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Navigating new logistical pathways on the China-Europe freight corridor

Freight forwarding transcends the mere logistics of moving goods from one location to another for cargo owners.

It involves a series of strategic decisions that leverage innovative, unconventional thinking, and the formulation of creative solutions to meet objectives effectively and ensure customer satisfaction.

This is especially important for a freight forwarder operating on the China-Europe route as this route is at the heart of rapidly evolving geopolitical tensions that impact the movement of goods.

As one of the leading freight forwarders on this route, Dimerco Express Group has seen this happening one too many times.

The COVID-19 pandemic highlighted the vulnerability of global supply chains and the need for creative solutions to handle the various disruptions, both digital and operational, and ensure seamless service to customers. 

The current crisis in the Red Sea has impacted the movement of goods from China to Europe. Disruptions on this route have required the exploration of alternatives for freight transportation between China and Europe, a critical trade corridor for a wide range of industries.

Innovative Solutions

Rail and Road freight options on the China-Europe corridor have emerged as viable alternatives for customers facing disruptions in moving goods on this route due to the Red Sea crisis.  

While these options provide the required solutions for customers, its feasibility and attractiveness may vary based on several factors including cost, transit time, and the geopolitical climate affecting route availability.

The China-Europe Rail Option

The issues surrounding traditional sea routes, particularly via the Red Sea, have created a notable surge in interest and bookings for rail freight, with inquiries up over 40% in the past two months.

The cost of rail freight is currently in the range of USD 6,000-7,000 for a 40′ FCL which is close to the current peak rates of ocean freight, which stands at about USD 5,000/40’. This competitive pricing makes rail an attractive alternative despite the higher cost.

In addition to full container loads, LCL rail freight also saw a 30% volume increase in January 2024 compared to 2023.

Xi’an, a major hub for the China-Europe Express rail, has reported around 5,351 departures in 2023, a 15.3% year-on-year increase, with plans to increase departures to over 7,000 trains in 2024.

Challenges

The rail option, however, is not without its challenges. The main limitation is that the rail route transits through Russian territory which is not acceptable to the majority of the USA and EU headquartered customers due to the Russia/Ukraine war. This limits the China-Europe rail options currently.

While there are alternative routes via the Black Sea, it may not be suitable for cargoes that require quicker transit, since the transit time on this route is 40 days longer and also could cost up to 50% more compared to the standard railway route to Europe via Russia.

The China-Europe Road Option

The road freight option from China to Europe has seen a few success stories recently, especially with a specific instance involving transporting goods from Huzhou, China to Sweden.

This road freight movement from China to Sweden took 24 days, although this could have been completed within 20 days if weather and road conditions were better.

While the road option costs more than the rail option, the quicker transit offsets this cost, especially for customers who move high-value, time-sensitive cargo and also for the movement of DG (Dangerous Goods) and oversized cargo.

Diversification of Supply Chain Routes

Both the rail and road options offer critical alternatives to traditional sea freight routes, enabling businesses to diversify their supply chain strategies and mitigate risks associated with geopolitical tensions and crises.

These alternatives have shown to be particularly relevant and popular for customers in the automotive, EV, aerospace, solar, and electronics space, which require reliable, timely, and secure freight transportation options.

For small to medium-sized businesses based in Asia or other developing regions that do not have geo-political and sanctions-based limitations, the block train service from China to Europe remains a feasible option and there is an increase in demand in light of the continued crisis in the Red Sea region.

Conclusion

The China-Europe Rail and Road freight options present viable alternatives to traditional sea routes amid current geopolitical tensions.

While challenges such as cost and route limitations exist, the benefits, including reduced transit times, industry-specific applications, and enhanced supply chain resilience, underscore their growing importance in global logistics strategies.

Further development and optimization of these routes could significantly impact the efficiency and reliability of freight transportation between China and Europe.


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