A direct freight rail connection between the southeast Finland city of Kouvola and Xi’an in central China revved up in 2017. However traffic on the route has almost come to a standstill, even as the city is investing tens of millions in new terminal facilities.
Yle’s investigative journalism programme MOT has revealed that the profitability of the direct freight link from southeast Finland to China relies almost exclusively on Chinese funding. According to MOT, this is a risky situation given that China alone decides on the magnitude of the grants.
According to MOT, financial backing from Beijing could reduce by up to half the prices paid by European freight operators. At the same time, it helps China to increase trading relations with Europe.
China tightens funding criteria
After the rail connection was inaugurated, there was an explosion of freight traffic between China and Europe, much of it inspired by the generous contributions of the Chinese state.
However China soon realised that it was also paying for empty containers to be delivered to its cities from thousands of kilometres away in Europe. As a result the central government in Beijing tightened the rules for granting funding in mid-2018, slowing freight traffic out of Kouvola.
The first year of full operations for the freight line was still reasonable. According to Valery Zhukin, CEO of route operator Unytrade, last year 24 trains travelled between Kouvola and Xi’an in China. However he admitted that the trains were not full.
"The trains were not always full. There were trains that were only one-third or a quarter full. At the time China still allowed this," he added.
He commented that the main reason that the freight trains were empty was a decline in the price of pulp and the deteriorating economic situation in China.
Kouvola sinks €30m in new terminal
Although trains have not been running to China, city officials in Kouvola are still building what will be Finland’s longest loading dock for locomotives. The construction of the terminal is predicated specifically on freight traffic to Asia.
The project has a price tag of 40 million euros, with taxpayers in Kouvola contributing nearly 30 million. It is a staggering investment, especially given that the city still needs to cut spending on basic operations by roughly 20 million euros. The financial situation may even put the city at risk of becoming one of the country’s crisis municipalities that is unable to finance operations.
However city officials have been pointing the finger of blame towards China.
"Over at the Chinese end they have not been as enthusiastic about traffic in this direction. A train should be full in both directions," said Kouvola Innovation development director Simo Päivinen.
Päivinen added that the slowdown in rail traffic is merely a matter of teething problems. The city of Kouvola is currently trying to expand the rail connection to another Chinese city, Chengdu.