October 14, 2016

Hyperloop One in talks to connect Russia and China with a cargo Hyperloop and get $50 million in funding from Dubai

Hyperloop One talking to Russia about a cargo Hyperloop to connect Russia with China

The model for the Hunchun-Zarubino cargo system assumes six containers departing per minute, 20 hours a day, 365 days of the year.

A Hyperloop involves using magnets to levitate pods inside an normal pressure tube. Fans blow on the pod blow air around the pod to enable speeds of just under mach one 750 mph (1,200 kph).

Hunchun, like so many of China’s new boomtowns, is a thriving manufacturing center with a growing population of 250,000. It’s a bit off the beaten path, tucked up North into a strategic nook near the borders of Russia and North Korea. But Hunchun, being so close to the border, boasts the largest logistics terminal in northeastern China, preparing textiles, electronics, grain and automobiles for export.

If only Hunchun had an easier way to get to the coast. Unlike the far bigger export hubs to the south, Hunchun is separated from the Pacific by rugged mountains. Sure, there’s a new $6 billion passenger high speed rail link between Hunchun and the provincial capital of Jilin to the east, but to the west and south Hunchun is hemmed in by Russia's Primorye region. In winter months, roads are often impassable.

Russian economic planners have long had their eyes on developing better, faster links between China’s interior and deep water, ice-free ports along the Primorye coast south of Vladivostok. Demand for export of goods from Hunchun’s logistics center is projected to surpass 40 million tons per year by 2030. There happens to be a couple of optimal places to build a port. One of them is the seaside town of Zarubino, which had long been a fishing village until Russian government began taking steps to develop a cargo export operation there several years ago. With a little vision, investment and long-term planning, Zarubino has the potential to become an important stop on the global cargo circuit. All it needs is a direct, high-capacity link back to Hunchun and its surrounding region.

That’s where the Hyperloop enters the picture. Hyperloop One's Executive Chairman Shervin Pishevar met in June with Russia's transport minister to confirm plans to develop a passenger system for the Moscow area and a cargo route in Russia's Far East. Last month Hyperloop One and Russian investment firm Caspian Venture Capital presented a preliminary feasibility study for that latter option: use of Hyperloop technology to connect Hunchun’s logistics center with the planned Zarubino port. The study, carried out by transport institute MGTNIIP, which has offices in Moscow and Irkutsk, confirms that an investment in a Hyperloop One system can generate a sizable operating profit transporting cargo on the Hunchun – Zarubino line.

The model for the Hunchun-Zarubino cargo system assumes six containers departing per minute, 20 hours a day, 365 days of the year.

The system calls for building twin Hyperloop tubes on columns that would thread through the terrain for the 65 kilometers between Hunchun and Zarubino. That’s a short enough route not to the break the bank but long enough to take advantage of the energy efficiency of Hyperloop cruising speeds. The project as proposed would be built in two stages commencing in 2020 and 2023 with a total estimated capital cost of $1.5 billion to $2.3 billion. By the time both stages are completed and operational, cargo demand for the Zarubino Hyperloop is projected to be roughly 900,000 TEUs per year, equivalent to half of the current volumes at the ports of Houston, Genoa, or Fuzhou. (An TEU, or twenty-foot equivalent unit, is a standard unit of measure in the container cargo business.) The system when fully operational would incur $77 million in annual operating costs and operating income of close to quarter billion dollars a year. The line’s maximum capacity would be 50 million metric tons in each direction, which would propel Zarubino into the ranks of the world’s 50 busiest container ports.

Hyperloop is often associated with speed, as in a system capable of moving at 1,000 kilometers per hour quietly and comfortably. But for cargo use, speed is not the primary factor. Shippers want availability, or system uptime, which is one of Hyperloop’s advantages over rail or roads. The model for the Zarubino study assumes six containers departing per minute, 20 hours a day, 365 days of the year. Being an autonomous system enclosed in a tube eliminates a lot of safety hazards such as grade crossings, but also takes weather and operator error out of the equation. And it’s not as if the cargo is inching along. Average speeds attainable on the proposed line would be 540 kilometers an hour. Shippers also get flexibility. A Hyperloop can send a container when it is received instead of waiting for a mile-long train to be loaded with hundreds of other containers. Its magnetic non-contact traction allows it to climb grades three times steeper than the 5% for traditional freight rail, which will come in handy in the mountainous region between Zarubino and Hunchun.

If the project gets the green light from Russian and Chinese authorities, it will take 2 or 3 years to prepare the detailed feasibility study and work with regulators to update the operating framework before construction begins in earnest. Project co-developer Caspian VC, also an investor in Hyperloop One, is the venture arm of Summa Group, a diversified industrial firm based in Moscow with interests in logistics, oil pipelines and port infrastructure. Its chairman Ziyavudin Magomedov has made it a goal to bring Hyperloop to Russia and envisions a day when cargo can zip overland at subsonic speeds from China to Europe across the vast Russian interior. It’s a wildly ambitious idea with world-changing potential, reducing the time it takes cargo to get from East to West from weeks to hours.

Hyperloop One has raised an additional $50 million as it prepares for a full-scale test of a Hyperloop system in the first quarter of 2017. Hyperloop One got its latest round of funding from DP World Group of Dubai. The $50 million takes its total funding to $160 million.

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