62 billion USD. However, both routes have only a very indirect connection to freight traffic between China and Europe.

So the situation will remain much the same into the future–some 90 percent of world trade will go by ship. Rail transport via the New Silk Road will not change this. If all this freight suddenly started rolling along the Silk Road, the route would be like an endless conveyor belt loop—the idea is completely absurd.

And what about the Maritime Silk Road?

More important than Eurasian railway routes is the so-called Maritime Silk Road, i.e., the transport of cargo from China to Europe by sea. As soon as Portuguese sailors opened up China for trade by sea in 1514, the old Silk Road began to fade from memory.

Today, more than 50 percent of global trade takes place on the Maritime Silk Road between China/East Asia and Europe. The world’s largest container ports are on this route: Shanghai, Singapore, Shenzhen, Ningbo-Zhoushan, Busan, and Hong Kong. The development of the Maritime Silk Road needed no Chinese master plan; logistics infrastructure arises wherever corresponding investments pay off.

China has numerous plans for these established shipping routes, including port expansions. Its shareholdings in around 80 port companies—including Piraeus and more recently Genoa and Trieste—support its plans and ensure investments. Why should we take issue with China for pursuing these goals leveraging its position as a leading global economic power? It is not the first country to promote its economic interests with direct investments and financing. Europe, too, should pursue a strategy of developing an enhanced infrastructure to transport freight to and from China/Southeast Asia in order to ensure a reciprocal exchange.

And China’s plan to step up the use of the maritime corridor through the Suez Canal, which shortens transport between China and Central Europe by at least four days compared to the route around Africa, is reasonable and less complicated. The Frenchman Ferdinand de Lesseps completed the Suez Canal in 1869 with precisely this goal in mind.

Conclusion

Nobody denies that the diverse projects of the New Silk Road hold great economic potential; that they would improve the network of connections between Asia and Europe; and that Beijing has a geopolitical interest in pursuing them. China is creating an enhanced infrastructure that will benefit all participants in the global economy. Nevertheless, it would be advisable to evaluate the logistical opportunities with the necessary dose of reality. I would caution against being dazzled by the beautiful visions and the fascinating narrative as it could cloud your vision and lead to using poor judgment and making risky investments.

 

Bernhard Simon is the CEO of Dachser Logistics