The Chinese government may adjust up freight rates for rail cargo transport after the Lunar New Year holiday, the Shanghai Securities News reported, citing sources with two listed companies. 

The government would increase rail freight rates by 0.03 yuan/t.km or so from the current average of 0.13 yuan/t.km, representing a growth rate of about 20%, the report said.

It’s most likely that the government may raise the freight rates first by 0.015 yuan/t, and another 0.015 yuan/t.km in a later time, an unnamed source with one listed chemical company was cited as saying.

Industry insiders consider the increase acceptable and would have little impact on the economy. The ideal rail freight rate should be within the reasonable rail/road freight rate ratio of 30-40%, or around 0.16 yuan/t.km, compared to the road transporting cost of 0.5 yuan/t.km, analysts said.

The actual changes, however, should be subject to the official document to be jointly released by the National Development and Reform Commission and the China Railway Corp.

If implemented, it would be the tenth time for China to increase rail freight rates since 2003, following a 0.015 yuan/t.km increase in February 2013.

While it is the inevitable trend for rail freight rates to increase amid the government’s market-oriented reforms, coal companies would face higher cost pressure as weak demand for the fossil fuel hinders transfer of the increased cost to end users.

In China, coal transport accounts for more than half of the total cargo transport by railway. Data showed that China’s railways transported 2.32 billion tonnes of coal in 2013, up 2.6% year on year.