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China-Europe rail under threat as shippers exit Russian route

Volume handled on the northern China-Europe rail route jumped 30 percent in 2021 as shippers searched for alternatives to congested ocean trades. Photo credit: Metrans.

The China-Europe rail network is facing massive disruption with a huge drop in volume expected on the northern corridor — conduit for more than 90 percent of the trade — that can’t to be absorbed by capacity-constrained routes to the south that avoid Russia and Belarus.

A total of 1.46 million TEU was carried on the China-Europe rail in 2021, an increase of almost 30 percent year over year as shippers forced out of the heavily congested ocean shipping trades turned to the rails. The middle corridor handled about 4 percent of that total last year, but forwarders are already reporting growing congestion.

Martin Koubek, director of the Silk Road and CIS for intermodal operator Metrans, told JOC.com Wednesday he is expecting rail freight along the northern corridor to fall by up to 80 percent compared with the first quarter of last year as clients avoided routes transiting through Russia.

“Trains are still running, but some clients have stopped sending cargo on these trains due to transit through Russia,” he said.

Nils Mueller, manager of rail at DSV Air and Sea Germany, told a Railfreight.com webinar there was “a clear lack of capacity” on the middle corridor. “The volume on the north corridor is too much to shift to the middle corridor,” he said.

Trains on the middle corridor from China typically travel through Kazakhstan, Russia, and Belarus before entering Europe through the Polish border crossing at Małaszewicze. To avoid Russia, services are being diverted via the Caspian Sea to the south, a far longer and less developed route.

Cankat Yildiz, a director at Middle Corridor Logistics, also highlighted the lack of capacity on the middle route. “We cannot carry all the northern corridor cargo and we need to produce more multimodal solutions to cope with the increasing volume,” he told the webinar.

Fears of Moscow retaliation to EU sanctions

Container shipping companies were quick to suspend bookings to and from Ukraine in the days after Russia invaded on Feb. 24, and soon extended the booking suspension to Russian and Belarusian cargo. The European Union and North America banned Russian aircraft from their airspace and Russia returned the favor, adding to flight transits and cutting air cargo capacity.

While sanctions imposed on Russia and Belarus by the European Union following the invasion of Ukraine do not forbid the transit of China-Europe rail cargo through the countries, there is growing uncertainty over how long Moscow will allow trains to transit the country considering the sanctions from the European Union. Cargo owners and forwarders have also expressed concern that they will be indirectly funding Moscow by using state-owned Russian Railways.

This has led to a host of global forwarders announcing a stop on handling rail freight that travels via Russia and Belarus, in addition to their suspension of all cargo bookings to and from both countries. Among those forwarders are Kuehne + Nagel, CEVA Logistics, DHL, and DSV. Maersk has also suspended moving rail cargo through Russia.

“Kuehne + Nagel had to stop the acceptance of bookings for rail transport [on its Eurasia Express] to and from Europe, as these transports pass through the Russian Federation,” the forwarder noted in a customer advisory this week.

“CEVA Logistics will no longer transport shipments to, from, or through Russia,” was the terse advisory recently from the CMA CGM subsidiary.

Maersk on March 4 announced a suspension of all Asia-Europe rail bookings on its sea-air services that use the trans-Siberian route through the length of Russia and emerge at the Baltic Sea.

Some Europe-bound cargo still running through Russia

However, not all forwarders have stopped transporting rail freight through Russia on services from China into North Europe. DB Schenker told JOC.com its rail transit from China to Europe through Russia and Belarus «is operational,», while a spokesperson for Nunner Logistics who did not want to be identified told JOC.com the Netherlands-based forwarder was currently moving 600 TEU per week along the China-Europe northern corridor through Russia.

With uncertainty over how long Russia will allow cargo bound for Europe to use its territory, the Nunner spokesperson said the forwarder has teamed up with Europe’s main rail freight terminal of duisport in Germany and Chinese rail logistics group Tiedada to offer a middle corridor service from China to Europe that travels to the south of Russia and Belarus.

About 80 TEU per week is using the middle corridor from China — moving via Kazakhstan, but then crossing the Caspian Sea to Azerbaijan, continuing through Georgia to Izmit in Turkey, and then a short-sea trip to Istanbul and on to Trieste in Italy before being railed to Duisburg for all containers destined for the Ruhr area and Benelux. Containerized cargo for the UK and other overseas destinations is railed to Amsterdam.

Duisport told JOC.com in an emailed response to questions that trains from China to Duisburg via the “new Silk Road” and passing through Russia and Belarus were still running according to schedule, but that some customers were suspending their overland shipments through Russia for the time being and looking for new options for China-Europe cargo. The partnership with Nunner and Tiedada through the Caspian Sea was one of the alternative routes.

But even as forwarders scramble to offer alternatives for cargo from China that avoid Russia, Ukraine, and Belarus, a DB Schenker advisory issued recently ended on an ominous note.

“Please be aware that the conflict also has the potential to affect consignments to and from other eastern European countries,” the forwarder noted, adding that although all consignments in the region were currently running as usual, «we are working on contingency plans for a number of different scenarios.”