Domestic Economy

Three Freight Trains Due in Tehran From China This Week

Business & Markets Desk
The rail transportation of goods between Iran and China is three times faster than the commonly used multimodal transport via sea
Iranian officials welcome the arrival of the first train connecting China and Iran at Tehran’s train station on February 15, 2016.
Iranian officials welcome the arrival of the first train connecting China and Iran at Tehran’s train station on February 15, 2016.
IRIR is looking to turn the Iran-China rail transport corridor to a transit route by involving countries along the way and beyond

The third, fourth and fifth cargo trains from China to Iran are due to arrive in Tehran by the end of this week, the deputy head of the Islamic Republic of Iran Railways, Mostafa Davoudi, told Financial Tribune.

“The first of the three, carrying 50 containers measuring 40 feet each, left China’s island province Hainan on December 28. The second and third set off on December 30 from Incheon Port and Shiyan in northwestern China, each loaded with 41 forty-foot containers. It will take between 14 to 15 days approximately for these cargo trains to arrive in Tehran,” he added.

The official noted that the trains are mainly loaded with automotive accessories and spare parts, household appliances and textile.

The first-ever train traveling the long route from China to Iran set off from Yiwu City in China’s Zhejiang Province on January 31, 2016. It covered 10,399 km, passing through Kazakhstan and Turkmenistan, to reach the border station of Injeborun after 14 days.

The second freight train departed from Yinchuan South Railway Station on Sept. 5, 2017, carrying some 560 tons of cargo, including mechanical equipment, ceramic tableware, crystalware and automobile accessories, worth around $1.6 million.

> Advantages Over Marine Transport

According to Davoudi, Iran-China trade is conducted through multimodal transportation, the lion’s share of which is carried via sea.

Sea transport is cheaper at first glance compared with other means of transport.

Yet, he said, it has many covert expenses that escape the eye before the procedures are gone through, such as demurrage fees for ships, warehouse fees, the costs of unloading the ships and loading on trucks or trains, etc.

In the case of Iran and China, marine transport of goods takes between 45 and 50 days.

“Rail transport is spared from all this hassle. A train sets off from a station in China and delivers the goods at a station in Iran. The expenses of multimodal transport system are non-existent in this corridor and the delivery duration is reduced by a third. This means goods can enter the production chain at a shorter time,” Davoudi said.

> Plans to Use Corridor as Transit Route

The rail corridor is currently being used to only transfer goods between Iran and China, but IRIR is looking to turn it into a transit route by involving countries along the way and beyond.

“We are planning to transit goods from China to Europe. The value of commodities exchanged between China and Europe stood at €520 billion in 2016. We expect a part of these goods to be transited through Iran in the near future. The transit of goods generates two and a half times as much value added than just transporting them into the country," the official said.

"Iran has this capacity and we are positive that this corridor will get off the ground soon. In this regard, we are in talks with countries along the way, including Azerbaijan, Turkey, Germany, Georgia, Poland, Ukraine, Uzbekistan and Tajikistan.”

The route, better known as the New Silk Road, is a 2,300-kilometer Chinese railroad that links Urumqi, the capital of China’s western Xinjiang Province, to the Iranian capital Tehran, connecting Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan along the way. It was first proposed by He Huawu, the chief engineer of China Railway Corporation in late 2015.

From Tehran, the grand project will join Iran’s east-west network leading to Turkey and East Europe. It could also open a way to Europe via a developing rail route from southern Iranian ports to Azerbaijan and Europe.

The Belt and Road initiative, put forward in October 2013 by Chinese President Xi Jinping, includes several corridors through land and sea, including the New Silk Road rail route, which will serve as a tailwind for the transport of goods and energy between Iran and China.

The two sides have set a long-term bilateral trade target of $600 billion a year.

In a meeting with his Chinese counterpart, Xiao Jie, in China back in May 2017, Iran's former economy minister, Ali Tayyebnia, said, “Iran’s position in Xi Jinping’s innovative plan to revive the New Silk Road is spectacular and ideal. Therefore, we intend to play an effective role in its implementation.”

Iran resolved issues related to government guarantees during Tayyebnia’s visit to China to represent Iran in the New Silk Road Forum held in May with China and 29 other nations reaffirming their commitment to build an open economy and ensure free and inclusive trade, under the Belt and Road initiative.

Tayyebnia noted that Iran was part of the ancient Silk Road—a route contributing for centuries to trade and cultural exchange—stretching from Japan to the Mediterranean Sea, and intends to play a more important part in the new Silk Road plan.

> Chinese LOC for Tehran-Mashhad Railroad

China opened a $1.7 billion line of credit for the electrification of the 926-km railroad from Tehran to the eastern city of Mashhad in Khorasan Razavi Province in December 2017, five months after a contract was signed for the project in Tehran. The route is a strand of the New Silk Road.

According to the Persian daily Donya-e-Eqtesad, this was the first and the largest LOC to have opened for Iran after international nuclear-related sanctions against the country were lifted in January 2016, following the signing of a landmark agreement between Tehran and world powers a year earlier.

The initial contract entails the allocation of $1.5 billion in loan by Exim Bank of China to the project. The guarantee for the loan is to be provided by Iran’s Bank of Industry and Mine.

The electrification project will be carried out by China National Machinery Import and Export Corporation, otherwise known as CMC. Iran’s MAPNA Group is the main contractor of the project. The project is expected to take up to 48 months and raise the speed of the line from the current 160 kph to 200 kph, cut down pollution and increase the railroad’s transportation capacity. The route is already double-tracked and both tracks will be electrified.

A subsidiary of China General Technology Group, CMC is an international engineering contractor in transportation infrastructure, industrial facilities and power plants. In 2014, the company constructed the Ankara-Istanbul high-speed railroad, together with China Railway Construction Corporation Limited and Turkish companies.

For Iran, the electrification of Tehran-Mashhad line is part of its wider rail development plan to electrify all railroads by 2025.



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