Demand Surges for Asia and Europe Rail Freight Ahead of CNY
At Uneek Forwarding, we have seen the demand for alternatives to air and ocean freight, due to challenges that include but are not limited to border choke points and pandemic restrictions that are all adding to transit times and fast-rising pricing.
Prohibitive air and soaring ocean spot freight rates plus the lack of containers available for loading in China have added to costs and transit times. The uncertainties have led to many Asia-Europe shippers to switch to rail freight services in ever greater numbers ahead of Chinese New Year factory closures from 12 February onwards.
The surge this year builds upon strong and growing demand for Asia-Europe rail freight capacity that increased progressively last year and accelerated in the final quarter, as cargo owners and their logistics providers sought more reliable and stable alternatives.
However, demand has surged further this year, despite strongly rising costs for the increasingly tight rail freight capacity, along with border delays on some routes creating backlogs and adding to supply chain logjams.
It is certain that rail services from Asia into Europe are currently a highly competitive proposition as an alternative to ocean transit times, especially given the lack of available containers for loading in China, which is still adding to costs and delays to ocean freight.
We have seen a surge in volume yet again in 2021 for our rail product, partly driven by conversion from our normal ocean freight. Rail has consistently doubled in demand during the last four years and we at Uneek expect 2021 to be no different.
It is important to understand that border delays are also slowing some rail shipments, but we are working closely with our partners to ensure as smooth a passage as possible. It is also important to identify that China-Europe rail freight volumes have doubled since the start of Covid-19 outbreaks as we all looked for alternatives. So we also believe that demand for rail services is also driven by the Covid-19 impact on air and ocean freight markets. In 2020 air capacity was drastically reduced by passenger flight cancellations that at the same time have driven air freight costs up. Ocean freight was impacted by pandemic regulations, and transit times have been extended.
Rail freight transit times and rates with the exception of the last quarter of 2020 remained stable and gave our customers more confidence to use this mode of transport.
China-Europe rail freight rates have roughly doubled in the last few months of 2020, due to the strong demand from shippers forced out of the air and ocean markets by tight capacity and equipment shortages. But demand for China-Europe rail freight services has remained strong, while some reports indicate that China-Europe ocean freight rates have even surpassed prices for some China-Europe rail freight services since October, despite the rising rail freight costs.
Nevertheless, another factor favouring rail freight has been structural changes in the China-Europe trade, in particular the large amounts of PPE equipment that has been shipped by both companies and governments. There were whole block trains dispatched from China to Europe carrying only PPE in 2020.
Lockdown policies in many European countries have also driven up sales of consumer electronics that helped people to adjust to new home-office reality. Many companies started to use the railway or increased rail freight usage to move such valuable cargo from China to Europe.
If you would like to explore our China-Europe rail freight services please contact us.
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