Uncertain Future for China-EU Logistics

Due to security risks, payment problems, and sanctions connected with recent geopolitical events, many suppliers and producers are choosing to avoid shipping cargo from China to Europe through Russia or the conflict zone in Ukraine. Most New Silk Road trains were rerouted away from Ukraine some time ago. This approach, however, is increasingly uncertain as both logistics companies and their customers seek to insulate themselves from sanctions being extended to other countries involved in the hostilities in Ukraine.

“As an alternative to land transport, we offer sea transport as a standalone service or in combination with air transport. Many customers choose these services when it is important to have goods delivered despite higher costs. Air transport is a viable alternative for many of the containers that have been arriving in Europe from China by rail, especially when it comes to just-in-time deliveries for the high-tech and automotive sectors,” says Botond Kovacs-Mate, AsstrA Hungary Branch & Country Manager.

To make matters worse, over the past month China has experienced the greatest increase in Covid-19 infections since the first wave in 2020. The Chinese authorities’ zero-tolerance policy indicates a high probability of further supply chain disruptions, and the queues of container ships outside major Chinese ports are getting longer by the day.

“Since the beginning of the Covid-19 crisis, many European importers have turned to rail transport from China. This has been due to several factors, including congestion in ports and rapidly rising sea transport rates. At the moment, both transport companies and their customers are holding their breath and following the developments with apprehension. However, we must remember that the main rail route from China to Europe does not pass through Ukraine. Only about 3 percent of cargo volume from China was transported via the country. Most of this traffic goes through Kazakhstan to the route’s main transhipment terminal in Małaszewicze, Poland,” emphasizes Vladyslav Martin, Head of the AsstrA EU-China Railway Department.

Alternative routes are being evaluated. For example there is the Trans-Caspian one (China-Kazakhstan-Azerbaijan-Georgia-Turkey) or China-Kazakhstan-Azerbaijan-Georgia-Romania via the Black Sea. It is already obvious, however, that many challenges – such us complicated delivery schemes and unfavorable weather conditions – will not allow these alternative routes to become workable alternatives for deliveries through the Russian Federation.

“Alternative routes would require a lot of reloading, for example on the China-Kazakhstan border and for ferries across the Caspian Sea from Aktau (Kazakhstan) that would need to be unloaded in Baku (Azerbaijan). And there is already an issue with ferry availability. Building a stable blueprint would be extremely difficult, so reloading times would be delayed. In Romania, as in Turkey, the connection network and terminals are not ready to handle large volumes. Also, this route may not be feasible considering increased costs and transit times of shipments via the Suez Canal. Of course, Such a route would have some demand, but it is already known that over the next 10 years – without huge investments in infrastructure – it could service no more than 5-6% of the cargo volume currently going to Małaszewicze. It is also worth noting that the Azerbaijan-Turkey line passes through the mountains, and the cargo flows would be literally frozen during the winter. That will also increase transit times.” adds Vladyslav Martin.