Railways on Track to Gain as Northern China Puts Brakes on Coal-Carrying Trucks
(Beijing) — The spring breeze in late March can barely clear the dusty air in the storage yards inside the Tianjin port area, as heavily laden trucks unload millions of tons of coal.
The black mineral dug up in northern China has traveled 500 to 900 km in heavy-duty trucks to reach the port before being shipped to power stations, steel mills and households in the south.
Some 100,000 diesel-powered coal trucks routinely run between the Tianjin port, the largest in northern China, and coal-producing regions in Shanxi and Shaanxi provinces and the Inner Mongolia region. This fleet of coal-carrying trucks has been growing since 2014, as coal prices have slowly picked up and diesel prices have kept sliding, driving more coal mine owners and traders to use the cheaper truck transportation instead of trains.
But the long line of coal-carrying trucks passing through cities in northeast China will soon come to an end, as central ministries and local governments in March jointly announced a plan to ban diesel-powered coal trucks in the region encompassing Beijing, Tianjin and Hebei province to tackle the severe air pollution. About a dozen ports in Tianjin, Hebei, and Shandong and Liaoning provinces are covered by the ban.
Tianjin’s municipal authority, which has been under closer public scrutiny with regard to environmental protection since the deadly chemical explosions at its port in 2015, took a bold step this month when it brought the date of the ban forward to the end of April in a bid to cut emissions and curb the city’s deteriorating air quality.
In 2016, over 68 million tons of coal was unloaded from trucks in northern China ports, including Tianjin’s. The ban on coal-carrying trucks means mine owners and traders must seek alternative methods of transport, mainly by train.
“Railway lines in eastern China have been electrified. (We hope) to use railway transport as much as possible, rather than road transport,” said an official at the Ministry of Environmental Protection who declined to be named.
A source with knowledge of the new policy said diesel-powered trucks, many of which have been using substandard fuel, contribute 70% of nitrogen oxide emissions and 90% of particulate emissions, the main cause of the toxic smog that frequently engulfs northern China.
But skeptics say banning coal-carrying trucks will do little to reduce emissions as truck drivers will find other business as long as there is a demand for low-cost road transportation.
While the effect of the policy on the air is yet to be seen, its implementation has sent shock waves through the transportation and coal industries. Several industry experts told Caixin that they expect to see a significant chain reaction from the new policy, affecting not only truck drivers, but also coal mines, port operators and the railway system.
The Tianjin port’s limited railway connections make it particularly reliant on truck transport. In 2016, 104 million tons of coal was shipped out, nearly 54% of which arrived at the port in diesel-powered trucks.
Cheaper transport costs combined with greater flexibility makes roads a more-attractive means of transport for coal traders to send products to Tianjin. The average cost of each ton of coal sent by truck from mines in Shanxi, Shaanxi and Inner Mongolia is 15 yuan ($2.20) lower than those sent by train, according to an executive of a logistics firm in Tianjin.
In 2016, coal products transported by truck contributed 11% of the Tianjin port’s revenue, or 1.4 billion yuan. Meanwhile, heavy-duty trucks unloading coal usually take iron ore stored at the port on their return trip for distribution to steel plants throughout neighboring Hebei, generating extra revenue for both the drivers and the port. Iron ore leaving Tianjin on trucks generated 1 billion yuan in revenue for the port last year.
The ban on coal-carrying trucks will hurt the Tianjin port as it will have to give up a huge part of its revenue, according to a source at Tianjin Port Holdings Ltd., the port operator.
Also opposed to the ban was the Ministry of Transport, which mainly oversees road and maritime transportation, with concerns that a ban on coal-carrying trucks “will affect the stability of the transportation system,” a source close to the ministry said.
But the ban won support from the Ministry of Environmental Protection, China Railway Corp., the state railway operator, and authorities in Beijing and Hebei, and was passed in February.
There is still some debate about the policy’s economic impact. An environment ministry estimate showed that halting coal-carrying trucks to Tianjin port and closing all coal storage yards would result in an annual decline of 670 million yuan in the city’s gross domestic product, which stood at 1.8 trillion yuan in 2016.
But a port employee disagreed. “It is impossible to calculate the loss (caused by the ban) to businesses related to coal transport including logistics, storage, financial and other services, as well as futures companies,” said the employee.
According to mining industry experts, transportation costs account for 35% to 50% of the coal industry’s total costs. The ban on truck transport is expected to push up coal prices as well as prices of other minerals such as iron ore, adding pressure to small steel mills.
Logistics companies and private coal traders that have worked with Tianjin’s port for a long time will be affected most. Smaller players will be forced out of the market, said a logistics firm executive.
The ban “will greatly raise the threshold for coal trading business. In the past, a small trader could start a business with as little as 500,000 yuan capital, but in the future, traders will need at least 5 million yuan,” said a coal trader, citing rising costs and longer cash flow periods for railway transport.
China’s rail operator is getting ready to take over the transport of coal from trucks, which is expect to give a boost to its business after a four-year decline in freight volumes. China Railway Corp. has promised to add 3,000 freight cars to support rising coal transport demand.
Increasing railway transport of coal will also benefit ports neighboring Tianjin that are better connected to the rail network, according to a manager at Hebei Port Group Co. Ltd., who expected a big rise in coal turnover at the Qinhuangdao port in Hebei.
Qinhuangdao’s port is already China’s largest coal terminal. In 2016, it handled 160 million tons of coal, and has a total capacity of 250 million tons.
Shenhua Group Corp. Ltd., the country’s largest coal miner, which operates its own rail line and carriages, is also expected to benefit from the new policy as small miners who can’t afford the rising costs may choose to sell their products to Shenhua at low prices, a private coal mine owner said.
By controlling the transport capacity, Shenhua will be able to further consolidate upstream coal resources, the manager said.
Contact reporter Han Wei (firstname.lastname@example.org)
Aug 22 17:59
Aug 22 17:21
Aug 22 16:17
Aug 22 15:33
Aug 22 13:34
Aug 22 12:18
Aug 22 12:26
Aug 22 11:38
Aug 22 10:14
Aug 22 05:45
Aug 21 17:33
Aug 21 17:59
- 1Editorial: How Should We Remember Deng Xiaoping’s Legacy?
- 2Ikea to Invest $1.4 Billion in China With Focus on E-Commerce
- 3CX Daily: Hong Kong Cuts GDP Growth Forecast, Announces Stimulus Amid Unrest
- 4Huawei Says Second Reprieve From U.S. Blacklist Won’t Have ‘Substantial Impact’
- 5 Opinion: Trump’s Manipulation of Currency Manipulation
- 1Power To The People: Pintec Serves A Booming Consumer Class
- 2Largest hotel group in Europe accepts UnionPay
- 3UnionPay mobile QuickPass debuts in Hong Kong
- 4UnionPay International launches premium catering privilege U Dining Collection
- 5UnionPay International’s U Plan has covered over 1600 stores overseas