The Sino-Russian roulette of coal flows; a multimodal optimization

The remarkable growth rates of the Chinese economy over the past decade have driven the world trade and have positioned the Asian country as the destination and origin of several international transportation routes. Bulk trade of iron ore and coal as major commodities has transformed into a sizable section of Chinese imports that fuels the domestic power and steel industries. Since 2009, People’s Republic of China has endeavored in importing coal from Australia and Indonesia. Production and consumption imbalances along with bottlenecks in the coal transportation system of the country are considered the main reasons that have made it more profitable for coal buyers to import coal than buy from domestic producers. Resource reservation policy and environmental reasons along with the 12th Five Year Plan of China hinder a preservation of the current importing status of the country. That has been the reason for various infrastructure developments in the neighboring Russia which aims to become the major coal exporter to China. Infrastructure developments have also been announced or are already under way in China in order to enable the domestic coal to reach at competitive rates to the final buyers. Therefore this thesis’ research purpose is to estimate the future coal flows in the Chinese market, given the infrastructure developments of China and Russia. In order to find suitable answers, a Linear Programming model has been developed with the purpose to estimate the optimal routes that would minimize the transportation costs of coal flows. Russia was estimated to be the most important coal exporter to China, should the infrastructure upgrades at its’ network take place. Various scenarios were run at which the importance of Bohai Bay’ s and Shandong’s ports was underlined along with the increasing importance of Yangtze River in the coal transportation network of the China. Supply and demand swifts led to different results and highlighted the future role of Russia as the major provider of coal for the eastern coastal regions of China. The findings demonstrated that the increased spending on infrastructure development in the Russian and Chinese coal transportation network will have a great impact on the trade dynamics of the regional market. It is stressed though that several factors should be taken into consideration when estimating future trade flows and not just cost and capacity criteria. Nevertheless, the model constructed could be a good indicator of the impact of infrastructure developments and could have applications on estimating specific infrastructure developments’ impact on trade flows and as a consequence on a socioeconomic sphere.