In a recent webinar on rail freight, logistics experts and industry insiders discussed Hungary’s ambition to become a vital transit hub for rail freight in Europe. The conversation, hosted by experts in the field, provided insight into the challenges and opportunities for Hungary’s rail freight sector. One key obstacle highlighted throughout the discussion was the issue of cost.
Sofia Burna Asefi, a consultant from the Risk Advisory Group, shared her expertise on Hungary’s role in rail freight logistics. She emphasised that transshipment poses a complex supply chain challenge for many companies operating in the region. Hungary serves as a crucial point in the transit of goods between Europe and Asia due to its strategic geographical location. However, several challenges hinder Hungary’s ability to fully realise its potential as a transit country.
These challenges include transit infrastructure issues with Ukraine, port congestion, fiscal interference in certain sectors, and operational difficulties. Sofia highlighted that these issues are not easily fixed and require long-term solutions. Nevertheless, Hungary remains an attractive option for logistics and transport companies due to its strategic position bridging Europe and China.
The discussion also touched on the need for infrastructure development in Hungary. While there are ongoing projects to improve infrastructure, such as the TRACE project aimed at expanding facilities in Budapest, there is a demand for more logistics hubs, warehouses, and efficient data systems. Ensuring a smooth flow of goods requires addressing various operational challenges and ensuring secure cargo handling.
The experts noted that competition is rising in Central and Eastern Europe, with countries like Serbia, Slovakia, and others investing in infrastructure projects to enhance their rail freight capacities. In response to this, Hungary is focusing on the expansion of logistics hubs beyond Budapest to meet the growing demand.
Hubs needed beyond Budapest
Martin Koubek from Metrans highlighted the importance of investing in locations beyond Budapest to create a more comprehensive network for cargo distribution. He emphasised that the infrastructure and the government’s support play a vital role in making Hungary an efficient transit hub.
Dmitrij Hasenkampf from RTSB supported the idea that the necessity for additional hubs beyond Budapest is driven by the growing cargo volume. The development of new hubs requires not only infrastructure but also connectivity to other European countries.
Challenges and Opportunities in the Shift to Rail
Sofia Burna Asefi emphasised that politics, economics, and business risks must be considered when evaluating Hungary as a transit country. Political risks in Hungary, particularly in terms of ownership and transparency, need to be assessed. The relationship between Hungary, China, Russia, and the EU plays a significant role in shaping the logistics landscape.
The discussion also touched upon the shift to rail, which has been gaining momentum in the region. It was noted that rail offers competitive lead times compared to road transport. The presence of reliable rail lanes to Serbia and other destinations within Hungary is improving the feasibility of rail freight. Rail providers are working to enhance transit options beyond Budapest and develop a more extensive network in the country.
Despite the challenges, Hungary’s ambitions to become a transit country for rail freight remain intact. The experts recommend that logistics companies conduct thorough due diligence, choose reliable partners, and consider the full supply chain and transportation routes when entering the market. The shift to rail in Hungary is gradually gaining momentum, offering more efficient and cost-effective alternatives for cargo transportation.
The Promise of Reliable Lead Times
Srdjan Zekovic from Van den Bosch, a key player in the logistics industry, began the discussion by highlighting how rail transport in the Balkans has come a long way. He expressed early doubts about the reliability of rail and the astronomical lead times it often entailed. However, a breakthrough came when the promise of delivering cargo from Serbia to the Netherlands within seven days became a reality. Zekovic explained that these lead times were now workable, making rail a viable option, especially as customer expectations adapted to these faster transportation options.
Budapest as a Hub for the Balkans
Zekovic shared a crucial insight from his experience. Three years ago, there were no intermodal rail lanes into Serbia, which hampered efficient transportation. Budapest emerged as a mature and well-established transport hub, bridging the Western markets and the Balkans. To utilise this opportunity, goods had to be transported to Budapest, where they could be collected and then brought back to Serbia. Despite initial challenges and delays, this approach worked within a week, showcasing the potential of rail freight in the region.
The Budapest-Belgrade Rail Line
The highlight of the discussion was the Budapest-Belgrade rail line, which promises to revolutionise the Balkan freight landscape. Expected to be ready by 2025, this project has generated significant excitement. Construction activities are already underway, with substantial investments made and the development of new terminals in Belgrade and along the rail line.
Improved Connectivity and Market Access
Zekovic was cautiously optimistic, emphasizing that while the line was being reconstructed, the rail industry had already laid the groundwork for intermodal transportation between Budapest and Serbia. The forward-thinking rail operators identified market needs and created opportunities even before the high-speed rail line was officially operational.
The Budapest-Belgrade line will introduce a reliable, high-frequency rail connection that optimises lead times, cargo capacity, and supply chain reliability for customers. Importantly, it will bring Central and Eastern European countries closer to the Balkans and improve the connectivity to markets in Macedonia, Greece, Bulgaria, and beyond.
The discussion also delved into the challenges of extending rail connectivity throughout the Balkans. The “chicken and the egg” situation emerged as a recurring theme, with stakeholders debating whether the absence of rail lines was due to a lack of cargo or a lack of infrastructure. Finding a balance between developing infrastructure and increasing the cargo volume was identified as a critical next step in furthering the rail industry in the region.
China’s perspective
The conversation extended to the Chinese perspective, with Jackie Yan from New Silk Road Intermodal sharing insights into how China views Hungary, particularly Budapest, as a transshipment hub. She pointed out that Budapest’s reliability and good relations with China have made it a favored hub for Chinese logistics companies.
Discussions also touched upon alternative routes, such as the Adriatic ports, the Middle Corridor, and the Greek gateway. While the Middle Corridor faced challenges, the route from Koper in Slovenia to Budapest was highlighted as a promising alternative. Nevertheless, Budapest remained the go-to hub for Chinese logistics.
Photo: Globetrotter19, CC BY-SA 3.0, via Wikimedia Commons