CNR on straight line to success in emerging markets

African nations are driving the fast growth of China's major producer of rolling stock

The global market share of China CNR Corp Ltd, one of the country's top train manufacturers by production capacity, is being lifted by surging orders from emerging economies that are upgrading their rail systems to expand services and improve trade logistics.

Opportunities include an upgrade of the Rio de Janeiro Metro in Brazil ahead of the 2014 FIFA World Cup and the 2016 Summer Olympics, construction of a light-rail system in Addis Ababa, Ethiopia and a number of railway projects in South Africa, Nigeria, Argentina, Turkey and Uzbekistan.

Yu Weiping, vice-president of CNR, said most governments in Africa, South America and Central Asia realize that underdeveloped infrastructure remains a major obstacle to economic growth.

"China's experience demonstrates that national rail networks not only bring benefits to domestic and regional trade, they also make it easier for people to move around, and that creates more business opportunities," Yu said.

Restricted by backward or nonexistent rail systems, many countries in Africa and South America face difficulties exporting farm products or mineral resources, as well as developing their tourism and logistics sectors.

Brazil is keen to boost its economy through sports. It turned to the World Bank to help finance a $12 billion effort to prepare for the World Cup and Olympics. Part of that effort involves an order for 90 electric multiple-unit trains from the train maker.

The EMU train, a new product from CNR Changchun Railway Vehicles Co, has four carriages and can travel at up to 100 kilometers per hour. These trains are equipped with a single air conditioning unit that allows the train to operate in temperatures as high as 56 C.

"These new trains will be used on line four between the Olympic village and the Copacabana game center in Rio de Janeiro. An EMU train can carry up to 1,300 people, which will ease traffic jams," Yu said.

In comparison with car-dominated urban traffic systems, urban light rail services generate fewer emissions and feature lower costs. They're ideal for mass transportation systems, especially in major cities or tourism destinations.

EMU shipments to Brazil began in February, and there are 30 EMUs operating in Rio de Janeiro.

Another 30 will be put into service before the World Cup starts in June. The rest of the order will be completed by the end of this year.

CNR is also providing rolling stock for subway lines 1 and 2 in Rio de Janeiro this year. The company has a technical team of 60 people in the city to oversee operations and offer practical advice or technical solutions to their Brazilian clients. The team will stay there until the end of the World Cup.

Boosted by surging foreign orders, CNR's export sales rose 40 percent last year to $1.7 billion.

"Africa is another hot market," Yu said. "Large parts of the continent are still struggling to develop their infrastructure, especially rail, port and road facilities."

Yu said that improving the infrastructure can help Africa urbanize and industrialize. Even though African infrastructure spending is in its early stages, Yu said, "it could have meaningful economic implications because it comes at a critical time, when the world is counting on emerging markets, especially Africa, to revive the global economy."

African governments, instead of concentrating investment overwhelmingly in farming, mining, energy and military development as they did previously, are allocating an increasing proportion of their foreign reserves to build and improve their railway networks.

As a result, the continent has become one of the largest markets for CNR to fuel its overseas growth.

The Chinese company's products such as locomotives, trams, freight and passenger cars are in use in more than 16 African markets, including Ethiopia, Tanzania, Zambia, Angola, Nigeria, Mozambique and Sierra Leone.

The company recently sealed a deal with Ethiopia to supply 41 light rail cars for use in Addis Ababa, with a contract value of $475 million. The cars will be built by China CNR Changchun Railway Vehicles. The groundwork will be carried out by China Railway Engineering Corp.

"Addis Ababa is 2,400 meters above sea level, so the carriages need to be able to withstand the harsh effects of ultraviolet rays. Moreover, Ethiopia has a long rainy season, which makes it imperative for the carriages to be extremely resistant to water and lightning," said Liu Gang, general manager of the international division of CNR's Changchun branch.

The first cars are to be delivered in August for test operations. The entire system is scheduled to start running by the end of this year.

The Chinese company will also supply 30 cars that will run on the new Addis Ababa-Djibouti rail line. The rail project will connect the Ethiopian capital to the nation's major port and spur economic activity.

"Africa has abundant natural resources and a large population, but its rail network is backward, with insufficient rail passenger and cargo resources," said Zhu Xiaoning, a professor of traffic and transportation at Beijing Jiaotong University.

Africa's chances to participate in global trade will continue to increase and the demand for rail transportation will rise.

"Because Africa's heavy industry cannot meet the continent's demand for rail products, China will become the main provider of railway equipment in Africa," said Zhu.