China Trains | Lars Nennhaus

🎥 Jun 05, 2018 📺 The New Silk Road Project ⏱ 20m 👁 142 views

Lars Nennhaus, Managing Director and Head of Development and Strategy at Duisport, discusses the Xi JinPing’s visit to Duisport in 2014, the symbolic journey of the Chongqing-Duisburg ‘Silk Road’ train and the changes in German-Sino relations. The New Silk Road Project (www.thenewsilkroadproject.com) channel features interviews from key actors and academics related to China’s Belt and Road Initiative, focusing on its trade and foreign policy aspects. In June 2018, the team travelled from London to Yiwu in Eastern China documenting some of its key emerging economic corridors and conducting in...

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Transcript (24 segments)

Charles Stevens0:02

Hello and thank you for tuning in to the podcast series by the New Silk Road project. I am your host today, Charles Stevens, founder of the New Silk Road project. This series is dedicated to understanding China's Belt and Road Initiative. We traveled from London to Yiwu in eastern China, interviewing key actors and academics. We apologize for the variable audio quality. We hope this series sheds light on China's growing global presence. A 190-kilometer drive took us from Rotterdam to the dry port of Duisburg in Germany, a multimodal hub where we spoke to Lars Nennhaus, managing director and corporate strategist at Duisport, which Xi Jinping visited in 2014 to understand its role in the Belt and Road initiative.

Lars Nennhaus1:34

I have been with the company for seven years, responsible for corporate development and strategy. Our main focus over the past years has been on developing transcontinental train connections to China. It all started a couple of years ago when we had the visit of Xi Jinping in 2014. At that time, he welcomed one of the first trains from Chongqing to Duisburg. This train symbolized the New Silk Route development. Since then, we have seen huge growth. Last year we handled close to 2,000 China trains starting and arriving in Duisburg. We expect to handle more than 5,000 trains within the next two to three years. We are working proactively with our Chinese and European partners to increase this development.

Charles Stevens3:27

On your website you describe yourself as a trimodal logistics hub. What does this mean and why is this the best approach?

Lars Nennhaus3:35

Trimodal means we have all possibilities to handle trains, ships, and trucks. Last year we handled more than 20,000 ships and 25,000 trains – over 400 trains weekly. We are responsible for close to 1,600 hectares of logistics base and 2.2 million square meters of covered warehouse facilities. The port of Duisburg is located directly on the River Rhine, Germany's most important waterway. Several rail operators connect Duisburg with more than 100 destinations all over Europe. I often say if you are in Duisburg, you are automatically in Italy, Great Britain, Spain, because of these high-frequency connections to industrial and logistic areas across Europe.

Charles Stevens5:03

As the largest inland port in the world, what have you been doing and what will you be doing to optimize transportation trains and links?

Lars Nennhaus5:13

We are preparing our infrastructure, superstructure, and logistics network for our clients. We have huge development in increasing our logistics base. We always ask what our customers need. Nearly all global logistics players provide services out of Duisburg, such as Dachser, Kuehne+Nagel, DB Schenker, and others. For example, Volkswagen has its largest CKD facility in our port. We ask what they need, and if they need a higher frequency connection to Rotterdam, we can install it. We have our own logistics department and we establish what is needed in addition to customer demand.

Charles Stevens7:04

Thank you. You mentioned the new New Silk Road trains. I understand the number has been increasing but they are still heavily subsidized. Do you think they offer an effective value proposition and return when China drops the subsidies?

Lars Nennhaus7:20

From our discussions at high government levels, the subsidies will be reduced. As I learned in university, subsidies are only good for stimulating business. Now the trains are running on a regular basis. It is up to us and our clients to increase the number of trains, make the connection stable, and bring the lead time close to 10 days between mid-Europe and mid-China, from Duisburg to Chongqing or Chengdu. These train connections are really an alternative to air freight. We are convinced subsidies will be reduced, but there may be some subventions on main corridors.

Charles Stevens8:42

There is the eastbound-westbound imbalance in trade. How are you hoping to address this so you are not sending back empty trains?

