Maersk has made permanent its weekly AE19 ocean-rail product that links ports in Asia with those in Northern Europe via a short-sea-international rail-short-sea service using the trans-Siberian express route through Russia, bypassing the congested southern route. Photo credit: Maersk
Congestion is building at both ends of the China-Europe rail network as capacity constraints on air and ocean carriers drives up demand and raises concerns over the landbridge’s reliability during the peak shipping season.
The unbridled growth in volume is placing the overland route under the kind of pressure it last saw in 2018, when soaring air freight demand quickly filled all available air freight space, pushing shippers to the rails and leading to congestion and lengthy delays.
Forwarders tell JOC.com that a huge increase in volume was again creating bottlenecks at key transit points at the Poland-Belarus and China-Kazakhstan borders, where the narrower gauge of rail tracks in Central Asia requires a train transfer at both crossings.
“We are now observing very strong demand for our west- and eastbound rail services with triple-digit volume increases due the COVID-19 pandemic outbreak,” said Thomas Kowitzki, head of China rail and multimodal at DHL Global Forwarding Europe.
“While we were able to cater the sudden volume peak without any issues in March and April by deploying more blocktrains, the rail capacity started to get tighter from May onwards due to further growing volumes,” Kowitzki said.
Marco Reichel, Shanghai-based business development director for Asia Pacific at Crane Worldwide Logistics, said the forwarder was preparing for an increase in rail demand.
“Vessels are completely full for September already and we expect the situation to be worse two weeks after the Golden Week holidays,” he told JOC.com. China’s National Day falls on Oct. 1 and is part of the country’s Golden Week holidays.
Demand for the rail option was already strong coming into 2020, but once the coronavirus disease 2019 (COVID-19) grounded much of the passenger fleet and ocean carriers cut capacity, the volume began to take off.
China State Railway Group, the state-owned operator of the rail network, reported that 5,122 China-Europe freight trains were operated in the first half, a 36 percent increase year over year. The busiest border point in the network was at Khorgos on the China-Kazakhstan border, where the 2,000 trains handled in the first half was almost 50 percent more than in the first six months of 2019.
UTLC ERA, a joint venture of the Belarusian, Kazakh and Russian railways, said in a recent statement that 277,600 TEU were carried on its network in the first seven months of 2020, an increase in volume of almost 70 percent year over year. Record volume in July was recorded as infrastructure improvements increased the capacity of the network.
Rail on track for strong Q4
“Our rail business has been growing tremendously compared to last year and we expect a further pick up in demand in Q4,” said Edoardo Podestà, Hong Kong-based chief operations officer, air and sea logistics, for Dachser Group.
However, Podestà said how the fourth quarter would play out was difficult to predict. “The strength of the rail peak season, including rates and possible bottlenecks and congestion, will depend on how strong the air freight peak season will be and by the level of air freight rates,” he said. “My feeling is that rail will do very well, but it will not go crazy.”
Rail demand is high with most of the Asia-Europe passenger aircraft fleet grounded because of coronavirus travel restrictions, and ocean carriers limiting capacity and keeping ships filled with peak season cargo.
“The unpredicted volumes are coming from customers seeking alternatives due to capacity shortages in air but also ocean,” Kowitzki told JOC.com. He said the shortage of rail wagons and port congestion was exacerbated by Chinese rail carriers suspending westbound trains and refusing bookings for several days in June and July in an attempt to moderate demand.
“With an increasing number of trains arriving in Europe at the border in Poland, we are also observing another bottleneck, which puts the entire system and infrastructure to the test,” he said. “This congestion is a result of infrastructure limitations, for example, only a certain number of trains are reloaded by day at the Polish border.”
To bypass the Poland-Belarus cross border issues, DHL at the end of last year launched a route via Kaliningrad in Russia to Neuss in Germany, which is not facing such delays.
Also avoiding the bottlenecks is Maersk. Strong demand has encouraged Maersk to make permanent its weekly AE19 ocean-rail product that links ports in Asia with those in Northern Europe via a short-sea-international rail-short-sea service that the carrier launched in mid-2019.
The service is based on a short-sea connection between Asian origin ports in Korea, Japan or China and the port of Nakhodka in the Russian Far East that is operated by Maersk’s Sealand Asia, followed by an intercontinental rail connection across Russia from Nakhodka to St. Petersburg, which takes 11 days. The last leg of the product is another short-sea connection between St. Petersburg and Maersk’s ports in Europe.
Contact Greg Knowler at [email protected] and follow him on Twitter: @greg_knowler.
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