Shippers considering tougher penalties cancel China-Europe rail reservations
Shippers are canceling China-Europe rail freight bookings amid intense speculation that sanctions could prevent freight from passing through Russia.
According to Scan Global Logistics, China-Europe rail freight remains operational “for now”, despite crossing Russia and Belarus.
The freight forwarder said: “Russian Railways is included on the US sanctions list, however, there is no ban on transportation through Russia as we speak.
“The main focus is on the potential impact of Russia’s exclusion from the SWIFT payment system and how Chinese rail freight providers will respond to it. For now, it is considered that transactions can still take place.
“But it is expected that rail freight will eventually be impacted and delays will come.”
Indeed, whether the sanctions will force trade through Russia to a halt may be a moot point, given the one-sided mitigation of risk that shippers and freight forwarders are likely to take.
For example, Flexport immediately stopped taking bookings for its Trans-Siberian rail service, and yesterday Maersk – a strong supporter of the Russian rail route, given that it avoids congestion hotspots on the China-Kazakhstan border – announced its intercontinental rail transport to and from Russia would be temporarily suspended.
Jacky Yan, founder and CEO of New Silk Road Intermodal, said shippers had started canceling bookings due to fears over penalties and insurance.
He said The Loadstar“Currently, most trains go through Russia and Belarus to Poland, so the service remains unchanged. Similarly, the train passing through Ukraine was diverted to Malaszewicze in Poland, and the train to Kiev was stopped because of the war.
“The sanctions against Russia have caused problems with payment for US dollars, we have seen reservations canceled because of this, and some reservations canceled because of fears of damage to the cargo.
A Taiwanese electronics maker has suspended reservations with China Railway, fearing its cargo could be “stranded at the Russian-Polish border”.
Lars Jensen, founder of Vespucci Maritime, said that unless there is a major change in the Russian-Ukrainian war, “it seems clear that all shippers, carriers and freight forwarders must at least have plans to emergency in place for a complete cessation of services”. in Russia, potentially within days.”
China-Europe rail freight has become increasingly popular over the past two years, given the Covid crisis and the impact on sea and air freight, and last year volumes jumped by 29%, to 1.46 million teu.
“The biggest potential ripple effect now would be if the overland rail link between China and Europe were disrupted,” Mr Jensen said. “Currently, throughput on the rail link is around 500,000 TEUs. If this stopped, it would add nearly 10,000 TEUs per week to demand to Asia-Europe [ocean] services, where it would compete for space on ships that are already full.
“Rail line freight is usually where the shipper emphasizes speed and is willing to pay higher freight rates, and therefore if that freight was redirected to ocean services, it could deduct some of the lower value cargo on these ships.