Lars Nennhaus8:53

The ratio was one to four, four trains coming from China and one leaving Duisburg. Now the ratio is one to two. We are actively stimulating business with our clients. We have a huge customer base in our port and in North Rhine-Westphalia, the strong industrial backbone of Germany. Many shippers are now asking to use the trains. It is a natural development, and hopefully we will come close to a ratio of one to one. But this will take time because production of consumer goods is located in Asia. You need logistic concepts to combine train connections with pre-production facilities in Europe and combine the transcontinental train with the maritime Silk Road to organize empty container flows.

Charles Stevens10:54

Very well positioned to be and continue to be the largest inland port in the world. How are you dealing with competition from other players like Malaszewicze, the Port of Rotterdam, and the Rotterdam-Tilburg chain?

Lars Nennhaus11:09

We don't see this as competition. At the end of the day, it's important for our customers. We have the same customers in our port and in the Port of Rotterdam. Customers ask for frequent and stable connections. Every train that runs supports this initiative. We are in several working groups and will sign a cooperation agreement in Chengdu with relevant players to develop specific train connections based on customer needs. We see all these developments as supporting the initiative.

Charles Stevens12:20

I've read the trains can be vulnerable on certain routes to security risks, along the CPEC corridor in Pakistan or elsewhere. Do you feel along the routes you are currently using that this is a problem?

Lars Nennhaus12:35

I don't see that as a huge problem. There are more challenges on the climatic side. The train has to pass through several climatic zones, from very cold in Kazakhstan winter to very hot in summer. For a container full of electronics, you need heating and cooling systems. Also, when the train is going through thousands of kilometers, you need maintenance and repair stations in case of accidents. These are challenges many companies are working on. We should focus on those rather than security risks, which come automatically.

Charles Stevens13:53

With the development of the subway route, with electrification of the trans-Caspian line and the Kazakhstan-Turkmenistan-Iran-Baku rail, is this something that Duisport is looking at utilizing this more southerly route?

Lars Nennhaus14:13

We believe there will not be just one Belt and Road connection, but several. There will always be a connection via Russia because the automotive industry clusters in northern China, so it makes sense to connect there. There will be a connection through Kazakhstan and a southern corridor. We look at focal points and customer needs. Some connections will be faster, some can carry additional cargo. Every alternative will be valuable for customers.

Charles Stevens15:05

You wrote two years ago that trains from China do not only carry commercial goods but also political ambitions. How are you balancing your strategic cooperation with the Belt and Road Initiative as well as aligning with Germany's political agenda?

Lars Nennhaus15:23

First and foremost, we are responsible for our customers and their needs. I am not a politician. But we have public shareholders. When we signed our first cooperation agreements and welcomed President Xi Jinping, we asked the provincial government. The Vice Chancellor of Germany at that time, Sigmar Gabriel, joined us when we signed a cooperation agreement in China. That may answer your question.

Charles Stevens16:13

Thank you. In your opinion, what do you see as the greatest challenge to the Belt and Road Initiative in the next five years?

Lars Nennhaus16:25

I see both opportunities and challenges. The opportunity is that China will be the leading trading partner for Germany in Europe. We can build sustainable partnerships on both sides, with equal investments, not just buying and consuming. We need cross partnerships on a long-term basis. The precondition is a win-win situation. It is not good to be dependent on your partner. We must figure that out before entering partnerships. We are lucky to have such partnerships and need to continue developing them.

Charles Stevens17:55

You have a considerable network spanning across Eurasia. Are you looking to opportunities in Africa or Latin America, or further afield?

Lars Nennhaus18:06

Our focus is 99% on existing clients and on these China trains. In the past, we developed a master plan for the government of Sao Paulo to support the largest port in Latin America and connect Santos with Sao Paulo. So we do such consulting when existing customers ask for support in Africa or elsewhere, but our main focus is on existing business. The port is now 300 years old, and we have partnerships that will continue for many years.

Charles Stevens19:28

Last couple of questions. If you were going to summarize the Belt and Road Initiative in a single word, what would that word be?

Lars Nennhaus19:40

Maybe towards huge opportunity. Huge opportunity. But I have a lot of homework to do. My personal wish is that the European Union and European countries have an answer to this Chinese initiative as Europeans, to combine it with our own developments like the Trans-European Corridors, and to build sustainable partnerships for the future.