Analysis of the round-trip cost of road container transportation in China

With the rapid growth of China's foreign trade, the cargo consolidation and distribution through ports has created increasing demands on road container transportation. Road container transportation, however, has not played a big role in supporting the inland economy as expected, and some large companies have even exited the market. This study develops a roundtrip cost model to investigate the cost impact on road container transportation. Study results showed that freight rates have remained low, while fuel prices, which are one of the most important cost factors, have soared in recent years. The average cost per ton-kilometer (ton-km) under normal transportation conditions is almost equal to or even higher than the average freight rate. The fundamental issues of Chinese road container transportation are twofold. First, the fixed (regulated) freight rates prohibit road container transportation companies from raising revenue. Second, the continual rising cost factors have squeezed the profit margin of container trucking operators to zero or even negative levels. To increase their revenues, the road container transportation companies should develop more value-added services for customers or engage in industry alliances, rather than focusing on cutting their operational costs.