China Reportedly Doubled Freight Shipping to Europe Via Russia, Central Asia Before Suez Jam-up
The fate of hundreds of billions of dollars’ worth of global exports were put in limbo last week after a Japanese-owned container ship ran aground in the Suez Canal, with all efforts to dislodge it proving futile. Lloyd’s List estimates that the ship is holding up a whopping $400 million in goods every hour that it remains trapped in the canal.
China has dramatically increased the shipment of goods to Europe using the railway infrastructure in Russia and Central Asia, with freight train transport doubling in the first two months of this year after seeing a similar surge in demand between 2019 and 2020, the Financial Times reports, citing official data cited by Chinese media.
According to the data, over 2,000 freight trains ran between China and Europe in January and February of 2021, about double the rate seen a year earlier during the same period.
Freight train shipping reportedly also saw a fifty percent jump in 2020 compared to 2019, and has climbed a whopping 700 percent since 2016, amid the implementation of China’s ambitious Belt and Road initiative to expand trade and integrate the Eurasian space.
FT says the shorter transit times offered by rail-based shipping, combined with a recent global container shortage, has made overland transport via Russia and the countries of Central Asia an increasingly attractive proposition for some exporters. One Chinese salesperson of exercise equipment told the business newspaper that her company had switched to freight train shipping to Europe amid a surge in the cost of sea-based transport, and the doubling of transit times.
Observers say overland shipping by rail can often be an attractive alternative to sea-based shipping, even if it is typically more expensive, as a result of both infrastructure upkeep costs and the costs associated with the transfer of cargoes to and from various modes of transport. Under ordinary conditions, ships take an average of between 30 and 33 days to make it from ports in East Asia to northern Europe using the Suez Canal, which accounts for as much as 12 percent of all goods shipped globally. If ships are forced to travel around Africa, that shipping time grows by weeks. By comparison, major Russian companies such as Fesco Transport Group offer deliveries from China, Japan or Korea to terminals in the European Union in as little as 19 days, albeit at a premium.
Overall, overland rail-based shipping still accounts for only a fraction of China’s total exports, with the estimated 209,000 containers shipped to Europe via rail in the first two months of 2021 accounting for just over 10 percent of the 2 million containers processed by Yangshan Port south of Shanghai in January alone.
Nevertheless, subsidies provided under the Belt and Road, combined with surging demand for the speedy shipment of high-value goods amid coronavirus-related lockdowns, are said to have prompted some companies to choose overland transport, with the China-Europe rail routes continuing to expand capacity in light of the surging demand.
On Friday, Fesco reported that it has seen a jump in demand for alternative routes from customers who ordinarily ship goods to Europe through the Suez Canal. Shipping through the strategic waterway ground to a halt last week after the Ever Given, a large Panamanian-flagged, Japanese company-owned container ship, ran aground while on route from Malaysia to Rotterdam, rendering the canal temporarily inoperable. All efforts to dislodge the stranded container megaship have so far proven futile.